Power policy

Colombia’s Ministry of Energy ratified in 2019 its intention of achieving a total installed capacity of at least 2,500 MW of renewable energy by 2022. In 2020, this value was less than 1,350 MW, so their renewable energy capacity needs to grow 85% to reach this target. Their historically weak policy support for non-hydroelectric sources of renewable energy has resulted in limited renewable energy development. However, 2019 saw the country hold its first successful long-term wind and solar auction (after an unsuccessful attempt at the beginning of the same year), in which it awarded contracts to 1.3 gigawatts of wind and solar projects. Projects will have to start operations by January 2022 and were awarded a 15-year PPA. A third renewable energy auction is due in January 2023, according to PV Tech, delayed from this year, and is expected to add 2,800 megawatts to the national energy mix. Also, in 2019, Colombia introduced a mandate for electricity distributors supplying regulated markets to procure 10% of their power from clean energy sources from 2022 onward. The country also established conditions over the years (2014-2018) for a net metering policy for small-scale auto generators.

Power prices and costs

Colombia’s Ministry of Energy ratified in 2019 its intention of achieving a total installed capacity of at least 2,500 MW of renewable energy by 2022. In 2020, this value was less than 1,350 MW, so their renewable energy capacity needs to grow 85% to reach this target. Their historically weak policy support for non-hydroelectric sources of renewable energy has resulted in limited renewable energy development. However, 2019 saw the country hold its first successful long-term wind and solar auction (after an unsuccessful attempt at the beginning of the same year), in which it awarded contracts to 1.3 gigawatts of wind and solar projects. Projects will have to start operations by January 2022 and were awarded a 15-year PPA. A third renewable energy auction is due in January 2023, according to PV Tech, delayed from this year, and is expected to add 2,800 megawatts to the national energy mix. Also, in 2019, Colombia introduced a mandate for electricity distributors supplying regulated markets to procure 10% of their power from clean energy sources from 2022 onward. The country also established conditions over the years (2014-2018) for a net metering policy for small-scale auto generators.

Power market

Colombia has a total installed capacity of 17.6 gigawatts at year-end 2020. Large hydro accounts for 62% of this, and it provided 65% of the 70 terawatt-hours of electricity generated that year. That was followed by natural gas and coal, at 12% of generation each. Other renewables accounted for 8% of generation, with most coming from small hydro. Capacity additions since 2010 have been dominated by hydro, oil and diesel. In order to limit the use of fossil fuels in their national power market, a carbon tax was introduced for thermal coal, LPG and natural gas from 2024 on. As of that year, 20% of the going rate will be charged, and every 12 months that will increase by 20 percentage points, until the full value is applied in 2027. This gradualness allows thermal agents to incorporate clean technologies that generate less CO2 emissions.

Among renewables, Colombia had 966 megawatts of small hydro, only 180 megawatts of solar and 19.5 megawatts of wind. Colombia’s power market has numerous private and state-owned players across segments, but some parts remain concentrated. While the generation market has more than 50 independent power producers, each retail company is responsible for a region of the country. Still, consumers with higher demand (normally commercial and industrial with demand over 2 megawatts) can buy power directly from generators. Besides that, the system regulator, Creg, allows small and big companies to generate their own electricity in order to meet their needs, whilst making it possible to sell the surplus to the interconnected system. As an example, on March 2021, GreenYellow secured a PPA to take all output of the solar power plant Petalo de Cordoba I, which will supply electricity for all AC of the 27 warehouses of Exito Group.

Most investment directed to non-hydro renewable energy in Colombia to date has come from international development banks. From 2011 to 2020, Colombia attracted $1.3 billion in investment, with a substantial increase in non-hydro investments seen in 2018, especially for solar, with $46 million invested only in 2020. Investment is expected to regain highs in the coming years as auction projects progress.

Doing business and barriers

The government introduced tax incentives for investment in renewables in 2014, providing for the accelerated depreciation of up to 20% per year for renewable-energy investments; 50% income tax deduction on investments valued at up to 50% of taxable income for up to five years; VAT exemption for renewable-energy equipment and services; and import duty exemption for renewable energy equipment. Policies introduced in 2019 have added momentum to the renewables market. Colombia’s first successful renewable auction awarded long term PPAs, paid in local currency, to 1.3 gigawatts of wind and solar projects. The presence of large global companies in the auction underlined the attractiveness of Colombia as an emerging clean energy market. With the exception of domestic player Celsia, all winners were large, global firms aiming to secure early market entry.

Although Colombia has clear rules on interconnection, one of the main technical issues for project developers (especially for photovoltaic plants) is that sometimes the permission to connect to the grid takes too long and the country's grid infrastructure needs to be expanded since the network doesn’t cover vast areas of the east of the country.

Clear barriers to renewable project development remain. Wind projects in particular face significant delays to commissioning as essential transmission infrastructure in the promising La Guajira region is held up. Home to many indigenous communities, La Guajira is an isolated and undeveloped peninsula located on Colombia’s northern Caribbean coast. The region has excellent wind resources but is poorly interconnected with the main Sistema Interconectado Nacional (SIN) grid. All of the wind capacity awarded in the auction is located there, which represents over 75% of total capacity awarded in the auction. The project for 470 kilometers of power lines plus substations was due to be commissioned by December 2023, but since public consultation with local communities was delayed due to the Covid-19 pandemic, the lines are now not expected to be completed until late 2024.

EV market

The Colombian market ihas seen constant growth in its EV sales rate since 2018 due to their government boost in the clean transport sector (both electric and hybrid) with many incentives, fuel economy standards and carbon tax do diminish the emissions.

EV policy

Colombia's president launched in August 2019 the National Strategy for Electric and Sustainable Mobility. The initiative has the goal of incorporating 600,000 electric vehicles by 2030. It has also the goal of achieving by 2035 that 100% of public vehicles purchased for Mass Transportation Systems be electric or with zero polluting emissions. Parts and loading centers of electric and hybrid vehicles have a differentiated value added tax and exemption on import tax (as do the stations for charging electric vehicles). For the construction of the infrastructure of the stations, Colombian municipalities may carry out public-private partnerships. Bogota, D.C., must guarantee that there are at least twenty fast charging stations in functioning order, and the municipalities of special category may guarantee that there are at least five stations in their territory. The Ministry of Energy and Mines also defined some rules and rights that consumers have once they buy an EV and it includes an income tax discount of 25% of the investment made.

Buildings market

Colombia's Energy Efficiency Plan 2017–2022 encompasses measures for transport, industrial, commercial and residential sectors.

Buildings policy

Some of the residential measures include replacement of domestic refrigeration equipment, incandescent and CFL bulbs with LEDs, improvement of energy efficiency in buildings through athermic paints, wind extractors and substitution of electric showers for Solar Systems Thermal. With that in mind, the "Fondo de energias no convencionales y gestion eficiente de la energía" (Fenoge) finance, manage and execute plans, programs and projects aligned with the purpose of improving Energy Efficiency and the use of Non-Conventional Sources of Energy in the country.