Electricity sector in Colombia

Colombia: Electricity sector
Data
Electricity coverage(2005)	87% (total), 93% (urban), 55% (rural); (LAC total average in 2005: 94.6%)
Continuity of supply	n/a
Installed capacity(2005)	13.4 GW
Share of fossil energy	33%
Share of renewable energy	64% (mostly large hydro)
GHG emissions from electricity generation (2003)	6.5 MtCO2
Average electricity use (2005)	828 kWh per capita
Distribution losses (2005)	16%
Residential consumption (% of total)	42.2%
Industrial consumption (% of total)	31.8%
Average residential tariff (US$/kWh, 2006)	0.0979; (LAC average in 2005: 0.105)
Average industrial tariff (US$/kWh, 2006)	0.0975,(LAC average in 2005: 0.083)
Institutions
Sector unbundling	Yes
Share of private sector generation	60%
Competitive supply to large users	Yes
Competitive supply to residential users	Yes (only above 0.5 MW)
Number of service providers	66 (generation), 7 (transmission), 61 (distribution)
National electricity regulator	Yes (CREG)
Responsibility for policy setting	Ministry of Mines and Energy
Responsibility for renewable energy	Ministry of Mines and Energy
Responsibility for the environment	Ministry of the Environment, Housing and Territorial Development
Electricity Sector Law	Yes (1994)
Renewable Energy Law	No
CDM transactions related to the electricity sector	3 registered CDM project; 107,465 t CO2e annual emissions reductions

The electricity sector in Colombia is dominated by large hydropower generation (81% of production) and thermal generation (19%). Despite the country’s large potential in new renewable energy technologies (mainly wind, solar and biomass), this potential has been barely tapped. A 2001 law designed to promote alternative energies lacks certain key provisions to achieve this objective, such as feed-in tariffs, and has had little impact so far. Since the potential of large hydropower has been practically exhausted, thermal plants dominate the current expansion plans. The construction of a transmission line with Panama, which will link Colombia with Central America, is underway.

An interesting characteristic of the Colombian electricity sector (as well as of its water sector) is a system of cross-subsidies from users living in areas considered as being relatively affluent, and from users consuming higher amounts of electricity, to those living in areas considered as being poor and to those who use less electricity.

The electricity sector has been unbundled into generation, transmission, distribution and commercialization since sector reforms carried out in 1994. About half the generation capacity is privately owned. Private participation in electricity distribution is much lower.

Electricity Supply and Demand

Supply

Installed capacity

In Colombia, thirty-two large hydroelectric plants and thirty thermal power stations feed electricity into the interconnected network system. At the end of 2005, installed net effective capacity was 13.4 Gigawatt (GW), with the following share by source:

• Large Hydropower: 63.92 %
• Thermal (gas): 27.41%
• Thermal (coal): 5.2 %
• Small hydropower: 3.08 %
• Mini-gas: 0.17 %
• Cogeneration: 0.15 %
• Wind: 0.07 %

Production

Total electricity production in 2005 was 50.4 Terrawatt-hour (TWh) . Hydroelectric plants generated 81.2 percent, thermal plants 18.6 percent and the Jepírachi wind plant 0.1 percent of the total.

Demand

In 2005, total electricity consumption was 48.8 TWh, which corresponds to an average energy consumption per capita of 828 KWh per year. Consumption per sector is divided as follows :

• Residential: 42.2 %
• Industrial: 31.8 %
• Commercial: 18 %
• Official: 3.8 %
• Other uses: 4.3%

Demand is growing by approximately 4 percent annually.

Imports and exports

Colombia is a net power exporter. In 2005 the country exported 1.76 TWh of electricity to Ecuador (3.5% of total production). It imported only very small volumes of electricity from Venezuela and Ecuador (0.02 TWh each).

The Puebla Panama Plan includes a project of electric interconnection between Colombia and Panama that will allow the integration of Colombia with Central America. This project, carried out by ISA in Colombia and ETESA in Panama, entails the construction of a transmission line with 300 MW capacity (3% of installed capacity) from Colombia to Panama and 200 MW capacity in the reverse way. The line is expected to become operational in 2010 .

Access to electricity

In 2005, the interconnected electricity system served 87 percent of the population, a percentage that is below the 95 percent average for the LAC region . In Colombia, electricity coverage is 93 percent in urban areas and 55 percent in rural areas. About 2.3 million people do not have access to electricity yet.

In 1999, The Ministry of Mining and Energy initiated, through IPSE (Institute for the Investigation and Application of Energy Solutions), the implementation of 93 rural electrification sub-projects. A special fund, the FAZNI (Fund for the Electrification of Non-interconnected Zones), was established to assist isolated regions access financial support. These projects contemplated both the expansion of existing networks and the establishment of stand-alone solutions.

