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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Oil Rich Venezuela's Electricity Shortfalls Lose Economy $80 Billion

Oil Rich Venezuela's Electricity Shortfalls Lose Economy $80 Billion

One of the odder inconsistencies in the global energy market is the fact that many energy rich nations are plagued by indigenous shortages.

Among them is Venezuela, which has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere and is the United States' fourth largest oil importer, accounting for roughly 1.5 million barrels a day.

But in domestic energy policies President Hugo Chavez, leader of his self-proclaimed "Bolivarian revolution," has stumbled badly in addressing his nation’s chronic electricity shortages.

The cost to the nation?

$81 billion, according to a report in Venezuela’s most popular newspaper, El Universal.

During a press conference a group of Venezuelan energy experts, including Venezuela's power grid regulator Oficina de Operacion del Sistema Interconectado (Office of Operation of Interconnected Systems, or OPSIS) former general manager Miguel Lara,
Universidad Metropolitana Professor Nelson Hernandez, former consultant to Venezuela’s state-owned Petroleos de Venezuela (PDVSA) energy company and the Ministry of Energy and Petroleum, Universidad Simon Bolivar Professor Jose Manuel Aller, Universidad Central de Venezuela Professor Victor Poleo, La Electricidad de Caracas utility former executive director Inaki Rousse and consultant Jose Aguilar contended that the Chavez administration "has sought to destroy national production and is deceiving the country," citing the lost $81 billion as proof. According to them, "the announced goals have not been attained; a very high cost to the nation has been produced, and the problem has not been solved as they purport to make people understand."

According to Venezuelan power officials, Venezuela’s current daily electricity demand is 15,500 megawatts.

Hitting back at their critics, President Chavez told reporters that Venezuela's electricity-saving measures have eased the burden on the country's overworked power grid and that power generation now exceeds demand by 2,500 megawatts following a package of conservation restrictions implemented last June. Among other restrictions some factories and commercial centers were required to cut consumption by 10 percent or risk being fined. President Chavez added that last year his government added 3,000 megawatts of capacity and plans to add an additional 4,000 megawatts by the end of 2012.

Outgoing Electricity Minister Ali Rodriguez Araque added that between 1999 and last year the government had invested $7.65 billion to develop the national electricity system and that this year 4,000 megawatts will be added to the national electricity system. In addition Araque noted and that that the government is investing $6 billion in the construction of the Manuel Piar Hydroelectric Tocoma Dam Power Plant in the Lower Caroni River Basin in southern Bolivar state, which, when it comes online, will generate an additional 2,160 megawatts of electricity.

But the beginning of Venezuela’s parlous electrical situation dates back to 2007, when Venezuela's power sector was nationalized. Compounding the problems, strict governmental regulation combined with low tariff rates to severely limit profits, leaving little capital for improvements much beyond simple maintenance.

In 2011 Venezuela saw widespread blackouts return after Chavez rashly stated that his government had overcome the severe power crisis of the previous two years, when a long running drought lowered water levels at the country's main hydroelectric dam.

Venezuela’s electricity sector is one of the few in the world to rely on hydroelectricity for the majority of its power production.

Venezuela’s reliance on hydroelectricity is due to government policy dating back to the 1960s, when Caracas decided to minimize fossil fuels power production in order to export as much oil as possible with the result that now 82 percent of Venezuela's electricity comes from renewable energy sources, primarily hydroelectric power.
Venezuela’s hydroelectricity production is concentrated on the Caroni River in Guayana Region, which hosts four dams. The centerpiece of the Caroni River hydroelectric cascades is the 10,200-megawatt concrete gravity and embankment Central Hidroelectrica Simon Bolivar dam, also known as the Guri Dam. The 531 foot high, 4.6 mile-long Guri Dam’s output makes it the third-largest hydroelectric plant in the world.

So, current Venezuelan electrical policy is to press forward with new projects while continuing to bang wasteful energy consumers like a gong. On 27 January Venezuela’s Minister of Electricity Hector Navarro said in an interview with state-run ANTV that,  "Venezuela has a wide range of power production. This makes electricity distribution reliable. However, the scourge of energy waste is still present in society. It is an irrational, cultural, and educational problem that must be addressed."

Whatever the truth of Navarro’s observations, with a presidential election schedule for 7 October, Venezuela’s current electrical policies would hardly seem a vote winner for President Chavez’s reelection.

By. John C.K. Daly of Oilprice.com

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