Ecuador to upgrade power grid with $150 million loan from the Inter-American Development Bank

Ecuador is expanding and improving its electrical system’s operational efficiency thanks to a $150 million loan approved by the Inter-American Development Bank (IDB).

IBD loan will go to improve Ecuador’s power grid.

The program will support the government’s efforts to bridge the gap in access to electricity coverage, increase the nation’s energy efficiency, reduce the use of fossil fuels, and improve the power sector’s operational efficiency.

The program will also strengthen and expand Ecuador’s National Transmission System and the National Distribution System and enhance the nation’s transmission infrastructure to allow for the increased exchange of energy in the Andean region.

The country is in the process the adding eight large hydroelectric projects to the power grid. Once operational, probably in early 2018, Ecuador will be energy independent with excess capacity to sell to neighboring countries.

This electrical grid upgrades will facilitate the priority use of electricity in the agroindustrial sector, and will promote higher electricity coverage in rural and marginal urban areas.

Ecuador experienced recurring energy crises during the 1995-2010 period due to electricity shortages and the poor quality of its power infrastructure. Ecuador’s electricity sector had systematic weaknesses, with prevailing high levels of electricity losses, and low coverage and poor service quality rates.

Since 2013, Ecuador’s Ministry of Electricity and Renewable Energy has implemented the Energy Matrix Transition strategy, which seeks to boost social welfare and economic development by improving the supply, reliability and quality of electricity service as well as Ecuador’s active participation in the Andean regional electricity market.

The IDB’s country strategy with Ecuador includes the support for the power sector’s efforts to encourage the sustainable increase and diversification of energy generation, transport and distribution capacity, system reliability, energy efficiency and universal access to energy. This project contributes to create a long-term energy strategy that promotes a sustainable energy framework, facilitates adequate energy supply, and improves access to electric power.

The IDB loan of $150 million is for a 25-year term, including a 7.5-year grace period and interest rate based on LIBOR. It includes an additional $89.1 million in local counterpart funds. An additional $70 million corresponds to parallel financing from the Japan International Cooperation Agency (JICA) through its Cofinancing for Renewable Energy and Energy Efficiency (CORE) mechanism; this funding is pending approval by JICA’s by the fourth quarter of 2017.