The electricity sector launched a new alert due to the lag that exists in the entry of new generation projects and that could make the possibility of energy rationing in the country more visible. In addition, this is one of the causes that has led Colombians to have to pay more expensive rates.

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At the end of 2022, the installed capacity of the National Interconnected System (SIN) increased to 18,777 megawatts due to the start-up of 25 plants, which contributed an additional 995 MW.

However, this capacity could be even greater if the 1,800 MW of the second phase of Hidroituango had entered as planned before the emergency in the project, in addition to another 1,547 MW from the wind farms that won in the 2019 auctions and which should start operating in 2022.

Apart from the inconveniences of these projects, the delay of Colectora, the line being built by the Bogota Energy Group (GEB) and that it will be in charge of transporting wind energy from La Guajira, has also made time run.

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It should have been operating since November 30, 2022, but due to the covid-19 pandemic and the difficulties they have had in the prior consultation processes with the 224 communities in the area of ​​influence, the Ministry of Mines and Energy granted GEB a extension and the new date is July 22, 2025.

But now that they were about to conclude these consultations and move towards the application for the environmental license, the Ministry of Interior He notified them that they had to do 11 more with populations of La Guajira, when the previous government assured them that they were not necessary.

“I hope that the project does not continue to be a mechanism to solve problems that go beyond those of the project, because we are not the State. These consultations can take four more months, and if the time is extended, the project could be delayed until 2026 or 2027,» he said. Juan Ricardo Ortega, president of the GEB.

One of the major concerns generated by this lag in new supply is that if little rain is recorded in the future and demand continues to grow at a rapid pace, as it has been doing in recent years, there could be a deficit of energy and It would not be possible to attend to all the consumption of Colombians. In other words, the door would be opening to energy rationing.

For this reason, it is essential that new plants come into operation that can cover all future demand, especially considering that the National Government’s plans to accelerate the energy transition include having more electric cars and buses.
According to the Energy Mining Planning Unit (Upme), by 2036, electricity consumption in Colombia could have an average growth between 2.22 and 3.33 percent each year.

While Fitch Ratings forecasts that demand will grow by 1,500 GWh (approximately 2 percent), in addition to the growth of 2,500 GWh in 2022.
This implies that 1,000 MW of additional capacity would be needed annually to meet this increase, without putting additional pressure on energy prices.

Effect on rates

The supply of generation that is needed and the little capacity of dams that Colombia has have also led to eleven prices in the Energy Market.
As explained by President of Isagén, Camilo Marulanda, in the formation of the price it influences the perception of future generators, which implies releasing less water because a summer season will come and they need to have how to meet their commitments with the system and customers.

In practice, this is done by raising the price offered so that the thermal plants increase their participation, but it turns out that these plants are consuming a more expensive natural gas price as a result of the war in Ukraine and an expensive dollar.

In addition, while the demand increases, the rains are reduced more and more (see image). During the phenomenon of girl of 2022 —which seems to have been very intense— it rained less compared to the one that broke before.

And although the reservoirs are currently above the historical average, when no water falls their level begins to drop rapidly: so far in 2023 they have gone from 79 to 67.32 percent and as of February 9 the stored resource it was 12,249 GWh, which would be enough to meet the consumption of Colombians (220 gigawatt hours per day) for only 55 consecutive days.

On the other hand, having little dam capacity, Camilo Marulanda says that stating that the reservoirs are full is a «false reassurance», because this can change from one week to the next. In the 40 days to date this year, its level has fallen 14.7 percent and this suggests that a summer of one and a half or two months can generate stress in the system.

According to estimates of the National Oceanic and Atmospheric Administration (NOAA) In the United States, there is a 50 percent probability that an El Niño phenomenon will occur between August and October 2023, although as the months go by this possibility may change.

«You have to know how to use water properly and save it for the summer, because facing an El Niño phenomenon with low reservoirs could put the electricity supply at risk,» says Camilo Marulanda.

What is the solution?

With this scenario, the need for a new Reliability Charge auction becomes more important. The Ministry of Mines and Energy has already confirmed that it will actually be done, but has not yet provided details.

Although it is just as important that all the projects that won in the 2019 auctions and that have reported problems in advancing towards their construction can come into operation. For this, the accompaniment and support of the Government becomes essential.

More power generation, as well as allaying potential demand slack risks, could help drive power rates down further. according to Danish, in January the annual inflation of electricity was 20.95 percent.

But for new investments to arrive in Colombia, it is also necessary to clarify the regulation so that companies can know under what conditions they can invest them, since these are resources that are invested over 30 or 50 years.

“The sector has to be proactive to try to find a formula that leaves the Government and companies alone to avoid this volatility in the stock market price, but without affecting the credibility of long-term regulation, which is what will attract investment for solve the supply problem that we have», points out the president of isagen.

Correcting the current reduced damming capacity is very complicated because it is not feasible to build large hydroelectric plants due to existing environmental and social restrictions. Therefore, the way out is to continue complementing generation with small hydroelectric plants, maintain the operations of thermal plants and more non-conventional renewable energy, especially solar, since these are projects that can be built in a short time.

However, the viability of this type of initiative would be at risk due to a higher tax burden and the devaluation of the peso, since close to 70 percent of the resources required are in dollars.

This is added to the increase from 1 to 6 percent of electricity transfers for this type of project that were added to the National Development Plan and that would end up injecting more pressure when evaluating economic viability.

“If one of the Government’s goals is to accelerate the energy transition and the construction of more wind and solar farms in Colombia, this higher tariff goes against this desire. Multiplying this rate by six is ​​a bit high,” said the president of Isagén.