Service Quality

Interruption frequency and duration

In 2005, the average number of interruptions per subscriber was 185.7, while duration of interruptions per subscriber was 66 hours .

Distribution and transmission losses

Losses in transmission and leaks are still a concern, even if the total amount has decreased in the last years. Distribution losses in 2005 were 16 percent . As an example, that same year, losses for just one utility (Empresas Públicas de Medellín) were more than 2 percent of the total power generation.

Responsibilities in the Electricity Sector

Policy and Regulation

Colombia has had a liberalized energy market since 1995. The sector is characterized by an unbundled generation, transmission, distribution, and commercialization framework.

The structure of the Colombian energy market is based on Laws 142 (Public Services Law) and 143 (Electricity Law) of 1994.The Ministry of Mines and Energy is the leading institution in Colombia’s energy sector. Within the Ministry, UPME (Unit for Mining and Energy Planning) is responsible for the study of future energy requirements and supply situations, as well as for drawing up the National Energy Plan and Expansion Plan.

CREG (Regulatory Commission for Gas and Energy) is in charge of regulating the market for the efficient supply of energy. It defines tariff structures for consumers and guarantees free network access, transmission charges, and standards for the wholesale market, guaranteeing the quality and reliability of the service and economic efficiency. Among others, CREG is responsible for providing regulations that ensure the rights of consumers, the inclusion of environmental and socially sustainable principles, improved coverage, and financial sustainability for participating entities.

The provision of public services (water, electricity, and telecommunications) to final users is supervised by the independent Superintendency for Residential Public Services, or SSPD.

Generation

Colombia has 66 registered electricity producers. . Private companies own 60 percent of the installed generation capacity and account for 43 percent (measured in number of consumers) to 49 percent (measured in kWh sales) of energy supplied to the interconnected grid.

Just three companies - the public companies Empresas Públicas de Medellín and ISAGEN, as well as the private EMGESA - control altogether 52 percent of total generation capacity.

Transmission

Transmission in the National Interconnected System is carried out by seven different public companies, four of which work exclusively in transmission (ISA, EEB, TRANSELCA and DISTASA). The remaining three (EEPPM, ESSA and EPSA) are integrated companies that carry out all the activities in the electricity chain (i.e. generation, transmission and distribution). The largest company is Interconexión Eléctrica S.A. (ISA), which belongs to the government .

Distribution and Commercialization

Currently, there are 28 pure commercializing companies; 22 distribution and commercialization ones; 8 ones that integrate generation, distribution and commercialization; and 3 fully integrated ones .

Renewable Energy Resources

Colombia has 23 MW installed capacity of renewable energy (excluding large hydro), consisting mainly of wind power. The country has significant small hydro, wind, and solar resources that remain largely unexploited. According to a study by the World Bank’s Energy Sector Management Assistance Program (ESMAP), exploitation of the country’s significant wind potential alone could cover more than the country’s current total energy needs.

Investment costs for renewable energy technologies in Colombia were estimated in 2005 as follows:

Energy source	Technology	Cost (US$/kW)
Large hydro	Reservoir (dam)	700-1,700
Solar PV	Photovoltaic solar systems	5,000-10,000
Wind (on shore)	Electricity generation	800-1,200 (large scale)
		up to 3,000 (small scale)
	Pump	1,500-4,000
Geothermal	Electricity generation	3,000-5,000 (small scale)
		1,500-2,500 (large scale)
Biomass	Direct combustion	2,800-5,000

Source: ESMAP 2007

Hydropower

With 70 percent of the country’s power generation, hydropower is a very important national energy source. The total large hydropower potential for Colombia is estimated at 93GW, with an additional 25GW of small hydropower (<20MW). However, the potential for large hydropower faces difficulties, as the best sites have already been developed, also due to the escalating environmental and social costs associated with large dams, and the likely impacts of climate change and climate variability on the hydrological regime of the country (drastic increases in surface temperature in the Andes, changes in precipitation patterns, and increases in the intensity and frequency of El Niño-Southern Oscillation (ENSO) signals driving prolonged periods of drought).

The large hydropower plants to be built in Colombia up to 2010 are listed below:

• Calderas: 26MW
• Transvase Guarinó
• Amoyá river: 80MW
• Manso river: 27 MW
• Porce III: 660MW
• Quimbo: 400 MW

Wind

The wind regime in Colombia is among the best in South America. Offshore regions of the northern part of Colombia have been classified with class 7 winds (over 10 meters per second (m/s)). The only other region in Latin America with such high wind power classification is the Patagonia region of Chile and Argentina.

