Financial strain, stalled projects and political promises collide in a sector already vulnerable to blackouts.

For years, Ecuadorians have paid electricity rates that cover only part of what it actually costs to keep the lights on. That quiet imbalance — tucked behind subsidies and political caution — is now widening into a crisis that threatens new investment, exposes aging infrastructure, and leaves the country dangerously exposed if another severe drought hits. Government officials insist that consumers will not pay more, yet the companies responsible for producing and delivering power say they may soon lack the means to maintain and expand the system.

A gap that keeps growing

For 2026, regulators estimate that Ecuador’s electricity service will cost 12.83 cents per kilowatt hour to provide — but users will pay only 10.61 cents. The difference, nearly $600 million, would be absorbed by state-run generators and distributors already stretched thin from years of underfunding. With revenues fixed below real expenses, essential investments get postponed, and the margin of safety in a hydro-dependent system shrinks. Officials acknowledge the deficit but argue that tariff stability must be preserved, even as climate conditions grow more unpredictable.

Making subsidies visible

A major shift is underway inside the Ministry of Energy: the “hidden subsidy” that has masked the true cost of new power plants and equipment may finally be brought into the open. For more than a decade, a regulation treated billions invested in the electricity sector as having no time value — as if infrastructure never depreciated and capital carried no risk. By ordering a reform of that rule, authorities are signaling that those long buried costs should at least be counted.

The ministry stresses that this accounting change will not raise bills for any customer. But energy analysts argue that transparency will reveal who benefits most from generous subsidies. Large mining operations, they note, currently pay less than other heavy industries despite consuming vast amounts of energy. A policy intended to protect consumers has increasingly shielded powerful sectors while weakening the finances of state utilities responsible for powering everyone else.

Promises and the price of megaprojects

Even before droughts pushed the grid to the brink, companies like Celec were shouldering debt for hydroelectric megaprojects without any mechanism to recover that investment from users. More than $1.8 billion borrowed to build Coca Codo Sinclair and Sopladora remains on the books, and the repayment burden grows each year that tariffs stay frozen. The sector’s dilemma has become clearer: protecting consumers at all costs is now threatening the very system meant to serve them.

A showcase project stuck in neutral

Nothing illustrates that tension more than the stalled Esmeraldas III thermoelectric plant. Conceived as an emergency measure to boost capacity in 2025, the project was supposed to deliver 91 megawatts of backup generation. Instead, it has been paralyzed since October — amid disputes, technical errors, and a breakdown in communication between the Uruguayan builder and Celec officials. Only 12 megawatts were briefly synchronized during test runs before the work stopped cold.

More troubling is that the company has already received more than $71 million — 80% of the contract value — without delivering an operational facility. And a crucial mistake looms over the site: dozens of engines arrived calibrated for a frequency incompatible with Ecuador’s grid. The fix is possible, but time and trust have both deteriorated, even as demand continues to grow.

A fragile system with high expectations

Ecuador entered this year with hopes that emergency generation would buy time for long-term planning. Instead, political vows to avoid any rate hikes have collided with economic reality — exposing the accumulated cost of decisions made to keep electricity cheap. The system still works today, but less money is available to modernize it, and fewer projects are ready to take pressure off hydro plants when the rains fail. The country’s power network has always been a quiet foundation for daily life; now the strain it carries is becoming impossible to hide.