Andean Group - September 2011 (ISSN 1741-4466)

Having faced major criticism over its hydrocarbons policy following the failed attempt at ending fuel subsidies (el gasolinazo) late last year [RA-11-01], the government of President Evo Morales has once again been forced to admit mistakes in relation to the energy sector, this time with regard to electricity. Technical problems and maintenance issues afflicting two of the main generating companies, Guaracachi and Valle Hermoso (both state-run), which left six of the country’s nine regions facing blackouts last month, have exposed the lack of investment in infrastructure, triggered concern from the private sector and raised familiar questions over the government’s handling of the nationalisation process.

Earlier this month, at an event held by the umbrella business chamber of Santa Cruz (Cainco), Morales admitted his government’s electricity sector policy contained “errors” after Santa Cruz – which accounts for 40% of energy consumed - La Paz, Cochabamba, Oruro, Sucre and Potosí faced black-outs the previous month due to a 144MW shortfall. Warning that the problem is likely to worsen in September and October, the national committee for load dispatch (CNDC), the technical body responsible for operating the national interconnected system (SIN), which supplies 90% of total national demand, points out that while Bolivia’s generation capacity stands at some 1,235MW, losses and “unavailability” can reduce it by as much 129MW a month. This, the CNDC warns, raises questions over the SIN’s capacity to meet demand, which is expected to reach 1080MW in September and 1100MW in October.

The government, which strengthened state control over the sector in May 2010 when it took over Guaracachi (which accounts for a third of electricity generated), Valle Hermoso and Corani, bringing 80% of the country’s electricity generation under the control of the state-owned power company, Ende [RA-10-06], is in part blaming the problem on the state in which it found Guaracachi. The government claims Guaracachi was on the verge of bankruptcy, with debts amounting to US$83m. Eduardo Paz, Guaracachi’s manager, is also blaming climate change for the gap between supply and demand. He pointed out that while the average temperature in Santa Cruz between September and January was previously 34°C, it had now risen to between 36-37°C – with each degree translating into an additional 20-30MW demand for air-conditioning - while La Paz has seen its temperatures plummet.  Yet critics more generally accuse the government of failing to plan sufficiently for the increased demand caused by GDP growth which, in a July report on the SIN’s 2011-2022 long term-plan, the CNDC estimates will expand by an average of 4.5% between 2011 and 2016. The same report also forecasts that demand over the same period would increase by 50%, from 6,201GW/h to 9,343GW/h.

Response
As was the case with the gasolinazo [RA-11-01], the government has reacted to the criticism with promises of investment. Bolivia’s central bank (BCB) has granted a US$176.2m loan to the Ende for four generation projects undertaken by Valle Hermoso, which aim to contribute an extra 114MW to the SIN.  Hortensia Jiménez, the deputy minister for electricity, said the government was planning to assign a total of US$841.7m to the sector up to 2015, a 385.3% increase on the amount executed over the 2006-2010 period. As well as the Valle Hermoso turbines and other thermoelectric projects, such as the Tarija-based Termoeléctrica del Sur project which is slated for completion by 2013 and aims to contribute an additional 120MW,  Jiménez highlighted government plans to construct ten hydroelectric projects by 2020. This also addresses another source of criticism: the country’s dependence on thermal energy to produce electricity which, according to the CNDC, accounted for 38% of generation capacity at the end of 2010, with the remainder coming from hydroelectric plants.

• Tipnis.

The stand-off between the government of President Evo Morales and indigenous groups over a proposed road that cuts through an indigenous territory and national park, Isiboro Sécure (Tipnis), has yet to be resolved. Although on 26 August both sides agreed to set up six negotiating tables to address the dispute, talks have since ground to a halt after the government failed to comply with the indigenous groups’ demand of sending half the cabinet (10 ministers) to the negotiating tables.