In recent years Latin American nations have enthusiastically embraced renewable energy sources, and a total of $16.5bn has been invested in the segment across the continent. In November 2016 Chile inaugurated the $343m, 196-MW El Romero solar power plant, which provides enough power to fuel a city of 1m people; while Costa Rica ran on entirely clean energy for seven months in 2016. Yet while its neighbours have introduced attractive incentive schemes and auction processes for clean energy projects, Colombia has remained relatively slow to adapt. In early 2017 only 1% of capacity was supplied by wind, solar and other renewable sources. However, an energy crisis in the first months of 2016 prompted the government to diversify its energy matrix. In the coming 15 years, 40% of the 5362 MW of energy set to be added to the grid has been earmarked for renewable projects.
The principle reason for Colombia’s slow progress in the renewables segment is its long-term strategy of hydroelectric generation with thermal backup. Around 67% of the country’s energy is produced by small- and large-scale hydrodams, providing cheap and clean electricity, but in periods of drought the country’s thermal generators provide backup and sell energy to the grid at a scarcity price set by the Energy and Gas Regulatory Commission (Comisión de Regulación de Energía y Gas, CREG). However, in May 2014 the government passed Law No. 1715, and green energy projects are now exempt from value-added tax, imports are tariff-free and taxes on assets can be written down 50% five years after the initial investment is made. It also established the conditions by which small generators can link and sell to the grid at scarcity price.
A number of private initiatives have been developed on the back of the new law, though they are often small in scale, and in May 2016 the first wave of benefits was approved. The first project, by Synkrom Solar, installed a 111-KW solar plant for an industrial warehouse in the southern city of Buga. The new legislation is also seen as useful for stimulating investment in the country’s 1448 towns and villages and 1.8m Colombians reliant on diesel generation.
However, for the sector to achieve its potential, project auctions with guaranteed long-term contracts will be required. By April 2017 the exact mechanism by which auctions would take place was subject to intense discussion, with CREG proposing four potential models in February 2017. The first auction, with approximately 3000 MW of generation up for sale, could take place as soon as June 2017.
A Place In The Sun
With a sunny climate, two coastlines and mountainous topography, there is potential for renewable energy projects across the country, but the most attractive region is also one of Colombia’s poorest. The northern department of Guajira has a solar potential of 2190 KWh per sq metre per year and ideal year-round wind speeds of five metres per second. The department is home to Colombia’s only existing wind project, a 15-turbine, 19,500-MW project built in 2004 under the UN’s Clean Development Mechanism. Luis Gilberto Murillo, the minister of environment and sustainable development, told media in March 2017 that the Guajira department had the potential to power the whole country and that seven major solar projects were in discussions with regional environmental agencies. Such projects will require major investment in transmission infrastructure and a careful negotiation process with the local Wayuu people, but the potential rewards for both operators and communities, through royalty payments, are significant.
It seems certain that 2017 and 2018 will be crucial years in the development of renewable energy. In February 2017 local firm Celsia announced it would build a 9.9-MW, 18-ha solar farm in Yumbo, Valle del Cauca – the largest in Colombian history. However, if the regulatory framework needed to unlock the potential of the segment falls into place, the growth of the industry means it is unlikely to hold that accolade for long.
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