The Real Causes of Venezuela’s Electrical Collapse

The Real Causes of Venezuela’s Electrical Collapse

In 1998 Venezuela’s electricity system was operating efficiently. Experts say that, by that year, 94% of the national territory was electrified and 97% of the population was interconnected. The Real Causes of Venezuela’s Electrical Collapse.

The Real Causes of Venezuela's Electrical Collapse

Twenty years later, the power plants built are barely operating. The blackout of March 7th 2019 exposed the reality of the system.

In order to understand the electrical crisis that Venezuela is going through, it is necessary to put a magnifying glass to the problem.

The decline of the system dates back to the late nineties, when it was imminent to establish an institutional agreement for the proper functioning of electric service to promote private investment in the coming century.

Thus, in 1999, in order to achieve these goals, the “Electricity Service Law” was proposed to Congress, the purpose of which was the liberation of the sector, since the country was going through a fall in public investment and if the private administration were not allowed to have greater participation, the sector would be submerged in a process of deterioration.

Former President Hugo Chávez himself admitted before Congress that the fall in investment placed “the country in the face of a real energy emergency”.

The law, explains former Vice Minister of Electric Energy Victor Poleo, contemplated aspects such as “water value and economic dispatch, formation of electricity prices in exchange nodes of the Trunk Network, competition in generation, synergies between public and private capital and between the National Petroleum Industry and the Electric Sector, criticality in the production of thermoelectric fuels”, among other elements that satisfied the needs of the sector. But “chavismo” never approved it.

Already in 2001, the engineer and former director of the Office of Operation of Interconnected Systems (OPSIS, in Spanish), Miguel Lara Guarenas, recalls that his entity, responsible for directing and coordinating the operation of the National Electric System (SEN, in Spanish), alerted the Executive that the country was heading towards a “situation of deficit of the electric supply” due to erroneous decisions taken by his cabinet.

And, although warnings were given in time and a commission was appointed to plan strategies to combat the emergency, there was never action.

The Real Causes of Venezuela's Electrical Collapse

On the contrary, says Lara Guarenas, the government decided to suspend “the policy of methodical maintenance of the plants, began to remove people from the positions and put people who were not suitable, bulked the payroll with income of family members or politicians who were not qualified to work in the area and froze the electricity tariff.

The decline of the sector began to take its first steps, a process that was strengthened more and more with the “evils” of the “Compañía Anónima de Administración y Fomento Eléctrico” (CADAFE), since the corruption within the state-owned company “due to the over-invoicing of projects and the delay in making them concrete” caused the now subsidiary of “CORPOELEC” to have an energy generation of 1,215 MW, “that is, 33% of its accredited capacity (3,721 MW) before the National Interconnected System,” adds Víctor Poleo.

Likewise, the state-owned company “administered 643 million dollars in 223 transmission projects (lines and substations) and, nevertheless, the projects finally executed by CADAFE correspond to only 155 million dollars, that is, 24%,” he said.

Among the plants to be built by Cadafe are the “Fabricio Ojeda” hydroelectric plant in “La Vueltosa”, located in the state of “Merida”, with an investment of 160.4 million dollars; the “Palavecino” plant in “Lara”, whose budget was 55 million dollars; and the “Pedro Camejo” thermoelectric plant in “Carabobo” with a budget of 107 million dollars.

However, Cadafe was not the only company with irregularities within its functions. “Electrificación del Caroní” (Edelca), a company controlled by “Corporación Venezolana de Guayana” since its creation in 1963, in 2005 by presidential mandate agreed with the OIV Consortium, formed by the Brazilian company Norberto Odebrecht S.A., the Italian company Impregilo and the Venezuelan company Vincler, to begin construction of the “Manuel Piar” Hydroelectric Plant, better known as the “Tocoma” dam in the lower “Caroní river”.

“World Energy Power.”

