Guri: Black Swan, Red Herring

The Guri Dam could be a black swan, but it’s also a red herring.

The regime’s official explanation for Venezuela’s deepening power crisis is that:

*A prolonged drought and El Niño during 2009/early 2010 caused the water level in the Guri Dam’s reservoir to drop to dangerously low levels that made rationing indispensable (false);

*Governments during the pre-Chavez era never invested sufficiently in maintenance or new generation/transmission capacity (false);

*The Venezuelan people are wasteful power users (true).

It is true that the level of water in Guri’s reservoir has dropped precipitously in the past, but it was even lower during the last drought of 2002/2003 when there was no power rationing.

It is also true that the Guri Dam and the other Edelca hydropower generation assets on the Lower Caroni River are falling apart due to bad maintenance, incompetent operators, and forcing more water through the turbines than is safe. But this is exclusively the Chavez regime’s fault.

Before it was infected by the Bolivarian Revolution, Edelca was a relatively well-managed and professional state-owned hydropower company.

But the revolution’s mismanagement of Venezuela’s hydropower assets on the Caroni River has brought the Guri Dam to the point where the catastrophic failure of as many as three of its 20 turbines could happen at any time. Guri is a Black Swan in waiting.

But Guri is also a red herring. By focusing more attention on Guri, including Corpoelec’s December 2009 report that warned of a “national collapse” in 120 days (April/May 2010), the Chavez regime has sought to distract public attention from the power sector’s real problems:

*Insufficient operational thermal power generation capacity. About two-thirds of the country’s state-owned thermal power generation assets currently are offline or working substantially below their installed capacity, and execution/completion of the regime’s planned new thermal power generation projects is running five to seven years behind schedule.

*The national power transmission grid is about 25 years old, on average, and its creeping obsolescence has been accelerated by the Chavez regime’s total disregard for maintenance. In addition, the state-owned power sector has not built any new 765 kV and 400 kV transmission lines in the past decade, almost.

*The state-owned power sector has accumulated massive liabilities (part of which pre-date the Chavez era) that easily total over $5 billion (including labor and other “pasivos” that usually are not acknowledged in the official numbers) because A) other state-owned entities do not pay their power bills, and B) power rates have been frozen by government decree since 2003.

*The best power engineers and technicians were purged from the state-owned power sector years ago by a regime that prizes revolutionary ideology and loyalty to Chavez above knowledge, skill, competence and professionalism.

*The people Chavez has appointed to run the state’s power utilities, many of whom are army generals, have been (and still are), without exception, an incompetent, corrupt gang of bozos.

Since it started raining in April, Chavez has been saying that the power crisis is over. Guri’s reservoir is recovering, Corpoelec will start up between 4,000 MW and 5,000 MW of new thermal power generation capacity in 2010, and the government’s power rationing policies are reducing power use, according to Chavez.

But these presidential claims are untrue.

Guri’s water level is dropping steadily again after rising a few centimeters at end-April/start-May, in part because Corpoelec has ordered Edelca to raise the volume of water flowing through the turbines to generate more hydropower. Larger volumes of water flowing through the turbines increases the wear-and-tear on these units, with the aggravating factor that necessary maintenance activities are being postponed. Guri’s power generation assets are under growing strain because Corpoelec is having serious difficulties increasing thermal power generation.

At best, Corpoelec probably will manage to start up between 1,600 MW and 2,000 MW of thermal generation capacity this year – although this would be an achievement of sorts considering that Cadafe has not completed even a quarter of its planned thermal generation projects since 2002.

Power demand declined by over 2.6% in the first quarter, but has been increasing again since the second half of April, though Chavez had ordered a 20% cut in consumption by the start of April.

The regime’s list of unfinished and under-performing power generation projects is impressive. For example:

*Edelca’s 2,270 MW-capacity Tocoma hydropower complex, the last project on the Lower Caroni River, was scheduled for commissioning in 2007, but it won’t be online until 2014.

