The Ecuadorian government modified the rules for developing new private generation capacity. Executive Decree No. 515 established a simplified regime for Non-Conventional Renewable Energy (NCRE) projects of up to 100 MW , regulated storage and added new conditions for financing, self-generation and network expansion.
The regulation prioritizes obtaining permits for projects up to 100 MW that incorporate storage and interconnection networks. Projects exceeding this threshold must undergo Public Selection Processes (PPS), without the possibility of being divided into smaller projects to circumvent this procedure.
The package enacted by President Daniel Noboa also addresses one of the most sensitive issues for private capital: private generators, transmission companies, and storage providers will have priority in receiving payments from trusts funded by end-user revenue . This is in addition to direct agreements with creditors and economic adjustment mechanisms.
Furthermore, in operational terms, renewable energy plants up to 10 MW will have preferential dispatch . However, those exceeding that capacity but not exceeding 100 MW will be subject to centralized dispatch by CENACE.
For projects between 10 and 100 MW awarded through direct delegation , the operation and maintenance component of the preferential price may be updated with international inflation indices.
This reform comes with a specific need for capacity, in which the Executive set out to incorporate 1250 MW of renewables , given the generation deficit of close to 1000 MW and the growing projection of demand ( 200 - 300 MW per year ).
This regulatory change had already been anticipated by Energía Estratégica in early June of this year , as part of a broader strategy to incorporate private capital into a sector that for decades was dominated by the State.
At that time it was anticipated that a trust would be activated starting in November for the investments, pending what might happen with the calls for bids to add 1250 MW of capacity.
What are other impacts of the electricity reform?
The regulations stipulate new requirements for competing, meaning that the Environmental Impact Study and the environmental license will no longer be necessary to award a PPS (Public-Private Partnership) . These requirements will be addressed at the stage of signing the enabling title or may be established as a prerequisite.
Renewable energy installations up to 100 MW are also excluded from the free reversion of assets to the State under the conditions established in the regulation.
Private ventures not listed in the Electricity Master Plan may request a Qualification Certificate and reserve the resource and area during the study phase.
The exclusivity agreement will last up to 18 months , extendable to 36 months for geothermal installations. The bank guarantee will be equivalent to 20 unified basic salaries for installations up to 10 MW and 40 for those between 10 and 100 MW.
Above that threshold, the logic changes: all generation developments exceeding 100 MW must undergo a Public Selection Process . The same competitive process will apply to renewable energy, storage, and ancillary services projects included in the Electricity Master Plan.
Successful bidders will be able to back their income through long-term power purchase agreements at the price offered in the process .
And when it comes to private initiatives classified as being of public interest and subsequently added to the Master Plan, the governing Ministry will have three months to convene the PPS , once the corresponding studies have been submitted and the favorable opinion of the Ministry of Finance has been obtained.
Decree No. 515 also includes specific tools for financiers. Among them is the Direct Agreement between the Ministry, the concessionaire, and the creditors , which allows for receiving notifications, rectifying breaches, or replacing the operator before a potential expiration.
If that replacement occurs under the contractual conditions, it will not be necessary to convene a new PPS .
The reform also modifies the order of priority for payments. Trusts established with funds collected from end users must prioritize payments to private generators, transmission companies, and private storage providers , as well as actors linked to strategic alliances.
Storage also gains explicit recognition within the sector architecture, thanks to the fact that the standard incorporates storage systems and complementary services , including frequency regulation, voltage control, reserves and black start.
On the self-generation side, it was established that surpluses can be injected and marketed without volume limitations towards regulated demand and large consumers, under the applicable conditions.
When that production comes from renewable energy sources, sales to regulated demand will have preferential price and term conditions determined by the Electricity Regulation and Control Agency.
Consumers subject to high-voltage tariffs will have 18 months to implement their own generation systems , with exceptions for certain public and social services.
New oil and mining projects will also have additional obligations. Why? Those with a demand exceeding 10 MW will have to self-generate 100% of their requirements , while smaller projects will be able to use phased self-supply schemes.
Autonomous Energy Districts and private networks are gaining ground
Decree No. 515 also creates the Autonomous Energy Districts , a figure that will allow the integration of generation, storage, local networks, lighting and charging stations within a delimited area.
They may be constituted by private, mixed or popular and solidarity economy actors and will be recognized as wholesale participants in the sector , with possible extension of the enabling title up to 40 years.
The permitted methods include local, remote, or combined supply. In exclusively local schemes, annual withdrawals from the system may not exceed previously injected surpluses .
If there is a net deficit, the district must compensate for the additional volume at the higher hourly cost recorded during the year, under the warning that two consecutive breaches may result in the expiration of the authorization.
Furthermore, network expansion incorporates private capital, provided that a distributor cannot implement the necessary infrastructure to meet new demand. And the return on investment can be channeled through the electricity bill, up to a limit equivalent to 50% of the total amount billed in each consumption period .
With this package, Ecuador simultaneously modifies the rules for enabling, contracting, dispatching, financing, self-generation, storage and networks , with a differentiated scheme up to and above 100 MW.