Colombia plans to hold its first-ever auction for long-term power supply in January 2019, joining other Latin American countries in the race to expand generating capacity through competitive tenders.
Colombia's mines and energy ministry issued resolutions 40791 and 40795 that lay the basis for the country´s auction debut early next year. The next step in the process is the publication of auction terms by energy planning agency UPME in early October, followed by pre-qualification, bidding and awards in January.
In the first auction, generation projects of at least 10MW using any technology will vie for 10-year contracts for 3,443GWh/yr of supply starting in December 2022. The supply is equivalent to 1,000MW of installed capacity.
In contrast to other countries, Colombia´s energy marketers, which in some cases are the same as distributors, will also participate in the auction as buyers. Colombia has dozens of marketers, but seven main ones account for most of the supply.
Offers will be evaluated on the basis of price and volume, taking into account the government´s objectives of adding resilience, security and diversity to the energy matrix. A key factor in the evaluation process will be the level of emissions associated with each project, a factor that would likely weed out coal and oil-based projects.
The auction is expected to attract a wave of renewable solar and wind projects, consistent with the outcome of auctions in Chile, Argentina and Mexico. The capital costs of alternative renewable projects have fallen dramatically in recent years, edging out higher-cost conventional projects based on natural gas, coal and large-scale hydro.
Currently relying on hydroelectricity for three-quarters of its power, Colombia is keen to diversify its matrix with wind and solar plants in the northeastern department of La Guajira, where a planned transmission line will connect future capacity to the national grid.
The renewables trend has sparked operational challenges in other countries such as Chile, where dispatch from intermittent units led to regulatory changes aimed at reconciling them with conventional baseload units.
After studying such international experiences, Colombia is taking a "gradual" approach, launching the first auction with a relatively modest supply goal and a shorter-than-average contract duration of 10 years, a ministry official tells Argus. Future auctions can offer contracts lasting 10, 15 or 20 years.
The duration of the contracts was among the topics of debate that emerged in the past two months of industry consultation. "Generators prefer longer contracts, while marketers want shorter ones," the ministry official said. "So we went with a mix. This caused a lot of discussion."
Colombia plans to mitigate execution risk by establishing a series of technical, legal and financial filters and guarantees, the official said.
Local renewable energy association Ser Colombia celebrated the new resolutions. Among the newest members of Ser Colombia are French generators Total and EdF.
The resolutions were issued in the twilight of the administration of president Juan Manuel Santos, who hands power to conservative president-elect Ivan Duque on 7 August.
