Executive summary Colombia has emerged as a leader in clean energy transition policy making and is an inspiring example of a fossil fuel producing country committed to climate action, based on a long-term decarbonisation pathway and a policy of energy and economic diversification and a just transition. In the context of the National Energy Plan 2020-2050, launched in 2016, Colombia started a journey to diversify its energy resources and ensure a reliable energy supply by promoting wind, solar and geothermal in the country’s electricity mix. At COP26, Colombia presented a net zero target and an ambitious Nationally Determined Contribution (NDC), aiming at a 51% reduction in greenhouse gas (GHG) emissions by 2030. These ambitions are reflected in the long-term strategy, the E2050 Strategy, the Energy Transition Law and the Climate Action Law. To implement its targets, Colombia uses a robust system of climate change management plans across government with targets assigned to each sector, including for energy (PIGCCme). The Energy Transition Law expanded policy actions and tax benefits to energy efficiency and low-carbon energy technologies, including geothermal, carbon capture and storage (CCS), and hydrogen. Colombia’s national oil company, Ecopetrol (Empresa Colombiana de Petroleos), is supporting the shift to low-carbon energy with investment plans for clean energy technology.
In 2021, the government introduced a pilot programme for subsidising the consumption of LPG cylinders with programmes to replace firewood, coal, waste, kerosene, ethanol and diesel use (Law 2128, MME Resolution 40342/2021). With limited fiscal space, the government relies on leveraging private investment, notably for investment in smart grids which can be included in the tariffs charged by network operators. This offers also co-benefits for the economic local development in rural areas. The government plans large-scale renewables and green hydrogen deployment, which are expected to generate USD 2.5 billion in investment and 400 000 jobs. The dedicated Fund for Renewable Energy and Energy Efficiency (Fondo de Energías No Convencionales y Gestión Eficiente de la Energía, FENOGE) is the main support programme in energy efficiency (including cash transfers) and unconventional energy sources, financing research, studies, energy audits, modernisation, and final disposal of replacement of equipment. Energy subsidies The government subsidised energy consumption for a total of USD 564 million in 2018 based on a national housing classification system (so-called strata)1. Sixty per cent of the subsidy is allocated to residential users (strata 1), 50% to strata 2 and 15% to strata 3. The subsidy is paid by commercial users (strata 5 and 6) who pay a 20% electricity surcharge as contributions.
Energy subsidies and contributions by strata, 2018, in COP million
The Covid-19 pandemic led to increased support for the production and consumption of fossil fuels. Despite the collapse of the global oil price in April 2020, subsidies increased in 2020 in Colombia. These include the 10% increase in natural gas subsidies for users of strata 1 and 2. Strata 1 users will increase to 70%, while strata 2 will increase to 60% for an additional billing cycle. Direct government transfers to reduce fuel prices decreased the price of gasoline by COP 1 200 (-13%), from an average price of COP 9 159 per gallon to COP 7 958 per gallon; diesel decreased by COP 800 (-9%) from an average of COP 8 952 per gallon to COP 8 152 per gallon (OECD/IEA, 2021).
CO2 emissions drivers and carbon intensity Colombia has a low carbon intensity of GDP compared to the IEA average, with CO2 emissions per GDP equivalent of 0.09 kilogrammes (kg) of CO2/2015 USD PPP, less than half the IEA members’ weighted average (0.2 kg CO2) in 2021. From 2000 to 2021, total energy-related CO2 emissions in Colombia increased by 42%, while GDP roughly doubled , showing a relative decoupling from economic and population growth. Overall, there was a reduction in the CO2 intensity of the economy (CO2/GDP) by 33%, along with a reduction of 29% in the energy intensity of the economy (TES/GDP). This can be explained by the 14% decline in the carbon intensity of the energy supply mix (CO2/TES) over the same period. The carbon intensity of Colombia’s electricity generation is fluctuating in line with the share of hydropower, reflecting annual and seasonal variability of the electricity generation mix during dry and wet years. In 2021, the carbon intensity decreased to 144.2 g CO2/kWh, from 229.3 g CO2/kWh in 2020, as the share of coal in electricity generation dropped by more than half (-58%) while the share of hydropower increased to 72%.
Energy-related CO2 emissions and main drivers in Colombia, 2000-2021
The PEN also estimates total energy system costs of the four scenarios presented, including capital costs of supply technologies, capital costs of end-use technologies and fuel costs. It finds that total energy system costs are the highest in the Disruption scenario (which also leads to the lowest emissions in 2050), at 13% higher than in the Updating scenario. The key driver of the high costs are the modelled high capital cost of low emissions and efficient end-use technologies, while assumed fuel savings are not sufficient to cancel out the higher capital costs. For example, the PEN assumes that EVs will achieve cost parity with internal combustion engine vehicles only around 2035, and that the long-run oil price is around USD 45/barrel (it should be noted that the PEN was elaborated in the middle of the Covid-19 crisis in 2020).