The Real Causes of Venezuela's Electrical Collapse

On September 22, 2006, during the laying of the foundation stone of the “Gran Mariscal Ayacucho Industrial Complex” (Cigma, in Spanish), former President Hugo Chávez ruled that Venezuela would soon be a world energy power, an aspect that was contemplated in the “Simón Bolívar National Project”.

With the consolidation of the socialist model, the nationalization of the electricity industry was a fact. Decree-Law No. 5,330, of July 31, 2007, containing the Organic Law of Reorganization of the Electric Sector unified under the name “Corporación Eléctrica Nacional S.A”. (National Electric Corporation). (Corpoelec) to Edelca, Enelven, Enager, Cadafe, Enelco, Enelbar, Seneca, EDC, Eleval, companies that until then had been in charge of the production, distribution and commercialization of electric service in the country.

Three years later, the Organic Law of the Electric System and Service was established, thus reinforcing the nationalization and centralization of the entire sector.

That same year, the construction of the “Parque Eólico Paraguaná”, in Falcón state, was approved. The promise of this investment guaranteed that “with the strength of the wind it will reach 20 MW in a first phase, then 100 MW”. The park was nothing more than the promise of an energy network that never arrived.

However, Chavez’s words were blown away, and just one year after nationalization the crisis was not reversed. The blackouts were a fact. As of 2008, “1,248 electrification projects have been financed by the Energy Boards,” reports the Konzapata digital portal, but none of them operated efficiently.

The thermoelectric plants began to decrease their capacity to generate energy, the establishment of distributed generation plants with a capacity of 464.2 MW was established in 12 states to avoid the electric deficit, they invested in the purchase of more than 79 million saving light bulbs that would be installed free of charge, the Government assured that the low level of Guri was due to the natural phenomenon “El Niño”, and the recurrent blackouts in the interior arrived to Caracas.

Then, the State appealed for a supposed “armor” that had as its objective that the Thermocenter Generator Complex – located in “Los Valles del Tuy” – satisfy the Caracas demand “with the two plants of the Site of 540 MW each, plus the 755 MW of Raisa,” adds Konzapata, while the Guarenas Thermoelectric, which would cover 75% of the municipalities Plaza and Zamora (Miranda State) would also contribute to such armor.

In 2010, the State under the Electric Emergency Decree, acquired through PDVSA’s subsidiary, “Bariven”,19 turbines to generate 1,000 MW for 767 million dollars. Months later, specifically on July 9, former Electricity Minister Alí Rodríguez Araque assured that Venezuela had overcome “the electricity crisis with the installation of more than 1,200 MW”.

The crisis never disappeared, it got worse.

The ultimate ruin of the system

The Real Causes of Venezuela's Electrical Collapse
People evacuate the Venezuelan National Assembly building during a partial power outage in Caracas on March 25, 2019. – A new power outage hits large areas of Venezuela on Monday, including Caracas, two weeks after the massive March 7 blackout that paralyzed the country for a week. (Photo by YURI CORTEZ / AFP)

The National Interconnected System of Venezuela (SEN) was developed in 1964 and its objective is to distribute the energy of the hydro and thermoelectric power stations by means of a high voltage transmission system: 850 volts. When these large transmission centers were reached,” says Miguel Lara Guarenas, “the distribution networks that were the electricity companies that provided the distribution and commercialization service began.

The program, from its inception, conceived that the hydroelectric plants of “Guri, Caruachi and Macagua – located in the lower Caroní – should supply an average of 60% of the demand and consumption of electricity in the country. As a complement, Tacoa, Planta Centro, Ramos Laguna. Los Llanos and Los Andes thermal power plants would supply the remaining 40%,” says the engineer. Today the story is different.

The country has 21 thermoelectric plants, four hydroelectric plants and more than 50 substations, but the energy capacity supplied by the plants is insufficient to meet the demand of Venezuelans.

The historic blackout on Thursday, March 7, 2019, which affected 23 Venezuelan states for 6 days, was alleged to have occurred because of a fault in Guri, demonstrating that thermoelectric plants are not generating electricity.

