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Energy

Coca Codo Sinclair Hydroelectric Project

Gonzalo Días de Pineda Parish, El Chaco City, Napo Province; El Reventador Parish and Gonzalo Pizarro Parish, Gonzalo Pizarro City, Sucumbíos Province, Ecuador
Written by Diana Castro on .
The Coca Codo Sinclair Hydroelectric Project is 130 kilometres northeast of the Ecuadorian capital, Quito, between Napo and Sucumbíos provinces. Declared a priority project in 2008, construction began in 2010 and it went into operation in November 2016. It is the largest and most expensive infrastructure project in Ecuador’s history. Funded by the Export–Import Bank of China (China Eximbank) and built by Sinohydro Corporation, the project is considered China’s gateway to power infrastructure in Latin America. It has, however, caused significant environmental harm and there have been quality problems.

Basic Information

Name: Coca Codo Sinclair Hydroelectric Project
Chinese Name:
科卡科多-辛克雷水电站
Location:
Gonzalo Días de Pineda Parish, El Chaco City, Napo Province; El Reventador Parish and Gonzalo Pizarro Parish, Gonzalo Pizarro City, Sucumbíos Province, Ecuador.
Type of Project:
Energy.
Project Developer:
Cocasinclair EP (a subsidiary of the state-owned Electric Corporation of Ecuador, CELEC).
Main Contractor:
Sinohydro Corporation (a subsidiary of Power Construction Corporation of China, PowerChina).
Known Financier:
The Export–Import Bank of China (1.7 billion USD).
Cost:
2.85 billion USD.
Project Status:
Operational

Project Outline

For decades, Ecuador faced severe electricity supply shortages, which became even more difficult after 2007 due to severe droughts. As electricity rationing and shortagesp. 75  put the country’s energy deficit at the centre of public debate, the government of Rafael Correa (in office 2007–17) developed an ambitious energy transition agenda characterised by the construction of large hydroelectric dams. The Coca Codo Sinclair Hydroelectric Project (CCSHP) was promoted as the centrepiece of this plan.

In October 2009, the state-owned Cocasinclair EP signed an engineering, procurement, and construction (EPC) turnkey contract worth 1.9 billion USD with Sinohydro Corporation—one of the key subsidiaries of the Power Construction Corporation of China (PowerChina). The beginning of construction was conditional on the closure of the financing and the bank’s first disbursement. Almost a year later, in June 2010, the credit agreement was signed when China Eximbank provided a loan of 1.7 billion USD to cover 85% of the total costp. 39  estimated in the EPC contract. Construction started in July 2010 and the dam was inaugurated on 18 November 2016—some 10 months later than the deadline set out in the contract.

The biggest hydropower project in Ecuador, the CCSHP was designed to have an installed capacity of 1,500 MW and generate an average of 8,734 gigawatt hours (GWh) of electricity per year—about 30% of the country’s annual electricity demand. The project is in the eastern Andes, in a region between the Ecuadorian highlands and the Amazon rainforest. The project is a run-of-the-river facility on the Coca River, at the foot of El Reventador, an active volcano between Napo and Sucumbíos provinces. The total area affected by the project extends over 400 square kilometres of mostly protected natural areas such as the La Cascada Protected Forest, the Cayambe Coca Ecological Reserve, and the Sumaco Biosphere Reserve. According to an unpublished definitive environmental impact assessment (EIA) carried out by Efficacitas—an Ecuadorian firm that provides consulting services in energy, environment, and sustainable development—about 20,000 people live in small villages in the territory, dedicating themselves mostly to small-scale agriculture and trade.

The CCSHP has five components: a water catchment dam, tunnel, compensating reservoir, pressure pipes, and powerhouse. From the intake dam, the water is diverted to the compensating reservoir via a sedimentation basin through a 25-kilometre tunnel built 500 metres under the mountains. From this point, the water is channelled through two pressure pipes to the underground powerhouse, where eight generators produce 1,500 MW of electricity. Finally, the water is returned to the Coca River, approximately 60 kilometres downstream of the first reservoir.

Although the CCSHP is expected to benefit the country in terms of increasing electricity supply, reducing the need for thermoelectric plants and greenhouse gas mitigation, questions remain regarding its long-term implications and sustainability. The lack of serious technical, social, and environmental studies since the beginning of the project has affected the construction and operation of the plant, and has caused cost overruns, delays, and irreversible environmental damage in the river basin.

