Colombia Announces First Renewable Energy Auction – Infusing Optimism into a Lagging Sector with Potential

Colombia’s Ministry of Mines and Energy announced last week that the national government expects to hold the country’s first renewable energy auction before next year’s presidential election on May 27.

Though details are scarce, Minister of Mines and Energy Germán Arce Zapata said on November 3 that the auction would be part of a regulatory “mechanism” that his ministry and Energy and Gas Regulatory Commission (CREG) are developing to begin awarding contracts for solar, wind, and biomass projects across the country. Oxford Business Group reported that Colombia could initially be looking to auction off “3,000 MW of generation.”

Arce said the mechanism will “lay down the foundation for Colombia’s electrical system to be first in Latin America and eighth worldwide in terms of sustainability,” according to a statement from the Ministry of Mines and Energy.

The mechanism will “lay down the foundation for Colombia’s electrical system to be first in Latin America and eighth worldwide in terms of sustainability,” according the Ministry of Mines and Energy.

The move is Colombia’s latest effort to ramp up investment in the country’s fledgling renewable energy sector, combat climate change, and reduce the country’s dependence on hydroelectric power, which currently makes up nearly two-thirds of Colombia’s energy production.

While hydro generation is relatively clean, and by definition renewable (although not without environment effects), the concentration in one generation method leaves the nation susceptible to drought, as was the case in late 2015 and early 2016 when a severe emergence of El Niño caused the reservoirs that fed into the country’s hydroelectric facilities to begin drying up.

The resulting national energy crisis was the second to hit in 23 years, and the situation was dire enough that President Juan Manuel Santos addressed the nation via television urging citizens and companies to reduce their electricity consumption.

After hydroelectric power, gas and coal-fired power plants are the country’s next largest source of energy, representing 28.9% of the country’s energy mix. Currently, just 3% comes from renewable sources.

Though the Andean nation has enacted several rules and regulations in recent years to incentivize renewable energy projects — including an assortment of tax breaks and import duty exemptions for equipment — the county has struggled to cut much of the red tape surrounding environmental licensing and negotiations with local communities, according to the U.S. Department of Commerce’s International Trade Administration.

“The principle reason for Colombia’s slow progress in the renewables segment is its long-term strategy of hydroelectric generation with thermal backup,” stated a 2017 report by Oxford Business Group. “Around 67% of the country’s energy is produced by small- and large-scale hydrodams, providing cheap and clean electricity, but in periods of drought, the country’s thermal generators provide backup and sell energy to the grid at a scarcity price set by the Energy and Gas Regulation Commission.”

Even though Colombia has been a bit slow getting out of the gate, many analysts are still bullish on its renewable energy potential. The U.S. Department of Commerce has called Colombia’s electricity sector  “promising,” citing projections that the Colombian government projects having 1,421 megawatts from “large-scale renewables” by 2028,  including roughly 1,370 MW of wind, 240 megawatts of solar, and 375 megawatts from geothermal.

Oxford Business Group says the northern department of La Guajira has the potential to generate “2,190 KWh per square meter per year” in wind energy due to its “ideal year-round wind speeds of five meters per second.”

Even though Colombia has been a bit slow getting out of the gate, many analysts are still bullish on its renewable energy potential.

Earlier this year, Luis Gilberto Murillo, minister of the environment and sustainable development, suggested that La Guajira has the capacity to solve all the country’s energy problems. “This department [La Guajira] has the potential to generate all the energy the country needs,” he said at an energy conference in department capital Riohacha in March.

Additionally, the Ministry of the Environment believes that the departments of Santander, Norte de Santander, Valle del Cauca, Huila, Boyacá, and specific areas of Risaralda and Tolima also have great potential for renewable energy projects.

With the prospect of the first renewable energy auction in the next six months, the coming years could be crucial for Colombia’s renewable energy sector. If the adequate infrastructure and regulatory mechanisms are put into place, many experts agree that Colombia could see a major increase in renewable energy project. But if the current conditions persist, Colombia could continue to lag behind.

“Colombia has the conditions to continue advancing,” Alejandro Lucio Chaustre, president of SER Colombia, a renewable energy nonprofit, told PV magazine on November 3. “The resources to generate [energy] with wind and sun is world class, but it requires the creation of a different regulatory mechanism than the existing one. [One] that will make it viable to close on large-scale projects, because it is not possible with what exists today.”

Photo: MaxPixel