Finding solutions to Colombia's short-term power problems

Gustavo Pérez, an associate sales director of APR Energy, talks to BNamericas about how demand is on the increase for temporary power generation systems in the Andean country against a backdrop of fears about a supply crunch.

BNamericas: How do you see the current environment in Colombia for APR Energy’s business?

Pérez: The energy sector in Colombia is very diverse and competitive. There are small local and multi-Latin players competing with international companies in a relatively mature market. The projected growth of energy demand — 2.6% for the next 14 years — creates long- and medium-term opportunities to implement supplemental power, which, in turn, will support the growth of Colombia’s economy and power grid.

With its experience delivering nearly 5GW of power capacity to more than 35 countries, APR Energy is well suited to support this growth in Colombia with its specialized fast-track power solutions. Additionally, there are new energy-intensive projects in the oil and gas, mining, cement and metallurgy sectors where we are especially skilled.

More specifically, APR Energy’s turnkey power solutions are scalable and utilize advanced technology that can be powered by several types of fuel including natural gas, LPG, associated gas, and diesel. Our flexibility also extends to the financial aspects of a project. Whether you need an interim- or longer-term project, each contract is individually structured to meet our customer’s needs.

BNamericas: Does APR hope to participate in any projects that are included in the next long-term supply auction? What type of projects would interest you and how could a potential partner benefit from APR's involvement?

Pérez: Yes. Notably, projects that have a need for quick start-up times for demand response or grid stabilization would benefit greatly from APR Energy’s technology, which can typically reach full power in about five minutes. Our turnkey business model also allows us to provide integral O&M of gas generation plants. And finally, unlike other players in the "temporary power" industry, APR Energy can customize and design solutions that are adjusted to the needs of clients, without depending on specific technology.

BNamericas: In Colombia the government failed to award contracts at the first renewables auction in February because of a lack of competition among bidders. The mines and energy ministry has since proposed several changes, including contracts for specific time periods, longer supply periods and remuneration in US dollars. In your opinion, will these changes be enough to ensure that the next auction is successful?

Pérez: Unconventional renewable energy is an undeniable path, a global reality and fortunately, a growing trend. Colombia will not be an exception. Although competition rules prevented contracts from being awarded at the last auction, the result marked competitive prices and plurality of offers. Even though many of the proposals were disqualified, I am optimistic that with certain adjustments, a second round would be successful.

Furthermore, I do not believe that remuneration in dollars increases appetite on the demand side. This is because consumers pay for their energy in pesos, and this would transfer the risk of variation of the exchange rate to the company commercializing the energy. Longer contract terms with more competitive prices will help to attract more demand offers, but it is also very important to set specific criteria to avoid a dominant position on the supply side, which would end up harming the consumers.

Overall, a combination of factors is required to improve the conditions of future auctions, but I believe the Colombian stakeholders have the knowledge and ability to establish adequate rules and that the outcome of the next non-conventional energy auction will be positive.

BNamericas: At an auction in February, Colombia offered premium payments to developers that bring plants online ahead of schedule. Have you received interest from developers wishing to implement temporary systems to fast-track generation and benefit from these incentives?

Pérez: I believe you refer to the auction that assigned firm energy obligations and offered a bonus for plants that enter operation before December 1, 2021. We have discussed with developers and after a situation that causes low hydrology, such as El Niño or the failure of a large hydroelectric plant, this solution is certainly a viable option to consider. While these scenarios are unlikely, we are prepared to react quickly if the need arises.

BNamericas: Colombian power system operator XM has warned that the Hidroituango crisis could lead to a mid-to-long term energy deficit. Has this situation created new opportunities for APR?

Pérez: Yes. We have experience in solving such situations and our profile fits perfectly. However, everything depends on whether the obligations assigned to Hidroituango, as well as the revised schedule of its entry into operation, are modified.

Depending on what happens, these obligations could be covered by power plants outside of contracts, if that capacity existed in the system. In any case, APR Energy can install large-scale backup generation very quickly, often within weeks, when necessary.