How Venezuela's Economic Success Fueled Its Electricity Crisis

In battling its power crisis, Venezuela seems to be pulling out all the stops—well, almost. First, President Nicolas Maduro shut down the country for a week in March, giving citizens an extra three days off of work over the Easter holiday. Then it made every Friday a holiday for the next two months as part of a 60-day plan to curb electricity usage.

Earlier this April, the president called on women to stop using hairdryers, and to save them only for “special occasions.” He also asked citizens to hang their clothes instead of using dryers and to embrace the heat. Most recently, he rationed electricity for 15 shopping malls and announced that he was changing the time zone to save power—something his predecessor Hugo Chavez did in 2007.

But power outages, which have gone on for years, are only part of Venezuela’s problems. “It’s not just electricity; it’s the whole infrastructure of the country that’s crumbling.” says Jean Daudelin, a professor of development and conflict at Carleton University. “It’s the road systems, it’s the ports, it’s the water, it’s everything.”

Venezuela relies heavily on hydroelectric power from the Guri Dam it built in the 1970s and 1980s. Yet the U.S. Energy Information Administration reports that hydroelectric power met less than 25 percent of the Venezuela’s energy demands in 2014. Thanks to historic drought brought on by El Nino, a country that once had one of the largest water reservoirs in the world now holds patches of desert. Earlier this month, water levels hit a historic low of just 797 feet, according to Reuters.

Unlike other countries that use hydroelectric power, Venezuela doesn’t have a sufficient back-up plan for when the water runs dry. It’s not that the country didn’t invest in its electrical infrastructure, according to Victor Silverman, a historian at Pomona College who’s been studying the country’s energy crisis. Under Chavez’s presidency, the country invested around $10 billion in electrical generation, he says. “The problem is that [energy] consumption has increased much faster than that,” he tells CityLab, “about 63 percent over that same period.”

The current crisis is essentially what Silverman calls a problem of the country’s own economic success. Though Venezuela currently grapples with a poverty rate between 75 and 80 percent amid its economic recession, it did once see a remarkable decline in poverty under Chavez—from 50 percent in 1998 to 30 percent in 2013, according to the World Bank. “The Venezuelan economy reduced poverty at one of the most rapid rates in the world, and certainly one of the most rapid rates in Latin America over the past 20 years,” he says. “That meant people had the money to buy refrigerators, air conditioners, and … hairdryers.”

At the time, Venezuela, which holds one of the world’s largest oil reserves, was enjoying high oil prices. It eagerly invested the revenue from oil exports in social programs that improved the quality of life for its poorest citizens. The country made health care and food more affordable. More importantly, the government heavily subsidized fuel and electricity. Gasoline could be bought for mere cents on the gallon—the cheapest price in the world—and Venezuelans consumed electricity at a rate higher than many of their Latin American neighbors.

But the government failed to invest enough money in the energy sector to match the demand. It also failed to sufficiently invest in energy and income alternatives. ”They made serious mistakes in getting [out of poverty]; they needed to move a little more slowly and devote more of their resources to these basic investments,” says Silverman. “That's why the ratio between electricity generation and consumption got so out of whack.”

When oil prices started to sag, the dip in revenue left the government cash-strapped. Yet it was still paying $12.5 billion in fuel subsidies alone. Against a volatile political landscape, Maduro has repeatedly refuse to dramatically scale back those subsidies. (The last time Venezuela eliminated gas subsidies, in 1989, it led to the caracazo, a wave of violent protests that left thousands dead and led to the eventual collapse of the previous government.)

“Maduro won’t give his enemies a card that they could use to draw him out,” Daudelin tells CityLab. “The government is extremely fragile and needs to keep a large amount of people happy, so it spent the money there in subsidies and social services, and in corruption.” In February, for the first time in 20 years, the government raised gas prices by 6,000 percent—a staggering number until you realize that a tank of gasoline still costs less than a quarter. But that’s probably as far as Maduro will go, he says.

So what can the government do at this point? “I honestly can’t see a way out for them, or a place for long-term solutions,” says Daudelin. “[Maduro is] stuck.” Silverman agrees, adding that what Venezuela needs now more than ever is luck—in the form of heavy rainfall.

But it’s not fair to put all the spotlight on Venezuela, Silverman says. Nations all over the world, including neighboring Colombia and countries in Africa, are battling similar energy crises. Even more countries are dealing with problems related to water usage, including the United States. Hydroelectric power often gets touted as a clean, efficient alternative to natural gas, but if Venezuela is any indication, that may not be the case anymore thanks to a changing global climate.

“The whole world is facing this problem, and Venezuela is experiencing the worst of it,” Silverman says. “In a sense, they’re a canary in the coal mine for global climate change and hydroelectric power."