Venezuelan Focus on the Electricity Sector: Too Little Too

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E.O. 12958: DECL: 2020/01/12
TAGS: ENRG ECON EINV VE
SUBJECT: Venezuelan Focus on the Electricity Sector: Too Little Too
Late?

REF: 03 CARACAS 410; 08 CARACAS 1473; 09 CARACAS 1318
09 CARACAS 1367; 09 CARACAS 1475

CLASSIFIED BY: Darnall Steuart, Economic Counselor, DOS, Econ;
REASON: 1.4(B),(D)


1. (C) SUMMARY: The daily Venezuelan press is now filled with
stories concerning the electricity sector crisis that distract
attention and confuse the general populace. Relying on its
hydropower, Venezuela has managed to generate nearly all of the
electricity it requires on a daily basis. Current rationing and
electricity outages appear to be the result of the poor state of
its transmission and distribution networks. However, due to a
shortage of rain since 2008, the reservoir of the Guri dam complex,
Venezuela's largest, is severely depleted, prompting concerns that
the hydroelectric sector might fail by May. Even though Venezuela
experienced a similar crisis in 2003 during the last El NiC1o, new
thermal generating capacity has not kept up with electricity
consumption growth and the infrastructure has not been maintained.
The failure of the Bolivarian Republic of Venezuela (GBRV) to
invest and execute maintenance and expansion projects in the
electrical sector over the last decade has given rise to a scenario
where its hydropower may have to be shut down and the country does
not have sufficient alternative thermal power to meet demand. END
SUMMARY.



The Distractions




2. (SBU) On December 21, 2009, the GBRV published electricity
rationing measures aimed at reducing electricity consumption in
public buildings, commercial malls, etc. The emergency measures
called for all business in malls to be open only between the hours
of 11:00 am-9:00 pm. Implemented on January 4, 2009, the
regulation's impact was to close restaurants, bars, and movie
theaters located in malls (along with delayed opening in the
morning of banks, retail establishments, and certain government
offices). On January 6, 2010, the press reported that GBRV Vice
President Carrizales had announced the easing of the rationing
measures directed at malls after reviewing a report presented by
the Federation of Malls demonstrating that malls already had
reduced electricity consumption by 20% as a result of measures
taken following an Electricity Ministry directive in October 2009.





3. (SBU) The press has widely covered the possible closure of
production lines in Bolivar state-based heavy industries in order
to reduce electricity consumption. Press articles currently
speculate that the electricity crisis has afforded the GBRV an
opportunity to shift the blame for decreasing production and
on-going labor and mismanagement issues in those industries onto
the electricity crisis. On January 12, media reported a nationwide
electricity rationing program being rolled out by the Ministry for
Electricity and Corpolec.



Peeling the Onion




4. (C) On January 7, EconOff spoke with Carlos Marsik (protect) who
worked as an engineer in Post's Facilities Maintenance Section.
[NOTE: Marsik's last day of employment with the Embassy was January
8 as he is emigrating to Canada. END NOTE] Previously, Marsik
worked for electricity company Edelca (four years) in the Macagua

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hydroelectric plant. He then worked for Electricidad de Caracas (6
years) in mechanical systems. His wife is the head of the Turbine
Section in Edelca's Mechanical Design Department. The following
information incorporates Marsik's perspective on the electricity
sector coupled with additional post research based on available
open sources. The graphics were provided to EconOff by Ciro
Portillo (protect),former vice president of electrical company
Enelven. Although Portillo did not confirm the source, we believe
that they were prepared by Enelven.



Electricity Generation - Not a Crisis




5. (C) According to data included in the presentation provided by
Portillo summarized in the chart below, total installed electricity
generation capacity in Venezuela is 23.1543 megawatts (MW),but
maximum available capacity is only 17.7 (MW). Only 57% of
Venezuela's thermal generating capacity is available, but 88% of
its hydroelectric capacity is operating. The Guri hydroelectric
complex is comprised of two power plants containing a total of
twenty turbines. Six of the turbines are offline under-going
long-term maintenance and are not expected back in service until
the end of 2010. Without those six turbines, Guri's generation
capacity is 8.85 MW; with the additional turbines it will be 10.9
MW.






Installed Capacity (MW)

Per Cent of total installed capacity

Available Capacity (MW)

Available capacity Per cent


Thermo

8,557.1

37%

4,900

57%


Hydroelectric

14,598

63%

12,800

88%


Total

23,154.1

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17,700

76%




6. (C) The Venezuelan press is filled daily, however, with articles
about unscheduled power outages around the country, continued
electricity rationing, and calls for new rationing. The Operations
Office of the Interconnected System (OPSIS) manages the Venezuelan
electricity grid and publishes daily statistics. Post has analyzed
the statistics going back to October 5, 2009 (the last date
available) and determined that OPSIS has balanced generation to
meet electricity demand, maintaining a small band of excess/deficit
generation within 2 gigawatt hours (GWH) throughout the period.









