Ecuador: Review of FiT for PV and of subsidies for gas increase attractiveness of PV for agriculture and industry

Located directly on the equator, Ecuador offers great opportunities for PV installations. In 2000, Ecuador was even among the first countries worldwide to introduce a support mechanism for renewable energy in form of a Feed-in Tariff (FiT). The program, however, was suspended in 2009 due to difficulties in applying and enforcing the law. With the establishment of the Ministry of Electricity and Renewable Energy (MEER) in 2007, Ecuador started a second attempt to implement RES into its national energy mix. 

With the approval of the decree 004/11, Ecuador has re-introduced a FiT for non-conventional renewable energy sources (wind, PV, solar thermal, biogas, geothermal) with a capacity below 50MW. PV-technology receives the highest tariff, US$ 0.40 per kWh on the continent and even US$ 0.44 per kWh on the Galapagos Islands, which is valid for 15 years starting from the moment on when the applicant is granted the authorization certificate as a producer. These tariffs, however, do not apply for every renewable energy project, but are reserved for non-conventional renewable energy projects selected by the government and that will supply a maximum capacity of 6% of the national installed on-grid capacity. To increase private sector investment into PV systems the government will publish law amendments affecting small-scale PV installations shortly. These will include a redesign of the FiT and a revision of the share of non-conventional renewable energy in the total energy mix.

Additionally to the government plans to increase the share of renewable energy sources, the use of subsidized gas for commercial activities is prohibited since end of 2012 and a broad enforcement of the law is currently beeing worked out. This will increase the cost for gas from 1.7 $/cylinder to 25$/cylinder and PV qualifies as a cost-effective gas-substitute in these cases.

eclareon is currently evaluating the possibility of switching from gas to PV for a medium-sized chicken farm. This farm requires energy for four main activities: heating, ventilation, lighting and irrigation. The heating is a key element of the chicken production which requires a constant temperature for 15 days. Even though the farm is connected to the grid, black outs can last for several days, which is why they rely on gas for the heating.

With the government’s plans to decrease access to subsidized gas for industry and agriculture, the gas price per kWh will rise from US$ 0.008 to US$ 0.129 for the chicken farm. This price increase would ruin the chicken business. A modeling of the energy demand for heating has however shown that 38% less energy is needed for the chicken production when switched from gas to electricity. An on-site PV system with battery is therefore regarded the most effective solution for low energy costs and high reliability. This general scenario can be transferred to various sectors with similar energy requirements and therewith offers great business opportunities for experienced PV engineers and project developers.