Colombia increases efforts to incorporate renewables in its energy mix


Colombia is redoubling efforts to include renewable energy in its power supply mix. This has meant moving away from its dependence on hydroelectricity, which has been made unreliable due to shifting climate patterns. Law No. 1715 was passed in May 2014, creating a foundation for the adoption of these technologies by regulating integration of non-conventional renewable energy sources to the national energy system. The law stipulates a number of incentives for investment in the sector, including deductions on income tax for five years, exemption on value-added tax for equipment destined for investment in the sector and exemptions on Customs. The drive to expand renewable capacity from its current level has been given further impetus by ongoing difficulties with the country’s largest energy project, the Ituango Dam, which is intended to meet 17% of Colombia’s electricity demand (see overview). The country is aiming to reach at least 1500 MW of clean energy, or approximately 6% of its total energy output, by the end of 2022.


Considering Colombia’s geographic location, solar energy resources are abundant, with daily irradiation averaging 4.5 KWh per sq metre throughout the country, and regions such as La Guajira and César reaching 6.0 KWh per sq metre. Colombia’s foray into solar energy began in September 2017, with construction of the first photovoltaic plant connected to the National Interconnected System. With an installed capacity of 9.9 MW, the Celsia solar farm in Yumbo was the first of its kind. It was quickly followed by the Celsia Solar Bolívar, which has a generation capacity of 8.8 MW. While industrial-sized projects have been slow to materialise overall, in part due to persistent challenges related to environmental certification and consultation with indigenous communities, the rise in energy prices and reduction in the cost of photovoltaic technology have seen the market for self-consumption projects grow steadily. Companies such as Celsia, Solaer Group, Renovatio and Erco provide small-scale installations across real estate projects, including malls, industrial complexes, universities and public buildings, as well as companies and households.

In April 2019 El Paso photovoltaic plant was inaugurated with an installed capacity of 86.2 MW. The $70m project, built by Enel’s renewable energy subsidiary, comprises 250,000 solar panels and is capable of producing around 176 GWh per year. In the same department, the construction of a large photovoltaic plant is under way, with a planned installed capacity of 100 MW – or output in excess of 41 MWh per year. The licensing of this project is of specific importance because it has successfully navigated previous consultation processes with indigenous tribes. With projects coming on-line and power-purchase agreements (PPAs) successfully being signed with local authorities, the sector seems to have picked up momentum.


According to the World Bank, Colombia’s wind regime is classified among the best in South America; offshore regions in the northern part of the country have class-seven winds, comparable only to the Patagonia regions of Chile and Argentina. La Guajira has wind energy potential of 18 GW but currently has only 19.5 MW of installed capacity from a single project developed by EPM in 2004. Nevertheless, since Law No. 1715 was passed, a number of new projects have sprung up in the region. This includes developments from local company Jemeiwaa Ka’I, which has been creating wind projects for a combined 648 MW, split across five wind farms. Approximately 549 MW of this comes from confirmed output through a transmission line that is currently under construction.

Following a licensing round in 2019, US-based AES Corporation purchased the complex, with which it intends to continue development, construction and operation. “This is a first sign of what is to come,” Germán Corredor, executive director at Ser Colombia, a renewable energy organisation, told OBG. “Large multinationals are eyeing the Colombian market to make acquisitions of smaller local companies that have already made headway in renewable energy projects.”

The first wind energy project to receive approval from the National Agency for Environmental Licensing is the Alpha project, developed by Vientos del Norte, a subsidiary of Portuguese company Renovatio Group. The project will span 4000 ha and have a generation capacity of 200 to 250 MW. It will include 65 wind turbines and an electrical substation connecting it to the national grid. According to Andre Frada, CEO of Renovatio Colombia, the project will result in an investment of $110m and should begin construction by 2022 – although this will depend on the progress of the Mining and Energy Planning Unit.

New Contracts

Towards the end of February 2019 Colombia awarded contracts to two photovoltaic service providers for a combined 238 MW of generation capacity, which are expected to be brought on-line by the end of 2023. The providers are Emgesa’s El Paso Solar and Enel’s La Loma Solar. Contracts have been awarded to develop six projects in the La Guajira region, which have a combined capacity of 1160 MW. Emgesa will be overseeing three projects: Tumawind, Windpeshi and Chemesky. The Medellín-based Eolos Energía, owned by Portuguese company EDPR, with its project Parque BETA; Vientos del Norte, with Parque Alpha; and AES Casa Electrica project rounded out the bids. The contracted capacity is intended to provide additional output to ensure reliability of supply and offset fluctuations caused by disruptions to hydroelectric sources. These projects will represent a major increase in renewable energy capacity; Colombia currently has just 50 MW of installed alternative generation resources feeding into the national grid.

The renewable projects tendered were part of a much larger bidding process that also saw contracts awarded for new hydroelectric and thermal power stations. The Ministry of Mines and Energy has previously stated that more contracts from the initial renewable PPA tender, which was cancelled in late February after proposed prices did not meet government expectations, will be awarded some time during the second quarter of 2019, when another round of projects are set to be considered. The tender has attracted strong interest, with 27 domestic and foreign companies submitting bids for projects. The offers tabled represent generation capacity of 1500 MW, which is three times the targeted level and equivalent to the planned output capacity established in the medium-term plan. Interest in these projects indicates that Colombia’s renewable energy sector is seen by both local and international service providers as having solid long-term investment and earnings potential. “The accessibility of technology and the situation with Ituango, coupled with strong incentives provided by the government, make these tenders very interesting for investors,” Dafna Siegert, advisory partner at EY Colombia, told OBG.

Project Financing

In order to finance the development of these projects, companies have begun issuing green bonds either privately or through the stock exchange. As of April 2019, two entities had issued debt privately: Celsia’s Epsa and Davivienda, for COP420bn ($143.6m) and COP433bn ($148.1m), respectively. In both cases the international finance arm of the World Bank was involved. The first banking institution to make use of this vehicle on the stock exchange was Bancó ldex, for a total of COP200bn ($68.4m), which helped to provide COP328bn ($112.2m) in loans to firms throughout the sector. Local bank Bancolombia followed suit, with the issuance of COP300bn ($102.6m) in 2018. Findeter, the government’s financing arm, with the support of the German Development Bank, then issued a line of credit for $82.4m with a maturity of 15 years to be attributed to projects within the sector.


While biomass energy has great potential, due in large part to the production of vast quantities of agricultural, livestock and urban waste, this source is primarily used by large palm and sugar plantations for self-consumption. Examples of this include Ecopetrol’s Bioenergy project, the Incubator plant in Santander and Molino Federal in Tolima. Nevertheless, with 1.6m tonnes of palm oil and 2.3m tonnes of sugar produced in 2018, as well as strong output of coffee, plantains and livestock, Colombia continues to be an ideal location for the development of biomass energy projects. However, considering the fragmented structure of the agriculture and livestock industry, the likelihood of development of industrial-sized biomass projects is likely a longer-term ambition.

Thanks to its geographic location and abundance of resources, Colombia’s renewable energy future is bright. However, the challenges felt across other segments remain a source of delays for renewable projects as well. Smoothing the way will be an important policy prerogative as deployment of wind, solar and biomass projects would help the sector to strengthen its drought resilience and be better prepared for climate variability. Support from the institutional side of operations must be maintained and strengthened if Colombia seeks to transform its energy mix by 2022.

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The Report: Colombia 2019

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