Coca Codo Sinclair . PC: Wikimedia Commons.

Project Impacts

  • Employment and Labour Rights: According to official data from Cocasinclair’s parent company, the Electric Corporation of Ecuador (CELEC), during the construction phase, CCSHP generated 6,000 direct jobs and 15,000 indirect jobs. Social conflicts emerged related to noncompliance with labour rights regulations on health and safety and wage issues, as well as issues of discrimination and mistreatment. The breaking point came in December 2014 when the collapse of a pressure well claimed 13 lives.
  • Environment: Since the plant became operational, irreversible environmental effects have been observed in the river basin, including changes in ecological water flows, the disappearance of the San Rafael Waterfall, and regressive erosion processes that are now threatening the sustainability of the plant. On the other hand, as a run-of-the-river project, the CCSHP does not include a massive reservoir and thus is not comparablep. 8 in terms of carbon emissions with typical mega-hydropower projects, where large reservoirs cause deforestation and decomposing matter releases methane. In fact, there is evidence the dam has led to Ecuador decreasing thermoelectric production and electricity imports from neighbouring countries, resulting in a considerable reduction in carbon dioxide emissions. However, scientists warn that hydroelectric plants such as CCSHP are vulnerable to climate change.
  • Local Community: No displacement of people or violations of indigenous rights have been reported in relation to this project—unlike many other mega-dam projects in the region. However, local communities have suffered loss of livelihoods, declines in agricultural production for local consumption, and livestock and fishing activities. Although the construction of the project generated employment and boosted the local economy, since the plant became operational, there has been a slowdown in the local economy and an increase in unemploymentp. 14. Local inhabitants have been unable to resume the traditional work that ensured their subsistence.
  • Governance: Social participation in CCSHP has been deficient in terms of both quantity and quality. There is a lack of transparency and access to information. The project has also been tainted by cases of corruption, bribery, and cost overruns.

Initial studies of the hydroelectric potential of the Napo River conducted in the 1970s concluded the Coca Codo Sinclair project would be of great importance for the country. However, following an earthquake near El Reventador volcano in 1987, scholars across the country produced several studies that showed high levels of geological and seismic risk in the Napo River Basin, which, for many, made the project unfeasible. Despite this, in 1992, the National Institute of Electrification conducted the first feasibility studies, funded by the Inter-American Development Bank, and recommendedp. 6 a project with a generation capacity of 859 MW. As Ecuador was in a period of political instability, the government had difficulty obtaining finance for such a high-risk project. Only when Correa’s government came to power in 2007 did it resume the CCSHP, declaring it a ‘high-priority national project’. Soon after, the Italian consultancy ELC-Electroconsult was hired to carry out a conceptual redesign study for a plant capable of generating 1,500 MW—twice the capacity initially proposed. In 2009, the consulting firm Efficacitas carried out the definitive EIA.

As construction began in 2010, local populations had high expectations given the government’s promises of development, employment, and improvement in the quality of life. But negative impacts began to appear immediately, including significant increases in rent, land, and food pricesp. 49. In official documents released in 2014 and 2015, local authorities in El Chaco and Gonzalo Pizarro repeatedly expressed concerns about the decline in agricultural, livestock, and fishing activities because much of the population traditionally engaging in these tasks had gone to work on the CCSHP’s construction. Even so, most of the population continued to view the project as positive due to the increase in job opportunities and the revitalisation of the local economy. This perception began to change as labour conflicts arose.

Between 2011 and 2012, 26 complaints were presented against Sinohydro and Cocasinclair EP before the Labour Inspectorate of the Province of Sucumbíos. According to a detailed study, these claims alleged workers’ occupational health, safety, and general wellbeing had been compromised. The main problems were the absence of protocols for occupational accidents and security, the company’s failure to recognise overtime, and a gap in the salaries paid to local workers compared with foreign workers. Additionally, there were claims that local workers were mistreated and discriminated against by Chinese mid-level managers. Moreover, unsanitary drinking water and food generated health problems among local employees, and their housing at the campsite was precarious. Workers held several strikes and, in response to these complaints, governmental agencies conducted various inspections that led to a fine of 5,280 USD (equivalent to 20 months of the minimum wage) for Sinohydro due to noncompliance with local labour laws. The company reportedly introduced corrective measuresp. 14, including improvements in the workers’ camp infrastructure, the installation of a water purification plant and biometric systems to improve overtime monitoring, periodical medical exams for workers, and training in industrial health and safety.

