Colombia's energy transition crux: Renewables, reforms and red tape

Alexandra Hernández, the executive director of renewable energy association SER Colombia, speaks to BNamericas about offshore wind, rate freezes, auctions and a need to reduce bureaucracy for project developers. 

This is the second of a two-part interview. The first installment can be seen here.

BNamericas: The government recently issued a decree that will allow sector regulator Creg to freeze power rates. What impact will this have on solar and wind power generators? Could it make your operations unfeasible from an economic point of view and impact future investments? And how sure can investors be that there will be no more changes to the rules of the game, given the possible interference in rates and new taxes, among other things?

Hernández: The rate freeze represents a change in the rules of the game that could have negative consequences for the interest of foreign investors. 

Currently, the rates are calculated based on the unit cost, which recognizes the investments and operations of the companies throughout the electric power chain. However, by freezing the rates, the real values of generation, transmission, distribution and commercialization aren't adequately reflected for users. Therefore, it's always recommended to let the market and its signals define the conditions of the price of electricity.

At SER Colombia, we support the need for a clear regulation that provides security to investors and guarantees the solidity of the system, as well as the economic viability of the projects. For this reason, we reaffirm our willingness to contribute to the construction of a modern, efficient and facilitatory regulatory framework that promotes the development of non-conventional renewable energies in Colombia as a fundamental element in the transition process.

BNamericas: Colombia will hold a reserve power auction later this year. Do you expect strong participation from solar and wind developers? Do you have any predictions for how much new non-conventional renewable energy capacity could be brought online as a result of this auction?

Hernández: Although it's not possible to predict this capacity, it would be a good sign for the country to have a significant participation of renewables in the load auction to provide reliability to the system and greater diversification of the energy matrix. However, adjustments are required from the point of view of firm energy remuneration so that the complementarity offered by renewables to the system is better recognized. In other words, the contribution made by renewables in times of greatest drought should be reflected, since that is when there's more solar radiation and more wind. This complementarity should be reflected in the conditions under which the reliability charge is developed.

BNamericas: Colombia is planning Latin America's first offshore wind power auction this year. What are your expectations for this auction?

Hernández: We're currently waiting for the guidelines of the bidding process to be able to build and promote the development of this technology in regulatory terms. At SER Colombia we hope that clear rules will be determined for fiscal and commercial aspects, for connections, and in particular, for the qualification criteria of the companies. The feasibility of offshore projects must be ensured, taking into account the lessons learned from previous renewables auctions.

BNamericas: Enel recently suspended its Windpeshi wind project in La Guajira due to continued opposition from local communities and indigenous groups. In addition, the Wayú people have asked the licensing authority ANLA and the government to stop approving new wind projects in La Guajira, where many new developments are taking place or are planned in the future. What does that mean for the sector and the country's energy security? Does SER Colombia hope that the Wayú people can be persuaded to change their minds?

Hernández: A joint effort is required between all parties, the government, the communities, the companies and the local and national authorities, so that there can be a development of these projects in a harmonious way with all the actors involved and with the environment.

BNamericas: What role will solar and wind play in guaranteeing electricity supply during the impending El Niño cycle? Are new projects being accelerated to help prevent a supply shortfall or will this be the sole responsibility of thermoelectric generators?

Hernández: Faced with the El Niño phenomenon, the system has been playing with other energy resources for years, but that doesn't mean that the new projects that come in this year aren't important because each additional kilowatt that enters the system adds up in situations of drought. 

When a future El Niño phenomenon occurs again, it will be very important for the country to already have greater renewable energy capacity, given the complementarity that these resources have. Once again, renewables offer an important outlet and backup when the system needs it most in dry seasons and with low hydrology, as well as being a clean and competitive energy that will diversify the energy matrix.