Diversification of Colombia’s energy matrix: a step toward sustainability

By Mauricio Torres

According to a recent publication on Platform X by Dr. Adrián Correa, Director of the Mining and Energy Unit (UPME), as of July 2024, Colombia has an installed capacity of 1,820 GW of renewable energy (solar and wind) connected to the grid. Of these, 1,273 GW are in operation and 547 MW are undergoing testing. These resources provide the country with 10,461 GWh of energy per day, representing a 5.72% market share.

These figures demonstrate the diversification of Colombia’s electricity generation matrix, which seeks to reduce dependence on traditional resources such as large hydroelectric plants and coal and gas-fired thermal plants, in favor of low-emission resources for energy production.

This change has been driven in part by tax incentives for investments in non-conventional energy sources under Law 1715 of 2014, which provides for:

1. A 50% discount on the value of the investment in applicable income tax for a period of 15 years.
2. Exemption from VAT and import duties.
3. Accelerated depreciation of assets.

In addition, Colombia’s strong international commitments to reducing emissions, enshrined in Law 2169 of December 22, 2021, have been fundamental. This law establishes national mitigation targets that seek to:

1. Reduce greenhouse gas (GHG) emissions by 51% or 169.4 MTonCO2e by 2030 according to the reference scenario.
2. Achieve carbon neutrality by 2050.

Recently, the Colombian government has shown particular interest in the development of green and blue hydrogen, geothermal, and offshore wind energy projects, as detailed below:

Green and Blue Hydrogen

In August 2022, Decree 1476 on the Promotion of Innovation, Research, Production, Storage, Distribution, and Use of Hydrogen was established. This decree allows green hydrogen projects to use electricity from the grid if it is backed by a bilateral supply contract and renewable energy certificates issued by a third party under recognized international standards. Blue hydrogen projects must have a carbon capture and storage (CCUS) system in place.

Geothermal

For the development of this technology, several regulatory instruments were established in 2022:

1. Decree 1318 of 2022 for the development of activities aimed at generating electricity through geothermal energy.

1. Resolution 561 of 2022 of the Ministry of Environment and Sustainable Development, which established the terms of reference TdR-019 for geothermal energy exploration projects with an installed capacity equal to or greater than 10 MW.

1. Resolution 40302 of 2022 of the Ministry of Mines and Energy, which establishes the requirements for the Geothermal Registry and Permits for Exploration and Exploitation of Geothermal Resources.

Offshore Wind

In October 2023, the first round for the allocation of Temporary Occupation Permits for maritime areas was launched with the publication of the specifications. The deadline for submitting qualification documents to participate was extended to September 27, 2024. Once the participating companies have been selected, the application for designation of the area of interest will be submitted by December 20, 2024. The allocation of areas is scheduled for August 2025 and the delivery of the temporary occupancy permit (8 years) in December 2025. The successful bidder must carry out the relevant studies on the area and process the respective environmental license in order to be granted the concession for the construction, operation, and maintenance of the wind farm for 30 years, extendable for a further 15 years.

The progress made in diversifying Colombia’s energy matrix is a significant step towards sustainability and reducing greenhouse gas emissions. Tax incentives and international commitments have been key to driving this change. The commitment to emerging technologies such as green and blue hydrogen, geothermal energy, and offshore wind energy demonstrates the country’s commitment to a cleaner and more sustainable energy future.