With extensive hydro resources, the country is working to bolster the sector and existing networks

The electricity plants and transmission network are among the strongest aspects of Colombia’s infrastructure and a point of reference for Latin American countries seeking to modernise their own grids. At home, Colombia’s robust electricity infrastructure has been a boon to growth – especially considering the deficiencies in other parts of the public works network – and even a money-maker, as electricity exports to neighbours bring in increasing amounts of revenue. The ability to produce surpluses of electricity is largely due to the country’s vast hydroelectric resources. Of Colombia’s 14.4 GW of installed capacity around 70% came from hydroelectric plants, and in October 2013 it was 68% of a total 5.3 TWh produced in the country. Beyond the substantial capacity already installed, Colombia has untapped hydro resources that, if utilised, could produce several times the amount of electricity the country consumes. As the economy expands and consumption grows, several projects have been initiated to make use of these resources.

Hidroituango

The $3bn Hidroituango project is located in the municipality of Ituango in Antioquia, a northern department that is the leader in hydroelectric generation. When completed, the Ituango dam will flood an area almost 80 km long and 700 metres wide along the Cauca River. With a total capacity of 2400 MW, it will be the biggest production facility in the country.

The large-scale project is being carried out by a public-private partnership that includes the government of Antioquia, the state-owned Empresas Pú blicas de Medellín (EPM) and private companies from Colombia, France, Brazil and elsewhere. The project’s construction has progressed close to schedule since it began in 2010, and half of the dam’s capacity, 1200 MW, is expected to come on-line by 2018. This half would represent an 8% rise in national installed electricity capacity, based on 2013 levels, with the other half scheduled to come on-line in 2021.

Hidrosogamoso

The second-biggest ongoing project, Hidrosogamoso is located on the Sogamoso River in the department of Santander and is being developed by Isagen, a publically and privately owned utility company, with an investment of about $2bn. When Hidrosogamoso comes on-line, it will have a capacity of 820 MW. Construction began in 2009 and was scheduled for completion by December 2013. However, after delays caused by harsh winters in 2010/11 and 2011/12, Isagen pushed back the completion date by half a year.

As of mid-2014 the dam is still not operating due to a new holdup: protests and road blockages by local communities that will be affected by the project. Following the protests, the National Authority for Environment Licences opened an investigation into claims of undue environmental harm caused by the project, which could further delay the dam’s opening. Despite the holdups, it appears clear that the dam, which has been completed, will eventually come on-line, but the timeline remains uncertain.

Other Hydro Projects

Other notable hydroelectric projects include El Quimbo Dam on the Magdalena River and Porvenir II on the Samara River. El Quimbo is an $837m project of Spain’s Endesa through its Colombian subsidiary, Emgesa.

The dam is slated to have a total capacity of 400 MW. However, its completion date has been pushed back from November 2014 into 2015 amid local protests and a federal court order obliging Emgesa to reassess the project’s impact. Porvenir II is a project of Celsia, a Colombian electricity company, and will have 352 MW of capacity. The project is scheduled for completion in 2017.

Hydropower is an attractive option for electricity generation in Colombia because of the abundance of available resources and its relative environmental advantages compared to fossil fuel-based production (though there is some debate over whether hydroelectricity is truly “clean” energy). However, Colombia faces a unique set of risks in its reliance on water-based electricity.

Security

The first and most obvious of these is security. Colombia’s dams are generally located in remote parts of the country that are difficult for the military to actively patrol. The facilities are also large targets with extensive machinery, and thus have multiple points of vulnerability. The Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, FARC) and the National Liberation Army announced in 2012 their intent to jointly attack hydroelectric projects. In late 2012 the FARC attacked military patrol units near the Hidroituango project, killing several soldiers. In response, the military sent in a larger contingent of soldiers to patrol on an ongoing basis. The larger force has since maintained security at the site for the most part. The biggest attack since 2012 came in October of 2013 when a unit of the FARC damaged eight construction vehicles with grenades and rifle fire. No one was injured in the attack. EL NIÑO: Colombia’s hydroelectric sector periodically faces another problem, which no amount of manpower can eliminate: droughts caused by the El Niño weather phenomenon. El Niño occurs roughly every five years and affects areas near the equator from India across the Pacific to South America. In Colombia the phenomenon causes droughts, which hamper hydroelectricity production. El Niño can be predicted with some accuracy as much as a year in advance, which gives time to prepare, but virtually nothing can be done to mitigate its impact on hydropower. As of mid-2014, meteorologists believe El Niño may occur later in 2014. As a result of the inevitable, weather-based fluctuations in Colombian hydropower’s capacity, it is important that the country diversify its mix of electricity production.

Thermal Power

Gas- and coal-fired power plants could emerge as the solution to Colombia’s need to broaden its generation options. As of October 2013 gas accounted for 18% of the country’s electricity production and coal represented 8%. Plans are in place for several facilities that would expand the thermal power generating capacity, but some have been delayed. One of these is a 400-MW coal-fired power station managed by Gecelca, a public utility company, with two turbines to be constructed in separate phases. The first was originally scheduled for completion by a Chinese contractor in 2013, with the second planned for two years later.

However, in late 2013 the contractor requested a one-year extension, which has raised questions about the viability of the project’s second phase. Another delayed project is Termocol, a 202 MW coal-fired plant built by Poliobras. The construction company won the contract in a 2008 auction held by the Regulatory Commission of Energy and Gas (Comisión de Regulación de Energía y Gas, CREG), the national electricity regulator. The plant was supposed to be completed by December 2013, but by July 2014 it had become clear that the project was behind schedule. Poliobras was fined and, as of mid-2014, it is unclear when the plant will begin operating.

