La Guajira, a region in north-east Colombia bordering Venezuela and facing the Caribbean Sea, is the frontispiece for the country’s recent renewable energy boost. With an onshore and offshore wind potential sufficient to meet national energy demand, it is little wonder why.

The first wind project in the country was installed in La Guajira: an experimental project called Jepírachi, which means “wind from the north-east” in the local Wayuu language. It was built by national company Empresas Públicas de Medellín and German wind turbine manufacturer Nordex in 2003. 


Over the past few years, the country has accelerated its drive to attract foreign energy companies. Colombia expects to allocate roughly 5GW of renewable energy capacity at auction in January 2021, to be connected to the grid by the end of 2022. This follows another auction in October 2019, which awarded 2.2GW worth of solar and wind projects at an average price of $0.027/kWh.

Alongside feed-in-tariffs, bundled into the government’s laundry list of incentives, are VAT breaks and corporate tax exemptions — all of which have made investing in renewables in Colombia very competitive. 

There were a record six renewable projects announced last year with a total capex of $1.2bn, according to greenfield investment tracker fDi Markets. Previous years, from 2014 to 2018, had recorded just one project per year with a capex of between $25m and $70m.

Italian energy giant Enel currently operates Colombia’s largest solar plant, El Paso, located in Cesar with an installed capacity of 86.4MW. It also has 750MW of solar projects and 500MW of wind projects in development and under construction.

The Portuguese electricity utility company EDP and US electrical power distribution company AES have also established themselves in the country. 

Colombia displays great potential and promise. There is also a need for it to move away from its reliance on hydropower, on account of the La Niña/El Niño twinned weather patterns that affect rainfall and bring about drought. But for all the country’s drive to diversify its energy mix by way of renewables, some political and practical problems remain. Namely, disputes with local indigenous communities who can impede the construction of renewable projects and weak grid transmission connections between coastal regions and the demand-heavy cities. 

End of fossil fuels

Giancarlo Morelli, Latin America analyst at the Economist Intelligence Unit, expects that renewables will play a much larger role in Colombia’s future than fossil fuels — the latter, he adds, “has its days numbered”.

This will enable the country to diversify its economy while advancing its sustainable development goals, Mr Morelli says.

More broadly, while the economic recovery in 2021 will be primarily driven by improving private consumption and injecting dynamism into construction activity, he says, Colombia will be able to attract renewable energy investors through its attractive business environment and green public policies.

Rystad analyst David Dixon, who covers Latin America, recognises the recent renewables boom as a joint effort to diversify the country’s energy mix and encourage a “security of supply”, hedged against the La Niña/El Niño phenomenon. 

Hydroelectric plants account for roughly 70% of its energy generation and El Niño can disrupt that significantly. According to a paper by Oxford Energy Forum published in 2018, the country has limited storage capacity for hydropower: only 6% of total capacity in reservoirs can conserve water for more than six months. 

The report explains: “Under normal conditions hydro accounts for 85% of total generation, but, during El Niño events, this share falls to 65%, typically for five to 12 months.”

Mr Dixon also notes that the auctions in 2021, and resulting capacity connected in 2022, marks a “step change” for the country. From zero to almost six gigawatts of utility is a sharp rise, he stresses.

Government oversell

Naturally, this jump from just a few years ago is the result of strong government incentives for energy companies to invest in Colombia and connect to the grid, as illustrated by its competitive auction prices. 

Bogotá attorney at Holland & Knight, José Zapata, says that there is an “important oversell” in these incentives, however. 

Mr Zapata says that renewable energy companies face the same problems faced by the non-renewable energy companies before them, such as issues regarding consultation with indigenous populations and public hostility to the construction of wind turbines or solar panels. 

“At the end of the day, renewables are more expensive and there is limited capacity on the grid,” he adds, citing the La Guajira region as poorly connected. 

Colombia’s wind resources are concentrated in a few regions with limited demand, such as La Guajira, and with the greatest demand in the capital and bigger cities. Yet, as you move further away from the centres of strong demand, the carrying capacity of the lines falls away considerably. 

An awkward situation

As for the consultations with the indigenous population, Mr Zapata cites one project where the investor was supposed to consult the indigenous communities, but they said that they did not examine the proposal closely enough and their permits were suspended. 

He deems the whole situation “awkward”, adding that one would have expected stronger, more unified support across the government and the courts. 

By contrast, Gerardo Viña-Vizcaíno, consultant and sustainability adviser, refutes the idea that the blame for such disputes lies with the government. Instead, he maintains these non-interconnected regions “must be connected and managed entirely by government”.

Mr Viña-Vizcaíno says that “the country is planning to choose extra viability from renewable sources”, but remarks that this is a “political commitment rather than an emissions one”. 

Colombia’s main source of energy, hydro, is “clean”, he says, and, notwithstanding a Covid slump, it is also a large exporter of coal. The government’s focus, Mr Viña-Vizcaíno expects, will be on leveraging renewables in the industrial sector and on energy exports.

President Ivan Duque has also said that Colombia is developing a green hydrogen roadmap with Chile, another renewables exponent in the region.

But it is possible that one of the country’s recurring problems rears its head once more. 

“Cross-country electricity trade is set to augment over the coming years,” Mr Morelli says. “However, the weak interconnection between the countries’ grids remains a key obstacle to cross-country transmission.”

This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.