In 2019 Colombia invested close to 2% of its Gross Domestic Product (GDP) in renewable energy projects, according to the most recent report from the International Energy Agency (IEA).
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Despite being the developing country with a higher percentage of the electricity matrix based on renewable energies, the allocation of resources is still significant for these energies.
In fact, according to data from the Mining and Energy Planning Unit, in the next 5 years 15,000 megawatts (MW) will enter of energy corresponding to solar, wind and hydraulic sources, with which the composition of the installed capacity will become mainly solar and hydro sources, displacing thermal generation to third place.
This means that the country continues with the path of investment in these sources. Furthermore, according to the IEA analysis, Colombia is one of the few countries that has developed a green or carbon-intensive taxonomy.
In fact, this was published recently, in April by former President Iván Duque and joins other efforts that have been made by the Executive to promote investment in sustainable projects. For example, Colombia has the ‘Roadmap for the Energy Transition’, as well as for specific sources such as offshore wind power generation or the roadmap for green hydrogen.
This led to the fact that at the end of 2021 the flow of capital towards the country in wind and solar sources out of US$800 millionwhich according to the Mines and Energy portfolio meant the second highest investment of this type in history with respect to the countries of the region.
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For the next two years, the flow is estimated at US$3.5 billion according to Germán Corredor, director of SER Colombia.
According to the union leader, this is due to the signs that have been given by the Government for development, such as these roadmaps and other signs such as regulatory ones that allow the arrival of foreign capital is attractive.
The objective of the new Government and through the Ministry of Mines and Energy is to “accelerate the energy transition” for which they point out that there will be a new roadmap that will be known in five months. Although the electrical matrix is mainly renewable, the energy consumption matrix is still predominantly from fossil or more polluting sources.
For this reason, some of the strategies that have been contemplated are promoting the electrification of the vehicle fleet or promoting the connection to natural gas to reduce the consumption of firewood.
To respond to this increased demand, a new auction would be required, says Corredor. In fact, based on Upme projections (July 2022), in a high consumption scenario, from 2024 – 2025 there is a deficit in the balance.
However, the Minister of Energy, Irene Vélez, assured that before promoting a new auction, the Government will seek that the delayed projects begin to deliver firm energy before going out to bid again.
He also pointed out that the government is studying another mechanism in addition to auctions for the generation of renewable energy. “This is one of the tools that we are examining, but we are also reviewing other ways of promoting energy, such as distributed generation”.
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The Agency’s report presents Colombia’s competition model as a case study, which, according to the study, makes it possible to create support for the transition to renewable energies. According to the IEAs, this model allowed for more transparency in distribution prices.
“Such reforms improved the participation and profitability of the private sector and efficiency for public services.”, says the study.
However, it highlights that despite the fact that there are 250 companies in the sector, 4 actors dominate about 60% of businessesboth generation, transmission, distribution and marketing.
The IEA affirms that the auctions have also increased, with respect to other countries, Colombia is behind. Likewise, it points out that the subsidies to retail prices and the high concentration of the market mean a high fiscal risk for the country that must be evaluated, concludes the Agency.
Daniela Morales Soler