Colombia has an estimated wind power potential of 21 GW in the Guajira Department—enough to generate sufficient power to meet the national demand twice over. The country has an installed capacity of 19.5 MW of wind energy, almost all in a single project (Jepírachi). There are several projects under consideration, including a 200 MW project in Ipapure.

See also: Atlas de Viento y Energía Eólica de Colombia

Solar

Colombia has significant solar resources because of its location in the equatorial zone, but the country sits in a complex region of the Andes where climatic conditions vary. The daily average radiation is 4.5 kWh/m2, and the area with the best solar resource is the Guajira Peninsula, with 6 kWh/m2 of radiation. Of the 6 MW of solar power installed in Colombia (equivalent to about 78,000 average-size solar panels), 57 percent is distributed in rural applications and 43 percent in communication towers and road signaling. Solar systems can be very suitable for applications in rural areas, where energy demands are dispersed and modest and grid connection is often more costly (UPME 2005).

Geothermal

The former Colombian Institute of Electrical Energy, today IPSE, and the Latin American Energy Organization have identified three areas with geothermal potential: Azufral, in Nariño Department, where the Azufral Volcano is located; Cerro Negro-Tufiño, located between Colombia and Ecuador, where the Chiles Volcano sits; and Paipa, located in the Cordillera Oriental in Boyacá.

The potential of the main sources of geothermal power in Colombia is summarized below:

Area	Department	Potential
Chiles-Cerro Negro	Nariño	High
Azafral de Túqueres	Nariño	High
Doña Juana	Nariño	Unknown
Grupo Sotará	Cauca	Unknown
Puracé	Cauca	Unknown
Machía	Huila	High
Cerro Bravo	Nariño	High
Nevado del Ruiz-Santa Isabel	Caldas	High
Cerro España	Caldas	High
Machía	Huila	High

Source: ESMAP 2007

Biomass

Colombia has a great biomass power potential from agricultural residues (banana, coffee pulp, and animal waste). Its annual biomass power potential is estimated to be over 16 GWh, distributed as follows: 658 MWh/yr from biodiesel, 2,640 MWh/yr from bioethanol, 11,828 MWh/yr from agriculture residues, 442 MWh/yr from planted forest residues, and 698 MWh/yr from natural forest residues.

The landfills in the four main cities in Colombia (Bogotá, Medellín, Cali, and Barranquilla) are estimated to have the potential to provide for an installed capacity of 47 MW. The region of Urabá in the north of the Department of Antioquia has approximately 19,000 hectares of banana plantations, producing more than 1 million tons annually. It has also been estimated that approximately 85,000 TOE/yr could be produced from the 190 million m3/yr of biogas generated from coffee plantations, equivalent to 995,000 MWh.

History of the electricity sector

Early history

The first historical landmark in the establishment of electric supply dates back from 1928, when Law 113 declared the exploitation of hydroelectric power of public interest. The system worked in a centralized manner, in which vertically integrated state companies maintained a monopoly in their corresponding regions. A public company, ISA (Interconexión Eléctrica S.A.), exchanged electricity among the different regional systems.

During the 1980s, the Colombian Electricity Sector suffered a crisis, similar to most countries in Latin America. The crisis was the result of subsidized tariffs, political influence in the state companies, and the delays and cost overruns of large generation projects.

The 1994 reforms: Unbundling, private sector participation and regulation

At the beginning of the 1990s the government took steps to modernize the electricity sector, opening it to private participation. The restructuring was carried out trough Laws 142 (Law of Public Services) and 143 (Electricity Law) of 1994, which defined the regulatory framework for the development of a competitive market. The new scheme, designed by the CREG (Regulatory Commission for Gas and Energy), was implemented from July 1995 onwards.

2001 Law to promote energy efficiency and alternative energies

Colombia has an ambitious reform agenda in the power sector. The country seeks to encourage foreign investment, with an emphasis on hydrocarbons and power capacity expansion; simplify modalities for small-scale energy projects; and renew interest in non-conventional renewable energy technologies with a regulatory framework to facilitate a gradual change in the energy mix.

In 2001, Law 697, which promotes the efficient and rational use of energy and alternative energies, was promulgated. This Law was regulated by Decree 3683, issued in 2003. The Law and the Decree contemplate important aspects such as the stimulus to the education and the research in renewable energy sources (RES). Nevertheless, they lack fundamental aspects to impulse the development of RES significantly such as a regulatory support system to encourage investors, the definition of feed-in tariffs for renewable energy, grid connection norms, or quantitative targets for the share of renewable energy.