Despite these measures, problems remained on the construction site. On 13 December 2014, 25 workers were standing on a provisional platform inside the main pressure pipe at the power station when an avalanche of water and construction material burst through part of the tunnel. The platform collapsed, killing 13 people (10 Ecuadorians and three Chinese) and injuring another twelve. Sinohydro activated an emergency system for rescue work and covered all funeral and medical expenses. Additionally, it formed a team to investigate the cause and improve safety conditions at the site to prevent future accidents. The Chinese Embassy, for its part, called on Chinese companies ‘to reflect on this event, learn from this painful lesson, take appropriate measures, and increase safety to better protect Chinese and Ecuadorian workers’.

Official sources declared the disaster was due to a ‘collapse in a pressure well’. Unfortunately, the results of an investigation by the Attorney-General’s Department into the causes of the accident were not published. However, independent civil society organisations pointed to structural failures that caused the collapse of the pressure well. The accident occurred only months after a Mexican–Ecuadorian auditing firm detected technical defects and warned of the presence of cracks in water distributors. Their report ordered the suspension of work on three areas of the construction, including the pressure pipe in the powerhouse, because Sinohydro did not have approval for the detailed engineering designs. The report also noted the safety conditions were poor and Sinohydro lacked a geotechnical specialist—essential for this type of work. In 2015, the German company Consulting Inspection Services (CIS) issued a report confirming the cracks and Sinohydro was forced to repair them.

These setbacks caused repeated delays and cost overruns. According to the contract, CCSHP was to be completed by January 2016. However, the project was officially inaugurated by Chinese President Xi Jinping at an event held in Quito ten months later, on 18 November 2016. The total cost of the project increased from 2.61 billion USD (estimated in 2010) to 2.85 billion USDp. 7. No official information has been presented to explain this increase.

Once CCSHP began operating, the local economy soon experienced a slowdown, and unemployment in the communities surrounding the project increased. Local inhabitants have not been able to resume their traditional agricultural subsistence activitiesp. 18 or livestock work. The EPC contract with Cocasinclair EP does not incorporate a community relations policy or social compensation programs as part of Sinohydro’s responsibilities. Thus, the Ecuadorian Government undertook the tasks of engaging with and compensating locals, and conducting activities for local development, while Sinohydro limited itself exclusively to construction. The Ecuadorian Government sought to provide the population with the necessary capacities and conditions for productive economic development once the construction of the dam was complete. However, despite all the government’s efforts, these objectives remain far from being achievedp. 5. According to information provided by the project evaluation teamp. 27 in 2017, the amount budgeted for these programs had not been fully spent, for reasons that remain unclear. The projects completed included simpler ones such as training and employment programs, electrification works, sewerage services, waste treatment, education, and road infrastructure, while the more comprehensive development projects—those that would have direct productive and economic impacts—have not been fulfilled.

In November 2018, two years after CCSHP began operating, the state Comptroller-General found 171 defects not addressed by Sinohydro, as well as 7,648 cracks and microfissures in water distributors in the plant’s machinery room. The final report of 2019 stated the cracks were caused by Sinohydro’s use of non-approved materials and failure to apply proper technical procedures to weld the faults identified in 2014. Sinohydro, for its part, acknowledged ‘that quality control problems could occur when parts were shipped and moved from the factory in China’. In December 2018, Sinohydro hired German firm TÜV SÜV to carry out an evaluation of the cracks, and confirmed it would cover all repair costs. The Comptroller-General further reported that the construction of CCSHP had resulted in a loss of 165 million USD for the Ecuadorian state, due to breaches in the terms of the contract relating to poor-quality materials that caused structural failures in distributors. The audit report also noted that deadlines were missed, which should have resulted in fines of 80 million USD, but these were never applied to Sinohydro. To date, little is known about the progress of the repairs or the current state of the project.

