Currently, there are around 190 operators in Colombia, which accounted for 1.7% of the National GDP in 2017. In 2017, total electricity generation was 66,893.05 GWh, 68.8% of which was produced from hydropower, 29% by thermo-electric plants and 2.2% by smaller plants and cogeneration. Thermal plants, fueled mainly by natural gas, have become an important source of energy in drought periods. For example, in 2015 and 2016 there was a significant increase in thermo-electric power generation due to the water deficit caused by the “El Niño” phenomenon. However, hydropower continues to be the most important source of electricity in Colombia. In 2017, hydropower generation returned to normal levels considering new hydroelectric plants were set up, which helps to explain the forecast of hydropower growth at an annual average of 2.9% between 2018 and 2027.

As for consumption, electric power demand reached 61,700 GWh in 2017, representing a growth of 3% compared to the previous year. This corresponds to a per capita consumption of 1257.7 kWh in 2017. From 2010 to 2015, energy demand has increased by an average of 3% per year.  

Energy demand, regulated or not, has increased over the last year by 3.51% and 2.01% respectively. While mining and manufacturing sectors represent 66% of unregulated electric power demand, financial and commerce sectors represent 13% of the current electricity demand from the regulated market.

Institutions such as the Energy and Gas Regulation Commission (Comisión de Regulación de Energía y Gas - CREG) and the Mining and Energy Planning Unit (Unidad de Planeación Minero-Energética - UPME) currently govern the policies of the energy industry. Also, certain important guilds have emerged such as Acolgén, Andesco, Andeg and Asocodis, among others.

In order to guarantee future energy supply, the Ministry of Mines and Energy, and the Mining and Energy Planning Unit (UPME) developed the National Energy Plan (PEN) 2050. This plan aims to implement certain measures to allow the country to diversify the energy basket by means of increasing installed capacity by 35%, promoting renewable energy use, generating strategies for greater availability of energy, promoting infrastructure projects to increase international interconnection and, finally, achieving the required technological, infrastructure, human capital and regulatory modernization to enhance development of the energy industry.

It is expected that between 2018 and 2027, total power generation capacity will increase by an annual average of 2.6%, while energy consumption will expand by an annual average of 3.7%.

Renewable Energies

Renewable energies are obtained from the use of inexhaustible resources, among which the following may be found: wind, hydro, solar, geothermal and biomass. Colombia has great potential for renewable or clean energy developments considering its natural wealth, its strategic position in the tropics and, a mountainous system. This allows power generation derived from water, wind, sun and biomass residues such as sugarcane, palm oil, rice and banana. Currently, only 1% of energy comes from non-conventional renewable sources.

The renewable energy industry has become a key sector for the country due to several factors. First, there is a need to diversify the energy matrix considering Colombia depends on up to approximately 70% hydropower, which subjects it to the effects of climatic phenomena. Second, it must comply with the commitments acquired under the Paris Agreement which seek to reduce up to 20% greenhouse gas emissions by 2030. Third, there needs to be a balance in energy prices during periods of instability in the energy system. For example, during the climatic phenomena “El Niño” between 2015 and 2016, prices increased from COP150/Kwh to more than COP1300/Kwh. Finally, stability needs to be generated in the energy sector, which allows the promotion of long-term contracts that are necessary for the industrial sector.

With the aim to achieve an efficient energy matrix, the country will rely on solar and wind energy generation in the medium and long term. According to a report published by UPME, 160 solar energy projects and 14 wind energy projects have been registered, representing a total of 1,639MW and 1,246MW respectively. According to government estimates, by 2028 there could be between 143 and 239 megawatts from solar energy generation in the country.

In order to promote the industry, the government enacted Law 1715 of 2014 to regulate Unconventional Renewable Energies. This law established three benefits which aim to promote clean energy use: 

  1. Tax incentives in the VAT exception and income deductions to encourage research activities
  2. Tariff exemption regarding the import of equipment destined to these activities 
  3. Accelerated depreciation of assets with accounting benefits.