The Ministry of People’s Power for Electric Energy has not delivered official reports since 2016, when it presented the National Assembly with the Report and Account for 2015.

It reveals that the entity’s projects were not completed, does not provide information on the control activities exercised by the Ministry, its sectoral policies or the Annual Operating Plan.

An analysis prepared by “Transparencia Venezuela” states that the Report and Account presents “a lack of explanatory information on the use given to the financial resources that were not fully executed, a fact that occurred in 100% of the projects”.

For its part, Corpoelec maintains on its website that between 2013-2015 Venezuela’s electricity generation park had an installed capacity of approximately 24,000 MW, with hydroelectric plants supplying 62% of the electricity potential and thermoelectric plants 35%. The supply and demand of the sector is unknown at present.

However, specialists Winston Cabas, Miguel Lara Guarenas and Victor Poleo say that there is an installed capacity between thermal and hydroelectric power plants of 32 to 34 thousand MW approximately, since the “Parque Eólico Paraguaná” is not operational.

According to Cabas and Lara Guarenas, SEN’s supply is between 10,000 and 12,000 MW, with a population demand of 14,000 MW.

Poleo disagrees with these numbers. For the former minister, 14 thousand MW is the supply of SEN currently, while national demand stands at 25 thousand MW.

The Real Causes of Venezuela's Electrical Collapse

Engineers insist that system failures are caused by mismanagement of investments in the sector.

Cabas warns that thermoelectric plants operate with a deficiency because there is no supply of fuels. “PDVSA stopped producing the fuel needed and in its absence had to resort to gas pipelines,” and adds that to transport these gases you need a number of tank truck that are not available. “There are no idlers or roads in good condition”.

As a consequence, the energy capacity of the Guri is being overexploited; the reservoir reached its minimum level of 241.35 meters above sea level on April 29, 2016, only 1.35 meters from the operating limit of the “Casa de Maquinas II” (240 meters above sea level).

“The little energy that is produced is in the lower Caroní. This must be taken out through transmission lines and is not maintained, but also should have been replaced or expanded and did not occur. The transmission limits of those cables are exceeded and faults are presented” declares the president of AVIEM, Winston Cabas.

“Now we are more dependent on Guri, but it doesn’t work well either,” says Lara Guarenas.

The engineer remembers that the late Hugo Chávez promised that Venezuela would not depend on hydroelectric plants, and for that a series of thermoelectric plants would be built that would demolish this dependence; but “what they installed is useless and what was there, they just removed it”.

Tocoma, the “large-scale” hydroelectric plant announced in 2002 and whose construction began in 2005, aimed to generate 2,160 MW, or 70% of the national electricity production in order not to over-exploit the Simón Bolívar Hydroelectric Plant (as the Guri, formerly Raúl Leoni, was renamed). In 2012, the then Minister of Electric Energy, Héctor Navarro, inaugurated the first unit, but only 205 MW was activated; and in 2014 the project was “concluded”.

Four years later, Tocoma does not operate. Its budget initially had a cost of $3 billion dollars, then rose in 2013 to $7 billion dollars and finally positioned itself at $9.365 billion dollars, according to the current head of the portfolio, Luis Motta Dominguez. “Tocoma is the great red elephant of the national electrical system. It does not contribute any megawatt,” Cabas said.

Lara Guarenas adds that even if Tocoma is put into operation, there would be no way to distribute its energy to the transmission systems because “60% of the structure is deteriorated. Nothing is saved, there is nothing. Nor in the offices.

The engineer condemns the fact that the required maintenance of the equipment was not carried out at the time.

The Real Causes of Venezuela's Electrical Collapse

Now the units are observed in a “catastrophic” way and there are no national suppliers who sell the spare parts and the international ones, because of the debts that the State maintains with them, cancelled the service. “If you add up the hours of maintenance overdue exceeds 4 million hours. Start adding machine by machine of the interconnected system (…). It’s all because it’s not being maintained or intervened on time.”

