Bleak prospects for an energy giant

Venezuela has been facing political deadlock since its controversial President Maduro first came to power in 2013 following the death of his predecessor Chávez. International media reports have highlighted the crisis by pointing to the country’s hyperinflation, government pressure and shortages of food and medicine. These have indeed had a devastating effect on the country’s population, and since 2015, an estimated 4 million people have fled the country. Rebecca Bertram reports

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What has sustained the regime to this date, however has been the country’s energy wealth. Venezuela has the largest proven oil reserves and the eighth largest natural gas reserves in the world. Yet despite this, a severe electricity crisis with regular power cuts persists that paralyze the daily life of most Venezuelans. Such cuts have occurred increasingly since 2010, and in March 2019, almost all of Venezuela was hit for almost a week by the biggest power outage in the country’s history. The government has responded by imposing rationing plans which can last up to 12 hours per day.

Venezuela’s economy lies in shambles. The last two years have seen GDP decline by 17 and 15 percent respectively. Estimates for the year 2020 suggest a further contraction of 8.4 percent. Dwindling oil production and, since 2015, oil and financial sanctions by the United States and others combined push the economy into recession and hit state revenues that pay for the electricity generation and distribution.

However, contrary to a popular belief beefed up by the regime’s propaganda machine, foreign sanctions are not the only culprit for Venezuela’s electricity plight. In fact, the problem has been growing over the last two decades as Venezuelan governments neglected investing in basic electricity infrastructure and maintenance throughout the country. In addition, the formerly private – now state-owned – energy companies were filled with party loyalists of little expertise and understanding for the electricity sector. The system, theoretically capable of generating 34 thousand megawatts, is now producing a mere 5,5 thousand, just 16 percent of capacity.

Climate change has added to the country’s energy woes. Up to 80 percent of electricity generation stem from just one source: the Guri dam, one of the biggest hydroelectric dams in the world. But a long drought caused by the climate phenomenon El Niño in 2009 has resulted in a 79 percent decrease in water levels.

At the first shock, Venezuelan authorities were more surprised than ready to face this enormous challenge. But now they are waking up to the issue and want to begin to invest in alternative renewable energy sources. The Development Plan for the National Electric System for 2019 aims to integrate 613 megawatts of renewables, of which 500 from wind energy. Yet this plan is too little and comes too late. It takes time, expertise and investment to implement, something Venezuela no longer has. About 25,000 skilled electrical personal have left the country since the economic crisis began.

The energy giant Venezuela has a contradicting energy situation. In theory, the country enjoys abundant resources. In practice, it is suffering from a severe energy crisis with no end in sight:  A failing state with a failed economy that has lost the ability to repair the damage and reverse course.

by

Rebecca Bertram

Rebecca Bertram works as a freelancer and consultant on energy and climate issues in Honduras. She used to work for the Heinrich Böll Foundation both as the Director for the Energy and Environment program in the Washington D.C. office and as the Senior Policy Advisor for European Energy Policy at the Foundation's Headquarters in Berlin. Before that, she worked on international energy issues both for the German Ministry of Environment and the German Foreign Ministry. She holds a Master's degree in International Affairs and Economics from the Johns Hopkins University's School of Advanced International Studies (SAIS).

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