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Colombia, first guidelines for renewable energy auctions in 2021

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Founding Managing Partner OGE Legal Services

Hemberth is an attorney and partner at OGE Legal Services. He is a Master's Degree in Renewable Energies. He is a specialist in electricity and gas regulation, energy mining law, domestic...

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  • Nov 30, 2020
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The Ministry of Mines and Energy of Colombia, headed by Dr. Diego Mesa, anticipated the aspects that the National Government is taking into account to execute an auction of renewable energies for the year 2021.

The following are the main guidelines mentioned by the MME

- The economic reactivation policy includes the promotion of renewable energies: The government has considered that the energy sector is a very important market for the national economic reactivation and therefore the promotion of auction processes to encourage the market is feasible.

- Auction for Non-Regulated Users: Unlike the auction held in October 2019, on this occasion the aim is to participate and supply energy, through renewable energies, to the commercial and industrial sector represented by the Non-Regulated Users in Colombia. Currently, this demand represents 30% of the total energy supply in our country.

- Projects to be built in the short term: The intention of the auction is that the projects resulting from the auction enter into operation no later than December 31, 2021.

- Potential of renewable projects already registered: Currently, there are projects already registered with the Mining and Energy Planning Unit (UPME) in phases 2 and 3, which represent more than 7,000 MW of installed capacity, of which 5,800 MW use solar technology.

- For public policy reasons, it is necessary to accelerate the processes of assigning connection points: For the current government, hand in hand with the Energy and Gas Regulation Commission (CREG), it is necessary to promote the acceleration of the processes of assigning connection points.

- It is envisaged that the currency used for contracts will be in dollars / USD: Due to the fact that non-regulated users have the propensity and capacity to acquire greater economic risks, the MME is currently contemplating that the 2021 auction will be held in American currency. The long term contract modality will be maintained.

- Small Hydroelectric Projects (SHP) could enter: In order to include clean energies, the current Minister pointed out the possibility that small hydroelectric projects could participate in the auction.

- Publication of the non-binding draft or pre-submittals for 2021: In the first semester of 2021 it is expected that these documents will be published, which will be accompanied by workshops and spaces for receiving comments.

- In Colombia, in spite of the fact that the energy demand is being supplied, it is necessary to create response mechanisms in the face of situations of strong hydrology: For the current government it is indispensable to continue promoting the generation of energy, not only to supply the national energy supply in common situations but also when aggressive climatic changes occur as a result of phenomena such as that of children that affect the reservoirs and compromise energy security. Proof of these mechanisms is Resolution CREG 209 of 2020 which contemplates the mechanisms to attend to critical energy situations resulting from the summer and winter seasons.

The Minister of Mines and Energy of Colombia, Dr. Diego Mesa, mentioned the following relevant issues in Colombia:

- Transmission lines: Currently there are 16 projects for both national and regional transmission valued at approximately 360 million USD, some of which are under execution, while others are prior to being tendered. The intention is that half of these projects will be developed to further interconnect the Caribbean region with the center of the country.

- Electric Mobility: With the enactment of Law 1964 of 2019 "Electric Mobility Law", Colombia ranked first in electric vehicle sales in 2019, surpassing countries such as Chile and the Dominican Republic. By the year 2020 an increase of 80% was observed compared to the previous year's sales, achieving a positive impact with the issuance of the electric mobility law.

It is important to note that the MME seeks to implement a broad infrastructure of charging stations not only in capital cities but also in intermediate cities and municipalities that encourage inter-municipal and interdepartmental travel. To this end, the ministry is analyzing what additional incentives, to those that currently exist, can strengthen the charging infrastructure.

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