Colombia to hold first long-term power supply auction

Thursday, August 2, 2018

Colombia will stage its first auction for long-term power supply contracts in January, offering generators around 1GW of installed capacity, the mining and energy ministry said on Thursday.

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Some 3.443GWh a year will be available to bidders in power purchase agreements lasting 10 years. The projects will be due online in December 2022.

The auction will include the participation of non-conventional renewable energy (NCRE), as the government seeks to reduce the country's dependence on hydropower.

Energy minister Germán Arce Zapata said the announcement forms part of a "transition towards a sustainable energy matrix that is adaptable to climate change and reinforces supply."

According to figures published by local power market operator XM, hydropower currently accounts for two thirds of Colombia's 16.9GW installed capacity. In June hydroelectric plants contributed 79% of total electricity supply.

Meanwhile NCRE sources such as solar, wind and biomass make up less than 5% of the generation mix.

News of the auction comes as serious construction problems at the 2.4GW Hidroituango project raise concerns about a future energy deficit.

In a resolution published on Wednesday, the mining and energy ministry said Colombia would require 2.886GW of new NCRE capacity by 2031 if Hidroituango continues. In the event the project is aborted, some 4.312GW will be needed, it added.

In the same resolution, the ministry said that 54 generation projects currently registered with its UPME planning unit could participate in the auction. They include hydropower, biomass, wind and solar plants totalling 3GW of capacity.

The government has been working to promote private sector investment in the NCRE segment since passing a law in 2014 that granted fiscal incentives and promoted the implementation of demand-side management systems.

Taxable income has been halved for the first five years of investment in NCRE projects, while developers are also exempt from import duties and VAT.