Colombia's Renewable Energy Business Opportunities

In the past decade, the world's renewable energy capacity has grown by an average of 8%. So far, investments in renewable energy have increasingly flowed into emerging markets. A large part of it flows into Latin America. Between 2012 and 2015, the total investment was approximately $54 billion, with most of the investment taking place in Brazil, Chile and Mexico (IRENA).

Renewable energy in the form of hydropower has played a key role in power generation in Latin America for some time. Therefore, renewable energy accounts for about 25% of the energy supply. This is almost twice the global total and the US share of renewable energy.

One of the countries where the rise of this sector in Latin America is Colombia. In this article, we will introduce renewable energy opportunities in Colombia.

Look at opportunities in the industry

Colombia has a wealth of energy resources and the country relies heavily on installed hydropower (65% of annual consumption). This provides cost effective power. However, Colombia has non-traditional energy production potential, especially solar, wind and biomass. In 2010, Colombia’s renewable energy generation grew the fastest. This is the statement of the United Nations Industrial Development Organization and the International Small Hydropower Center. The total added capacity is 2,543 MW. In addition, large-scale onshore winds and large-scale geothermal energy can achieve the same cost per kilowatt as current hydropower.

Government agenda

After the mainland moved towards renewable energy, the Colombian government has a clear agenda. The electricity and energy sector in Colombia is under the jurisdiction of the Ministry of Mines and Energy (MME). The MME adopted an indicative action plan and set a goal. The goal is to achieve 3.5% grid connection and 20% renewable energy off-grid power generation by 2015. In addition, it will increase to 6.5% and 30% respectively in 2020.

The desire to achieve high proportions of renewable energy generation has led to changes in the business environment. For example, different stages of the supply chain are now seeking to introduce more renewable energy. The desire to introduce this energy makes business potential uncontrollable.

Different energy sources with different potentials

In terms of wind energy potential, the use of such resources alone is sufficient to meet the country's current energy needs. The La Guajira division stands out for its high natural resources in the area (estimated capacity of 21 gigawatts).

The winds of La Guajira are classified as Level 7 (near the average of 10 meters per year). This makes it one of the only two regions in Latin America. The Jepirachi Wind Farm is the country's first operational wind farm located in the region. There is also the potential for large-scale solar power generation in the Orinoco and San Andres regions in the north of the country.

Biomass energy also has positive prospects due to the large amount of agricultural and forestry waste produced in the country. Important sources of agricultural waste are banana plantations, rice, coffee and livestock. The most suitable places to produce this form of energy are Santander and Norte de Santander, Valle del Cauca, Llanos Orientales and the Caribbean coast. Some biomass projects, such as the Ingenio Mayagüez cogeneration plant, were put into operation in 2011.

In terms of small hydropower, there is an estimated 25 GW of natural power generation potential. These are mainly located in the Andean region.

Legislative support

Besides the opportunities within specific sectors and the desires of the government, certain opportunities are already in effect. The Colombian government has already passed various laws that make doing business within the sector very attractive. Some of these laws and/or incentives are.

Law 1665 of 2013

The new Renewable Energy Law (REL) approved the International Renewable Energy Agency Statute as an attempt to promote the adoption and sustainable use of all forms of renewable energy.

Law 633 of 2000

This law created the Financial Support Fund for Energy Provision in Non- Interconnected Zones (FAER). This fund has proven to be an important tool for the financing of projects in areas not connected to the national grid. The fund focuses on energy expansion using both renewable and non-renewable energy sources. Furthermore, it has become an important instrument for financing projects in these regions. Another significant aspect of Law 633 is the creation of the Fund for Non-Conventional Energies (FENOGE), which will help to finance initiatives in nonconventional energy with public and international resources.

Decree No. 2469

Legal or natural persons will be considered self-producers if they produce their own energy. Also, if they do not use a national transmission or distribution system. However, if there is a surplus, the self-generator can provide energy to the national network in accordance with regulations established by the Energy and Gas Regulatory Commission (CREG). Large self-generators must be represented by distribution agents in the wholesale electricity market, and distribution agents sell surpluses to national networks. In addition, large self-generators must be signed for an alternate contract. The contract is the responsibility of the network operator, which stipulates the fees and charges for the energy distribution services performed by the operator.

Tax exemption/welfare

Investors in renewable energy projects receive 50% of their taxable income each year. This will be the first five years after the investment. Equipment and machinery are not included in the VAT and are exempt from tax if such equipment and machinery are imported.