On May 11, the Ministry of Mines and Energy ("Minenergía") published Resolution 40141 of 2021 (the "Resolution"), which modifies the rules for renewable auctions. These modifications follow announcements made by Minenergía since last year, stating that a third renewables’ auction would be held in the second half of 2021. Specifically, according to a draft Resolution of this same entity, the auction must be held before December 31 of this year (link). 

For Whom are these Modifications Relevant?
This Resolution is relevant for those individuals or companies that own or represent generation projects from non-conventional renewable energy sources whose date of entry into operation is after the date of the Auction. 

The Resolution is also relevant for electric energy trading agents, who will be the buyers of electric energy. It is important to remember that, since the enactment of Resolution 40060 of 2021, traders are required to purchase at least 10% of their energy to serve end users from non-conventional renewable energy sources as of January 1, 2024.

What are the main changes in the Resolution?
The Resolution contains mainly four modifications:

a) Change in the Auction Manager
The entity that must conduct the auctions will not necessarily be the UPME. According to Article 1 of the Resolution, Minenergía may implement the auctions directly or it may designate a different entity, or the Manager of the Commercial Exchanges System ("ASIC", per its acronym in Spanish), as the auction manager. This article states that the auction manager is the entity that must publish the specific terms and conditions of the auction. 
As defined in Article 2 of the Project, these specific terms and conditions must have "no prior objection from the Ministry of Mines and Energy" and will contain the rules for the presentation and evaluation of the proposal, requirements, schedule, among other central aspects of the auction. In addition, Article 14 of the Resolution establishes the general obligations of the auction manager. Among others, it must hire the auction comptroller, establish and maintain the auction management system, and provide a report to the Ministry of Energy, within ten days after the end of the auction, in which it shall evaluate, in a complete and detailed manner, the awarding of the auction and the results obtained.

b) Draft of the Power Purchase Agreement of the Auction
Article 4 of the Resolution states that Minenergía, and not the UPME (as it was in the past), must define the draft of the power purchase agreement of the auction (“PPA”). Note that Minenergía has already published a provisional draft for consultation (link).

c) Buyer's offer
Article 6 of the Resolution eliminates the condition (V) established in Article 20 of Resolution MME 40590 of 2019 regarding the Buyers' offer, which prevented the sum of the quantities of the purchase offers from exceeding the average daily commercial demand of the buyer for the year prior to the publication of the specific terms and conditions.

d) Sellers' Offers
Article 6 of the Resolution determines that generation projects that have been awarded long-term contracts through this auction mechanism in the past are entitled to participate. However, the maximum amount of energy of their offers will be the result of subtracting the daily energy awarded in these contracts from the calculation of the average daily energy of the generation project, as specified in the specific bidding terms and conditions.

e) Changes on the Projects that are Entitled to Participate
Article 7 of the Resolution adds a paragraph to Article 22 of Resolution MME 40590 of 2019, establishing that projects that (i) do not have firm energy obligations assigned and (ii) have not executed energy supply contracts resulting from long-term contracting auctions, may participate and bid in any intraday block. On the other hand, projects that have been awarded with firm energy obligations, or that have executed energy supply contracts as a result of the long-term contracting auctions, may only participate by submitting their bids in Block No. 3, that is, for the 7 one-hour periods between 17:00 hours and 24:00 hours.

Next Steps

• The following documents are expected to be published in the upcoming months:
• Publication of the definitive Resolution of Minenergía calling for the auction.
• Publication of the definitive version of the draft PPA by Minenergía.
• Selection of the auction manager by Minenergía, if this entity decides that it will not administer the auction on its own.
• Publication of the specific bidding terms and conditions by the auction manager.