Cabas adds another problem: “Presumably used thermoelectric machines were bought and sold to Venezuela as new. A “business deal” that electrocuts.

The Joint Commission for the Study of the Electricity Crisis in the country of the National Assembly was in charge of evaluating the conditions of the SEN.

The report shows that during the construction of the Picure thermoelectric plant, which is part of the Josefa Joaquina Sánchez Bastidas generator complex, Derwick Associates -the contractor in charge of the project- the State acquired “General Electric 2 LM 6000 + 2 LM2500 aeroderivative gas turbines (open cycle) with 140 MW in total. The LM2500 units were used at 0 hours”.

The Commission asked Derwick Associates for an explanation, but the company replied that it ‘cannot provide contractual information due to confidentiality agreements’.

However, Derwick indicated to the National Assembly “that the average cost of its electrical works was 1.17US$/MW, which is within the international ranks without counting on the financing that the company had to carry out since they were up to 4 years without charging”.

The National Assembly considers the main feature of the crisis to be the deterioration of “a large part of the electricity generation and energy transport capacity of the electricity system to meet the electricity demand of the population”.

The Commission also points out that the State, despite having spent “more than 39 billion US$ in the acquisition and purchase of 14,000 MW in thermal power generation plants, money equivalent to four times Venezuela’s international reserves in 2016, only about 4,000 MW are operationally available, which could perfectly have been installed with a fraction of the immense amount of resources destined to the electricity sector in the last decade”.

The Dark of Maracaibo

The Real Causes of Venezuela's Electrical Collapse
Electric Outage.

“Marabinos” have been submerged in the penumbra for more than a year, when in December 2017 a massive fault left the Zuliana region in the dark. Since then, those who make life in Maracaibo know that at any moment the light will go away. The failure is no longer a coincidence, it is routine.

Maracaibo is turned off daily and the reason is the disconnection it has with the interconnected system. The former director of OPSIS, Miguel Lara Guarenas, states that Zulia has an installed electrical capacity of 2,300 MW, and Maracaibo has a demand of 1,600 MW; but it is useless because “not even 300 MW work. The little that works is in TermoZulia.

The SEN has an interconnection that was made from the lower Caroní of 1,000 MW that reaches the eastern coast, directly to the plants of El Tablazo and Las Morochas, and they supply the western coast of the state.

“The air crossing lines of the towers installed in the lake were made. All that system allowed to carry half of the demand, but the cables were lost, the conductors were changed and the import capacity of the Guri was lost, its own generation does not work,” says Lara Guarenas.

The electrical crisis in Zulia has caused the inhabitants to lose electrical equipment, food decomposition, and it was even denounced that the Maruma Hotel plant exploded due to excessive use. The National Assembly has asked Corpoelec to compensate those affected.

Overcoming the crisis

Venezuela’s electric service, considered in the 20th century the best service in the country and a reference in Latin America, will not return. Rebuilding the system will take time, the diaspora also became present in the sector: qualified personnel emigrated.

“You have to put people who have the knowledge, expertise and ethics to manage resources and solve those problems.

We will have to see the gaps in what we have and what is required, resume maintenance, equip the electrical system with inventory and rescue the infrastructure.

The first action is to put to work what we have and it takes less time. We are not going to have what we had before, but we can have something better,” adds Lara Guarenas, who does not rule out the idea of privatizing the system again.

He insists that in the conditions in which the SEN finds itself “private capital does no harm”. To give a private person the property to have resources is viable and it is an action that has to be thought about”.

Víctor Poleo, in his analysis of the Venezuelan Electric Sector, concludes that it is necessary “to vindicate the entire Electric Law of 1999, to rearm the Electrification of the Caroní, with the help of nations of hydroelectric tradition and with western manufacturers of hydroelectric equipment and to design a capitalization fund for the reconstruction of the Electric System”.

In spite of the options that may exist, the specialists consulted are united by the same criteria, in order to overcome the crisis there must be a change of government.

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