Featured Information

  • It is projected that electric power demand will increase by 2.85% between 2017 and 2031.
  • UPME registered 467 energy generation projects for 2017 of which 66.4% are solar, 26.8% hydraulic, 3.9% thermal, 1.7% biomass and 1.3% wind power.
  • According to UPME, natural gas demand will increase by 17.1% in 2018 as a result of the greater demand from thermoelectric and oil industries.
  • Hydropower energy increased by 17% in 2017.
  • Of the 190 operators of the electric power industry, there are 56 electrical generation companies, 12 transmission companies, 31 distribution companies, and 93 commercialization companies.
  • Colombia has positioned itself in the global top 10 for renewable energy generation according to the Global Energy Architecture Performance Index of the World Economic Forum.
  • 70% of the energy generated in Colombia comes from hydroelectric power plants.
  • La Guajira has some of the highest wind-generation potential on the continent, with the capacity to generate power for the entire country.
  • The UPME has registered more than 200 projects for the production of renewable energies, with investments exceeding US$ 60,000.

Source: Mining and Energy Planning Unit (UPME), The National Administrative Department of Statistics (DANE), BMI Research

Experience
Providing advice to ISA, ISAGEN, ENDESA, ENEL, CELSIA, EPM, ECOPETROL regarding corporate matters, as well as regulatory matters, related to the energy industry.
Providing advice to ISA, ISAGEN, ENDESA, ENEL, CELSIA, EPM, ECOPETROL regarding corporate matters, as well as regulatory matters, related to the energy industry.
Providing advice to INVERSIONES COLOMBIANAS ARAUCO S.A.S in connection with the implementation of a distribution and trade scheme for electric power in their shopping centers
Providing advice to INVERSIONES COLOMBIANAS ARAUCO S.A.S in connection with the implementation of a distribution and trade scheme for electric power in their shopping centers
Providing advice to ASHMORE in the negotiation of the EPC and O&M agreements required for the Regional Energy Transmission System project.
Providing advice to ASHMORE in the negotiation of the EPC and O&M agreements required for the Regional Energy Transmission System project.
Providing advice to NUCAPITAL regarding the development of its renewable energy project in Colombia.
Providing advice to NUCAPITAL regarding the development of its renewable energy project in Colombia.
Provided advice to ESPELLA ILUMINACIONES regarding the preparation and drafting of a long-term power supply contract with its Colombian clients for the development of photovoltaic self-generation under the new system of the Renewable Energy Law.
Provided advice to ESPELLA ILUMINACIONES regarding the preparation and drafting of a long-term power supply contract with its Colombian clients for the development of photovoltaic self-generation under the new system of the Renewable Energy Law.
Provided advice to ENERPRO regarding a 100-megawatt solar photovoltaic project in Santander.
Provided advice to ENERPRO regarding a 100-megawatt solar photovoltaic project in Santander.
Provided advice to SOLARCITY regarding regulatory matters of the renewable energy sector for the implementation of a photovoltaic self-generation project.
Provided advice to SOLARCITY regarding regulatory matters of the renewable energy sector for the implementation of a photovoltaic self-generation project.
Provided advice in regulatory and tax related matters to SC SOLAR for the implementation of renewable energy projects.
Provided advice in regulatory and tax related matters to SC SOLAR for the implementation of renewable energy projects.
Provided advice regarding regulatory matters to NEW CAPITAL for a 20-megawatt wind energy project in La Guajira.
Provided advice regarding regulatory matters to NEW CAPITAL for a 20-megawatt wind energy project in La Guajira.
Provided advice to GICOL for the development of an energy project from solid household waste.
Provided advice to GICOL for the development of an energy project from solid household waste.
Provided advice on the implementation of an electric cogeneration project for INCAUCA S.A. (renewable energy).
Provided advice on the implementation of an electric cogeneration project for INCAUCA S.A. (renewable energy).
Provided advice on regulatory matters to ARQUITECTURA Y CONCRETO in the PPA and EPC contracts in Antioquia.
Provided advice on regulatory matters to ARQUITECTURA Y CONCRETO in the PPA and EPC contracts in Antioquia.
Provided advice in connection with the structuring of three wind-generation projects in La Guajira for ENERFIN.
Provided advice in connection with the structuring of three wind-generation projects in La Guajira for ENERFIN.
Due Diligence to MACQUARIE for the PCHs acquisition.
Due Diligence to MACQUARIE for the PCHs acquisition.