In fact, OPSIS figures indicate Venezuela produced more electricity
than it needed from December 14, 2009 through January 4, 2010
(except on December 23)[NOTE: From December 14 onward, the blue
(electricity generated) and green lines (electricity demand)
overlap each other reflecting Venezuela produced nearly the exact
amount of electricity it required. The red line represents the
amount of electricity exchanged with Colombia and Brazil. For the
period presented, while daily energy demand averaged around 350
GWH/day, OPSIS was able to maintain an exchange with Colombia and
Brazil of less than 2 GWH/day, implying that any power outages or
rationing that occurred during this period were the result of
national transmission, local distribution, or load balancing
problems. Marsik stated that Venezuela's current transmission
network has the capacity to carry the electricity load, but suffers
from a lack of maintenance and investment. He noted that in 2009
under general guidelines from the Ministry of Energy and Petroleum
(MENPET),all electrical subsidiaries including Electricidad de
Caracas, cut maintenance and operations budgets by 85-90%.



The Real Crisis: Hydropower




7. (C) The possible collapse of the hydroelectric system as soon as
May 2010 and Venezuela's inability to make up for the loss with
thermo power is the real crisis confronting the Venezuelan
leadership. Venezuela's umbrella electrical entity, Corpolec
appears to have been able to generate sufficient electricity to
meet demand by running the hydroelectric turbines at a rate that is
not sustainable given current water levels. OPSIS data for January
7 puts the Guri reservoir's water level at 261 millimeters above
sea level (msnm),placing it in the "alarm zone" (see graph below).



cid:image005.png@01CA93A1.65DB9EB0



The pink line in the graph above tracks the predicted impact of the
"el Nino" affect over the months ahead. Our electrical sector
sources agree that this prediction most closely matches the trend
line seen since August 2009. If water levels continue to decrease
per this "el NiC1o" prediction and if the Guri hydroelectric complex
is subject to continued overproduction, water levels are predicted

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to broach the "emergency zone" around March 10 and the "collapse
zone" around May 10 (unless the watershed area receives significant
rainfall or Edelca stops using the hydroelectric plants and thus,
stops drawing down the reservoir). According to Marsik, the
"emergency zone" would require that some hydroelectric turbines be
turned off and the "collapse zone" would indicate the entire Guri
hydroelectric plant would be off-line. Even though the Guri
reservoir is designed for a two-year water cycle, low precipitation
levels since 2008 have left it vulnerable to the current drought.
Following the last "el NiC1o" in 2003, it took two years for the
water levels to return to the mid-point of the "safe zone."



GBRV Strategy




8. (C) It is clear that failures under the Chavez administration to
invest in basic infrastructure (reservoir maintenance/expansion,
transmission and distribution networks, generating capacity) have
resulted in the current crisis. The October 22 appointment of
Angel Rodriguez to head the new Ministry of Electricity and to be
the CEO of the electricity holding company, Corpolec, did not
signal a serious response to a crisis. Rodriguez is a political
hack who has no background in the electrical sector, has never run
a business before, and has not functioned in the executive branch.
He is a former labor union leader turned legislator and a trusted
Chavez loyalist. Chavez's rhetoric in the January 10 session of
his weekly "Alo Presidente" television program serves as another
hallmark of his response to the crisis, i.e., telling the
Venezuelan public that the crisis is caused by the rich.




9. (C) The Electricity Ministry is now focused on reducing
electricity consumption by 1.6 GW, but has not taken action to
reduce consumption during peak demand hours of the day (roughly
from 3 p.m. to 7 p.m.). [NOTE: On Friday, January 8, in addition
to announcing a devaluation of the Venezuelan currency, President
Chavez announced that public sector employees' workdays would be
shortened to five hours, from 8 a.m. to 1 p.m. END NOTE] Corpolec
uses hydroelectricity generation as its base supply and brings on
thermoelectric turbines throughout the day to meet peak demand.
Post suspects that the Electricity Ministry's short-term goal is to
increase the thermoelectricity generation capacity to substitute
for hydroelectric generation (and save the reservoir). According
to a January 8 media report, the Ministry claims the following
system improvements are in progress:

B7 Of 34 emergency projects designed to add 1.47 GW of
capacity, 0.6 GW of new capacity have been added.

B7 A ministry planning document claims an additional 1.25 GW
of additional thermoelectricity generation capacity will come
on-line in 2010;

B7 The same document states the Ministry plans to add 2.65
GW to the electricity grid in 2011.




10. (C) COMMENT: If Venezuela had invested and executed plans to
increase its thermoelectric generating capacity, it would be able
to take the Guri hydroelectric turbines out of service and conserve
the reservoir's water levels. The GBRV confronted a similar
problem during the last el NiC1o cycle in 2003, but the country's
electricity consumption was lower and its installed thermoelectric
generation capacity had not deteriorated to the degree it has
today.

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11. (C) Venezuela's current electricity demand and generation
capacity is 17.7 GW/day. Its installed thermoelectricity
generating capacity is 8.6 GW/day, but currently only 4.9 GW/day is
available, or a third of demand. The Electricity Ministry expects
to add 0.4 MW of new capacity by March. Clearly, bringing
out-of-service capacity back on line must be a GBRV priority, but
even if it is successful in the short-term, Venezuela can only rely
on its thermal turbines to supply half of the country's daily
electricity needs. Thus, we should expect to see greater emphasis
by the GBRV on curbing consumption. It is unlikely, however, that
Venezuela voluntarily will cut its electricity consumption in half
in the next quarter. Thus, short of rainfall saving the day, an
electricity crisis is a very real possibility. END COMMENT.
CAULFIELD