*The 1,000 MW Termobachaquero thermal power generation plant on the East Coast of Lake Maracaibo was supposed to start up in 2008, but it was never built.

*The 300 MW Pedro Camejo thermal power generation plant in Valencia is operating at half-capacity because of fuel and power transmission problems (i.e. existing transmission lines cannot handle the full 300 MW load).

*The 450 MW Josefa Camelo thermal power generation plant in Punto Fijo was completed, but it running at only one-third of its capacity because the transmission system in that area of the country cannot take the full 450 MW.

*The 2,000 MW-capacity Planta Centro thermal power generation complex near Puerto Cabello is shut down, and only two of its five 400 MW power generation units (Nos. 3 and 4) operate with any consistency. For years the regime has announced that Planta Centro will be repaired and operated at its full rated capacity. But this will never happen. Planta Centro is a pile of unsalvageable rusting steel and crumbling concrete.

The list is way longer, but what point is there in kicking a dead horse?

The core issue is that Venezuela today does not have sufficient power generation capacity to keep up with growing power demand. And, worse, of the over 23,000 MW of installed power generation capacity that the country reported as of end-2009, between 6,000 and 7,000 MW of that generation capacity is offline.

Power experts who know their profession (none work for Corpoelec or any of its subsidiaries) say that Venezuela needs at least $20 billion of investment over the coming five years simply to catch up in terms of power generation and transmission capacity.

But the Chavez regime consistently low-balls the power sector. Official plans call for commissioning 14,000 MW of new power generation capacity by 2015 at a cost of $14 billion. But that doesn’t cover critically needed investments in new transmission and distribution infrastructure.

Meanwhile, the regime also refuses to increase power rates, isn’t forcing delinquent state entities to pay their way-past due power bills, and is forcing amendments to the never-implemented Organic Law for the Electric Sector (LOSE) to ensure that only the state can own and operate the power industry.


About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
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3 Responses to Guri: Black Swan, Red Herring

  1. Huguito Broke and Nervous says:

    Hugo is suddenly very nervous because he is running out of foreign currency. I made a conservative and simplified guess about Venezuela’s daily cashflow in USD. Can somebody add better data?

    Barriles producidos promedio día………….. 2.500.000
    (-) Barriles entregados Petrocaribe día……. (75.000)
    (-) Fondo CHI-VEN y otros a futuro por día…. (50.000)
    (-) Consumo interno por día………………. (900.000)
    (=) Total barriles exportados por día……… 1.475.000
    (x) Precio cesta venezolana promedio ($)…… 69,49
    (=) Ingreso bruto de divisas por por día…… 102.497.750
    (-) Traspasos a CADIVI por día……………. (80.000.000)
    (-) Necesidades Internas de PDVSA por día….. (5.000.000)
    (-) Traspasos al FONDEN por día…………… (5.000.000)
    (-) Traspasos al BCV por día……………… (5.000.000)
    (=) Divisas disponibles para otros usos…….. 7.497.750


  2. Ernie says:

    Boy, I do enjoy reading your blog, and always wonder if you are based in Alaska, Iceland, or another remote location where they cannot get to you.


  3. Antonio says:

    Hi, gringo, glad you´re back and relentless. Listen I´m not an engineer nor do I pretend to be one, but I do happen to have a friend who is. Well, she worked on the Guri project many years ago and about three months ago we met and had an interesting conversation in which she let me into some facts and details worth mentioning: First, when the exact site of the dam was chosen they always had in mind two “clear water” river sources(two is better then one, as in more reliability); El río Paragua and El Caroni. The Orinoco river was never contemplated as a source because of its abundant sediment. Furthermore, clear water(sediment free) promises longer life for the turbines, and prevents cavitation. The dam as it is lacks lower trap doors(valves?) for releasing sand and debris and makes maintenance a rather dificult task. On the other hand, illegal open mining with compliance from the government has turned two clear water sources into muddy ones putting the dam at risk. Like I said before, just thought it was worth mentioning!!!!! Saludos!!!!


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