Green Economy

Alternatively speaking

Alternative energy

Despite their inherent limitations, energy sources alternative to hydrocarbons, and to those susceptible to extreme weather impacts, are to become a vital component of Colombia's energy matrix.

SOMETIMES, numbers speak louder than words, which certainly applies to Colombia’s energy matrix, where today only around 1% is derived from non-conventional renewables such as wind and solar. In contrast roughly 70% stems from hydroelectric plants and 30% from gas and coal. This may no longer remain the case, however, as a broader approach is taking hold. In 2018, the government of then-President Santos revealed national targets of 30% non-conventional renewables in the country’s energy mix by 2030; the amount calculated is to enable a 67-million-ton reduction in CO2 emissions by that year. The state targets were estimated, at the time, to require around USD6 billion in private- and public-sector investment.

The Potential
The nation’s peak electrical usage is at roughly 10,000 MW, with an installed capacity of 16,000MW. Officials suggest that non-conventional energy could double the number to 20,000MW. Energy-sector analysts have pointed to regional peer Chile, a regional peer, which in 2017 had registered no less than a 75% cut in electricity rates over four years, having quadrupled its renewables capacity.

The Ball Gets Rolling
The Mining and Energy Planning Unit (UPME) is an administrative and technical entity mandated to ensure sustainable development of Colombia’s mining and energy sectors. Answering to the Ministry of Mines and Energy, it assists in the formulation of both policy and regulation. In March 2018 UPME put forward a decree to “strengthen the resilience of the electricity generation matrix to events of variability and climate change through risk diversification.” The national grid was perceived as excessively concentrated and in need of diversification. As of April 2018, UPME had seen 299 projects registered for participation in a state tender pertaining the introduction of renewable energies into the National Interconnected System (SIN). A further decree in August confirmed government plans to procure 3.4TWh/yr of electric power from diverse technologies over a decade from December 1, 2022, by which time bid winners were required to have begun delivering juicing up the grid. This would represent about 4.4% of the projected demand in 2022 by UPME estimates.

Regulating the Market
A sector is as credible as the regulator that steers it and the legislation that standardizes it. Colombia’s recently drafted energy regulations, then, placed a welcome mat before the investor. Resolution No. 0570 of 2018 integrates green energy to respond to the pace of climate change, and put Colombia on the same page as international energy agreements such as the COP21. Such compliance enables the setting of effective sustainable norms for long-term contracting, which the regulation also entails. Those rules expressly apply to renewable energy generation projects such as solar and wind and are aimed at lifting clean energy generation to 15% within five years.

Who’ll Start the Bidding?
Louder yet than numbers, are actions, and as we went to print, Colombia was counting down to February 26, the date when select projects would be tendered in a 12-year Power Purchase Agreement (PPA). The duration had previously been announced at 10 years, although Colombia’s Solar Energy Association (SER) had petitioned the government for 15-year PPAs. In Colombia’s first such renewable energy auction—described as technology-neutral—the energy authorities will select solar, wind, and biomass projects with a capacity of over 10MW and allocate 1.18 million MWh per year. According to UPME, the auctions allow both for brownfield and greenfield projects to participate. Short-turnaround projects are favored, too, in order to expedite energy transition and security. Regarding the former, power generators operational since December 31, 2017 are eligible to bid. Greenfield projects, meanwhile, are set to become operational on or before December 1, 2022. “Our goal (…) is to increase the installed capacity of renewables from 50MW, which is what today a city like Ibague needs, to at least 1,500MW, equivalent to what Cali and Medellí­n need together,” said Colombian Vice Minister of Energy and Mines Diego Mesa
Alternatives are a reality. And with regulation in place supporting extended commercial commitment, Colombia can expect greater energy security within this decade.