Other ongoing projects include Termonorte, an 88 MW gas-powered plant slated for completion in 2017, and Termotasajero II, a 180 MW coal-fired plant scheduled to start up in 2015. If all current thermal generation projects are completed, Colombia will have total gas- and coal-based electricity production capacity of 5395 MW, compared to the 4545 MW that were in place at the end of 2012.

Electricity Export

Electricity production capacity is increasing to such an extent that concerns about oversupply have arisen. “Supply is growing much faster than demand,” Pablo José Barrera, director-general of BRP Engineers, a Colombian energy services provider, told OBG. The solution is exporting electricity, an activity that Colombian producers are currently engaged in and that may grow in the coming years. As Germán Castro Ferreira, the former executive director of CREG, told OBG, the electricity market in Colombia is free, and producers may choose to sell energy to either the national grid or to foreign entities. “If they choose to export, they leave an opening for another producer for the domestic market,” he said.

Today Colombia, which is a net exporter of electricity, sends power to Ecuador and Venezuela. As of late 2013 Ecuador imported about 3 GWh per day, about 3% of the country’s consumption, with the electricity delivered on a 500-MW transmission line. Electricity exports to Venezuela have traditionally been lower than those to Ecuador, at around 1 GWh per day; however, exports declined in the face of political unrest in Venezuela in early 2014. In March 2014 the country bought only 8.5 GWh from Colombia, and the future viability of electricity exports to Venezuela is in question given political events in the country.

Panama-Colombia Connection

The greatest opportunity to further expand electricity exports is the opening of the market in Panama, which could subsequently provide Colombian producers access to much of Central America. This enterprise has been in the works since 2009, but has stalled repeatedly, mostly due to politics. Plans had been in place for a 300 MW transmission line – with the possibility of expanding it to 600 MW – between Colombia and Panama that was to begin operating in 2013. However, in March 2014 Ricardo Martinelli, Panama’s former president, announced that Panama would instead expand its existing power grid. Eschewing the interconnection would result in higher energy costs for Panama, compared to the price of importing from Colombia, but may yield political benefits, as Mexico is believed to oppose the project. The Panama-Colombia transmission line project appeared to have stalled by the end of 2013.

However, the outlook changed when President Juan Carlos Varela won in Panama’s presidential election in May 2014, beating the governing party’s candidate, José Domingo Arias. A month later, President Varela announced that the interconnection project would go forward at the expanded 600 MW capacity. Before the election Varela had stated that the interconnection was a priority. Despite his comments, the project’s future remains uncertain, but it appears far more likely to be completed than it did only six months earlier.

Regulatory Framework

Colombia’s electricity system is regarded as being among the best in the region in terms of both infrastructure and regulation. Around 95% of Colombian households have electricity service, which places Colombia in the company of Latin American peers such as Argentina, Brazil and Ecuador, among others.

In 2011 Peru had less than 85% coverage and Mexico with less than 75%. Colombia is also known for having very clear and liberal electricity regulations managed by the CREG. A 2011 OECD survey found that Latin American policymakers in the transport and infrastructure planning sectors considered Colombia’s institutional framework for electricity infrastructure to be significantly better than the Latin American average.

Conversely, the same policymakers considered that the institutional framework for Colombia’s transport infrastructure was significantly better than that of its peers. These policymakers gave Colombia a score of 1 for both the quality and the design of its institutional framework for electricity. In the case of quality, a score of 1 meant “the institutional design clearly establishes responsibilities, incorporates checks and balances and incentivises accountability.” In terms of design, the score indicated that the institutional framework involved few actors and facilitated a streamlined process of infrastructure planning, development, monitoring and maintenance.

Private Sector Involvement

Owing to coherent regulation and the government’s commitment to maintaining a liberal electricity market, the private sector plays a significant role. Today, private producers account for about half of total installed capacity. Contracts for the construction of new plants are assigned by the CREG either on an individual basis or in larger auctions, the last two of which occurred in 2008 and 2011.

Wind

Despite the presence of solar, geothermal and wind resources, Colombia produces a very small amount of non-hydro renewable energy. However, recently there has been an increased focus on wind energy projects. The country has ample, high-quality wind resources, with parts of Colombia’s maritime territory possessing class-seven winds – the highest rating of wind for the purposes of electricity generation. Such wind resources are rare; the only other region of South America with class-seven winds is Patagonia, which has several wind farms.

The Guajira Peninsula in the extreme north is another promising source of wind power. EPM currently operates a 19.5 MW pilot wind farm there, and several other companies are considering wind farms on the peninsula. Isagen has carried out an environmental impact study for a wind farm of around 32 MW on Guajira, while American company Invenergy has also expressed interest in initiating a project in Colombia, possibly on the peninsula. Sopesa, the public utility company on the Colombian island of San Andrés, plans to build a 7.5 MW wind farm there. If completed, these projects would, to be sure, make a very small contribution to total installed capacity, but if they are successful they could encourage greater investment in the segment.

Colombia’s electricity sector remains one of the most efficient and modern aspects of the country’s infrastructure and energy industries. Despite hiccups in the ongoing construction of several thermoelectric plants, the sector appears to be continuing to develop, increasing overall capacity, buoying current accounts (thanks to electricity exports) and affording Colombian industry energy security. In a country with some infrastructure deficiencies, the electricity sector can serve as a model in the future.

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The Report: Colombia 2014

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