Because of these limitations, the World Bank’s Energy Sector Management Assistance Program (ESMAP) considers that there still is a legal vacuum for renewable energy in Colombia. While there have been a few initiatives concerning efficient and rational use of energy (design of the Colombian program of normalization, accreditation, certification and labeling of final use of energy equipment, and promotion of carburant mixture for vehicle use and massive use of natural gas), there have been no recent initiatives related to new renewable energy technologies.

Tariffs and Subsidies

Tariffs

The electricity market in Colombia has regulated and non-regulated segments. The regulated market, which is directly contracted and supplied by distribution companies, applies to industrial, commercial, and residential users with power demands under 0.5MW. In this market, the tariff structure is established by the regulatory agency CREG. In the non-regulated market, consumers with power demands of 0.5 MW and above can negotiate freely and contract their supply in the wholesale market (i.e., spot and contracts markets) directly or through commercial entities, distributors, or producers.

In 2005, the average residential tariff was US$0.0979 per kWh, slightly below the LAC average of US$0.105. The average industrial tariff was US$0.0975 per kWh, slightly above the LAC average of US$0.083 .

Subsidies and Cross-Subsidies

By law all urban areas in Colombia are classified in socio-economic strata, which are used to determine the level of tariffs for electricity, water and other services. According to that system consumers living in areas considered as poor - and consumers using low amounts of electricity - receive electricity and natural gas at subsidized tariffs. These cross-subsidies are almost entirely (approximately 98 percent) financed by consumers living in areas considered as being relatively affluent and who use more electricity. The cross-subsidies cover about 25 percent of the electricity and gas bill of low-income consumers. A special fund that covers the remaining amount not covered by consumers provided US$21.8 million in 2005. On average, 7.5 million people a month benefited from this fund. In addition, the fund provided subsidies of Col$ (pesos) 17,159 million (US$7.4 million) to 1,808,061 natural gas users.

Subsidies are also given to provide diesel for power production in non-grid-connected zones. While diesel in the interior of the country can cost in the order of US$0.8/gal, in remote areas it can cost in the order of US$4.5/gal because of high transport costs.

Electricity and the Environment

Responsibility for the Environment

The Ministry of the Environment, Housing and Territorial Development holds the Environmental responsibilities in Colombia and leads the country’s commitment towards sustainable development. Within the Ministry, the Climate Change Mitigation Group addresses all the issues related with climate change.

Greenhouse Gas Emissions

Because of Colombia’s abundant hydroelectric potential, greenhouse gas emissions are very low per capita (1.3 tCO2e) and per unit of GDP (0.2 tCO2e).

OLADE (Organización Latinoamericana de Energía) estimated that CO2 emissions from electricity production in 2003 were 6.5 million tons of CO2 . Currently 30 percent of CO2 emissions in Colombia come from the power sector, but these could increase if thermal generation gains a larger part of the energy mix.

Clean Development Mechanism projects in electricity

Currently (August 2007), there are three registered CDM projects in the electricity sector in Colombia, with overall estimated emission reductions of 107,465 tCO2e per year.

The Jepírachi project, in the Uribia region, is Colombia’s First and Only Wind Farm. This 19.5 MW project is expected to displace an estimated 416,690 million MtCO2 until 2019. The Jepírachi project is now in its fourth year of operation. It generated about 144 GWh and displaced about 48,500 tCO2e from February 2004 to August 2006.

The other two registered projects are the Santa Ana Hydroelectric Plant, in the Bogota’s suburb Usaquén,with estimated emission reductions of 20,642 tCO2e per year; and the La Vuelta and La Herradura Hydroelectric Project, in the Antioquia Department, with estimated emission reductions of 69,795 tCO2e per year.

External assistance

Inter-American Development Bank

The Inter-American Development Bank has currently one energy project under implementation in Colombia, the Porce III Hydroelectric Power Plant, owned by Empresas Públicas de Medellín (EEPPM) and approved in October 2005. This is a US$900 million project, of which the IDB is contributing US$200 million.

In addition, the IDB is supporting the Colombia-Panama electric interconnection project through US$1.5 milllion financing for the feasibility studies phase.

Sources

ESMAP, 2007. Review of Policy Framework for Increased Reliance on Renewable Energy in Colombia. In press

Ministry of Mines and Energy & UPME, 2006. Plan de Expansión de Referencia: Generación, Transmisión. 2006-2020.

See also

• Colombia
• Economy of Colombia
• Water supply and sanitation in Colombia

External links

• Ministry of Mines and Energy
• Ministry of Environment, Housing and Territorial Development
• Energy and Mining Planning Unit UPME
• Electricity Regulator CREG
• Empresas Públicas de Medellín
• ESMAP
• World Bank projects in Colombia
• IDB projects in Colombia