Colombia power auctions to debut in January

Bogota is following the model adopted by many of its neighbours as it seeks to diversify it power generation mix

Colombia plans to hold its first-ever auction for long-term power supply in January, joining neighbouring Latin American countries in the race to expand power generation capacity through competitive tenders.

The terms of the auction will be published by energy planning agency UPME in early October, followed by pre-qualification, bidding and awards in January. Generation projects of at least 10MW using any technology will compete for 10-year contracts for 3,443GWh/yr of supply starting in December 2022. The supply is equivalent to 1,000MW of installed capacity.

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 renewable projects have fallen dramatically in recent years, edging out higher-cost conventional projects based on natural gas, coal and large-scale hydro. Colombia relies on hydroelectricity for three-quarters of its power, but is keen to diversify its generation mix 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 base-load units. After studying such 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, an energy ministry official says. Future auctions could offer contracts lasting 10, 15 or 20 years.