Powering up a nation

Colombia's power market remains attractive to investors despite signs of an economic slowdown, according to the latest edition of the BNamericas Intelligence Series.

But a reliance on hydropower, permitting issues and the need to ensure reliable natural gas supply remain key challenges, the series' electric power report found.

"Short-term opportunities for generation projects are limited, but more capacity will be necessary in the long run," the report says.

"These needs could be filled in part by an emergent renewable energy sector, depending on how the market reacts to the new fiscal incentives and market mechanisms that regulators are putting the finishing touches on."

The International Monetary Fund (IMF) expects the Colombian economy to grow 3.5% this year, below its average of 4.8% during the last 10 years.

According to the report, electricity use in Colombia has historically followed economic growth, "with 2015 being no exception".

"Consumption has shown some signs of slowing this year but remains robust overall, up 3.4% year-on-year in the first seven months," the report says.

It added that the most conservative government estimates point to electricity use and peak demand growing at an annual average of 3% and 2.4%, respectively, in the next 15 years.

The report said 106 generation projects are in the prefeasibility or feasibility stage, representing 4.5GW of installed capacity.

Hydropower dominates the portfolio, making up 62% of the projects, followed by wind (19%), thermopower (17%), geothermal (1.1%) and solar (0.9%), according to the report, which cited the government's UPME energy planning unit.

Meanwhile, new incentives are expected to be offered to renewable energy developers as a result of regulations being drafted by the energy ministry and sector regulator Creg.

The report says Colombia's power system has maintained a comfortable surplus despite adding only 2.2GW of capacity over the past decade.

Installed capacity currently stands at 15.5GW, more than 5GW above the 2014 peak load.

"Based on these figures, Colombia should not face an energy crunch in the short term," the report says, warning that a lack of diversity could threaten future supply.

An influx of new generation projects is expected to guarantee opportunities in the transmission and distribution segments as the government aims to connect the 1.86mn Colombians still without power, the report added.

The Opportunities Evolving in Colombia's Power Market report can be seen here.