This whole situation was aggravated when, in February 2020, the San Rafael Waterfall—the largest in Ecuador—disappeared due to a huge sinkhole that appeared in the Coca River a few metres before the falls, swallowing part of the watercourse. There had been many warnings about the possibility that the hydroelectric project would see the falls dry up. Some experts are convinced the CCSHP project is the main cause of the disaster as major changes began to occur in the landscape just as the catchment work was completed in 2014. Following the disappearance of the waterfall, there were also signs of serious river sedimentation and regressive erosion (erosion that occurs in the opposite direction to that of the flow of water) just 10 kilometres from the dam—phenomena that have, in turn, affected downstream populations and ecosystems. Today, these problems remain at the centre of public debate. Experts report that the dam’s infrastructure itself is in serious danger. Some temporary measures have been taken such as work in the riverbed, topographic studies, and construction of provisional infrastructure. However, the search for definitive solutions has been made even more difficult by the Covid-19 pandemic and the political instability in the country at the time of writing.

In-Depth Sources

Castro, Diana. 2019. El Dragón en el paraiso: Cooperación energética Chino-Ecuatoriana [The Dragon in Paradise: Sino-Ecuadorian Cooperation in the Energy Sector]. Quito: Universidad Andina Simón Bolivar.

Castro Diana. (forthcoming). ‘China in Ecuador: The Coca Codo Sinclair Hydroelectric Project.’ In China–LAC: Infrastructure, Connectivity and Everyday Life, edited by the Asian Studies Center and Center for Latin American Studies, University of Pittsburgh, and Red Académica de América Latina y el Caribe sobre China.

Castro, Diana and Paulina Garzón. 2018. ‘China–Ecuador Relations and the Development of the Hydro Sector.’ In Building Development for a New Era: China’s Infrastructure Projects in Latin America and the Caribbean, edited by Enrique Dussel Peters, Ariel C. Armony, and Shoujun Cui, 24–57. Pittsburgh, PA: Asian Studies Center and Center for Latin American Studies, University of Pittsburgh; Universidad Nacional Autónoma de México; and Renmin University of China.

López, Victor. 2020. Renovable o sustentable? La seguridad humana en la gestión del proyecto Coca Codo Sinclair [Renewable or Sustainable? Human Security in the Management of Coca Codo Sinclair Project]. Quito: Instituto de Altos Estudios Nacionales. Link.

Melo, Mario, Paulina Garzón, and Carlos Mazabanda. 2017. China en la Amazonía Ecuatoriana [China in the Ecuadorian Amazon].Quito: Pontificia Universidad Católica del Ecuador.

Plan V, Mil Hojas, and La Fuente. 2018. ‘Coca Codo Sinclair: 1500 MW de corrupción [Coca Codo Sinclair: 1500 MW of Corruption].’ Periodismo de Investigación [Investigative Journalism], 18 November. Link.

Teräväinen, Tuula. 2019. ‘Negotiating Water and Technology: Competing Expectations and Confronting Knowledges in the Case of the Coca Codo Sinclair in Ecuador.’ Water 11(February). Link.

Vallejo, María Cristina, Betty Espinosa, Francisco Venes, Víctor López, and Susana Anda. 2018. Esquivando estándares de desarrollo sustentable: Estudios de casos en proyectos hidroeléctricos del Ecuador [Bypassing sustainable development standards: Case studies on hydroelectric projects in Ecuador]. GEGI Background Paper 001 (October). Boston, MA: Global Development Policy Center, University of Boston: 85. Link.

Vallejo, María Cristina, Betty Espinosa, Francisco Venes, Víctor López, and Susana Anda. 2018. Evading sustainable development standards: Case studies on hydroelectric projects in Ecuador. GEGI Working Paper 019 (October). Boston, MA: Global Development Policy Center, University of Boston: 33. Link.

Viola, Carolina. 2016. ‘Territorios y cambio estructural en hábitats periurbanos: Coca Codo Sinclair, inversión china y el cambio de la matriz energética en el Ecuador [Territories and Structural Change in Peri-Urban Habitats: Coca Codo Sinclair, Chinese Investment and the Change in the Energy Matrix in Ecuador].’ Revista Ciencias Sociales [Social Sciences Magazine] 38. Link.

Updated on 28 February 2022.


Diana Castro is the Research Director of Latinoamerica Sustentable (LAS) and a doctoral fellow in the Latin American Studies Programme at the Universidad Andina Simón Bolívar (UASB-Ecuador). Since 2014, Diana has studied the Latin America–China relations, with a particular emphasis on Chinese financing mechanisms for development and infrastructure-investment projects. Diana is a member of The Latin America and the Caribbean Network on China (Red ALC-China) and La Red China y América Latina (REDCAEM).