Through External Circular 022 of 2019, UPME announced the schedule for Colombia’s second renewable energies’ public auction. On the same day, this institution published the minute of the contract to be auctioned and the specific terms and conditions.

The document determines, among others, that the terms’ sheet draft will be released on July 30th, the publication of the participants on September 7th, and the auction will take place on October 22nd.

UPME’s document is another step forward on the Mining and Energy Ministry’s plan towards an energetic transformation. From the renewable’s auction that took place in February to the consolidation of an expert’s panel for such transformation, the signals for companies and investors are clearer than ever. 

After the negative results of February’s auction, the government is aiming for this new auction that includes several changes: 

First, the contracts’ duration went from 12 to 15 years, which provides generators a longer term for recovering their investments and, therefore, facilitates project financing.

Additionally, the selling of energy may be offered within intra-day blocks (from 00:00 to 7:00; from 7:00 to 17:00; and from 17:00 to 00:00). This is an important move forward for photovoltaic generation companies, that will be allowed to offer and supply energy within its productive timeframes. 

Apart from that, generation plants with a capacity equal or higher to 5 MW will be entitled to participate in the auction. This change is meant to secure a higher and more diverse participation on the generator’s side. 

One aspect that was criticized by generators and investors in the last auction, and that remains, is the contract’s price, which will be in Colombian pesos, and whose indexation will be performed according to Colombia’s Producer Price Index. The main critics argued that the contract’s price will be attached to Colombia’s currency volatility and, therefore, increases financial risks.

Finally, determining competition rules that guarantee an efficient allocation process remains at the head of the Energy and Gas Regulation Commission (CREG). This same institution must establish the maximum price limit for the energy that will be sold in the auction. The Mining and Energy Ministry will determine the demand goal, which will be announced by the UPME, together with the maximum limit price, after receiving the offers.