Global milestones under the IEA Net Zero Emissions Roadmap
As the PEN was designed before the adoption of Colombia’s E2050 strategy, it is not necessarily aligned with net zero by 2050 goals, while the E2050 is a decarbonisation pathway. The PEN 2020-2050 (Ministry of Mines and Energy) and the E2050 (Ministry of Environment and Sustainable system) have similar assumptions, but differ in many others, such as economic drivers and the share of the energy sector in the economy. When updating the PEN, it will be worthwhile examining Colombia’s E2050 against the global benchmark, the IEA’s Net Zero Emissions Roadmap and its milestones for the global energy sector to achieve net zero emissions by 2050.
Renewable electricity From 2011 to 2021, renewable electricity generation increased from 51 TWh to 63 TWh, and the share of renewables in total electricity production increased to 75%, with a peak of renewables electricity production (of 63 TWh) in 2021. In 2021, hydro was the largest electricity production source, accounting for 72% of total production. Wind and solar only accounted for 0.07% and 0.4%, respectively. At the end of 2022, Colombia had a hydroelectric installed capacity of 12 265 MW and an installed capacity of 570 MW of solar PV and 38.4 MW of wind. Colombia has unique potential to expand hydropower thanks to its ample river water resources. Colombia has also powerful wind and solar resources, with areas of the La Guajira province having annual average wind speeds of more than 12 m/s and large parts of the country exhibiting solar insolation of more than 5 kWh/m2.
Renewables in electricity generation in Colombia, 2005-2021
Transmission and distribution The national transmission system consists of around 28 000 km of transmission lines. There are 16 transmission system operators (transcos), which own and operate the transmission networks. The largest part of the network, 70%, is owned and operated by the state-owned Transco ISA. All transmission lines built before 2001 are regulated. Since 1999, Colombia organises auctions for new transmission projects to which both new entrants and incumbent transcos can participate.
Colombia’s electricity network
Colombia has transmission constraints between the centre and the north of the country and in the transmission and distribution networks of Distco Electricaribe (at or below 110 kV). Market decoupling can occur during congestion. The weak transmission infrastructure is also a major barrier to the development and system integration of renewable energy, notable wind power in the north of the country. There are 37 distribution companies in Colombia, which own and operate distribution networks as a regulated natural monopoly. Open access to the distribution network is established.
Regulatory governance of Colombia’s electricity market
Wholesale electricity market Colombia’s MEM has three main markets: 1) the spot day-ahead market with a single node mandatory power pool (bolsa); 2) the bilateral contract market (long-term); and 3) the capacity market with reliability options. The spot market for electricity is a day-ahead market in which each unit submits single bids (unique price for 24 hours and declared quantity). A firm can own a portfolio of power generation plants with different technologies. The economic dispatch occurs on a merit order basis (i.e. according to bid price) following principles of efficiency and does not allow for dispatching by technological differences. The CREG’s regulation requires a securitybased dispatch, a minimum cost dispatch with electric and energy restrictions. The spot market is administered and operated by XM. These dispatch rules involve co-ordination in case of electricity exchange with other countries.
Coal exports by type of coal in Colombia, 2021
Gas infrastructure The gas network (national transport system, NTS) is radial and connects production and import areas with consumption sites. It consists of two large but non-interconnected systems: the coastal gas pipeline system owned by Promigas in the Caribbean Coast region, including the Cartagena Regasification Plant (Sociedad Portuaria El Cayao, LNG) and the mainland pipeline system (Figure 8.7 in orange), owned by Transportadora de Gas Internacional (TGI, 2023). TGI is affiliated to GEB (Grupo Energía Bogotá) and operates 4 000 km of pipelines with a transmission capacity of 23 675 cm/d. Colombia has one LNG regasification plant and investment in two additional LNG terminal projects is planned.
Gas infrastructure in Colombia
In 2013, the government initiated a tendering procedure to build the first regasification plant in Barú, in Cartagena de Indias. The floating storage regasification unit (FSRU) “El Cayao” started operations in December 2016 (Sacyr Industrial, 2021). El Cayao has a storage capacity of 170 000 m3 of LNG and regasification capacity of 11.3 mcm/d.2 The contract for the FSRU is held for a ten-year period up to November 2026 by Grupo Térmico and SPEC (Sociedad Portuaria el Cayao), which is affiliated to pipeline owner Promigas. Promigas announced plans to expand the terminal to a capacity of 24 mcm/d by 2027. Aside from the FSRU storage capacity, Colombia’s natural gas network does not have underground gas storage. Linepack of the NTS and gas stored in completed oil/gas fields can be counted as storage. The NTS has little network redundancy that could ensure the reliability of the supply in case of planned or unplanned maintenance of the production or transportation facilities. In 2008, the CREG created incentives for distribution and marketing companies to invest in projects ensuring network reliability, but none of the proposals materialised.
Colombia 2023 Energy Policy Review The International Energy Agency (IEA) regularly conducts in-depth peer reviews of the energy policies of its member, accession and association countries. This process supports energy policy development and encourages the exchange of international best practices and experiences. This first energy policy review of Colombia’s energy policies examines the country’s achievements in developing its energy sector as well as the challenges it faces in ensuring a sustainable energy future. Colombia’s energy transition policy making is an inspiring example of a fossil fuel producing country committed to climate action, based on a long-term decarbonisation pathway and a policy of energy and economic diversification and a just transition.
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