Electricity sector in Colombia

The electricity sector in Colombia is dominated by large hydropower generation and thermal generation. Despite the country's large potential for new renewable energy technologies, 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. Large hydropower and 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 is a system of cross-subsidies from users living in areas considered relatively affluent and from users consuming higher amounts of electricity to those living in areas considered poor and to those who use less electricity.
The electricity sector has been unbundled into generation, transmission, distribution, and commercialization since sector reforms were 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

Electricity supply in Colombia relies on the National Interconnected System and several isolated local systems in the Non-Interconnected Zones. SIN encompasses one third of the territory, giving coverage to 96 percent of the population. The ZNI, which covers the remaining two thirds of the national territory, only serves 4 percent of the population.
Thirty-two large hydroelectric plants and thirty thermal power stations feed electricity into the SIN. On the other hand, the ZNI is mostly served by small diesel generators, many of which are not in good working condition. At June 2015, installed net effective capacity was 15.5 Gigawatt, with the following share by source:

TECHNOLOGY	INSTALLED CAPACITY	PERCENTAGE
Hydroelectric	10,919.8	70.35%
Thermal	1,684.4	10.85%
Thermal	1,180	7.60%
Liquid	1,366	8.80%
Gas - Liquid	276	1.78%
Biomass	77.2	0.50%
Wind	18.4	0.12%
TOTAL	15,521.8 MW	100%

The share of thermal participation in generation has increased since the mid-1990s. This has happened in response to the 1992/1993 crisis caused by El Niño-Southern Oscillation associated droughts and the high reliance of power generation on hydroelectric installations that lacked multi-year storage capacity. As a result of the new policies adopted by the country, the dominance of hydropower in the generation portfolio has been reduced from 80 percent in the early 1990s to less than 65 percent today. The expansion path involved adding 1,500 MW of new capacity, equally distributed between hydro and thermal sources, by 2011. This will entail investments of US$258 million per year.

Production

Total electricity production in 2005 was 50.4 Terawatt-hour. 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 kW·h 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. It imported only very small volumes of electricity from Venezuela and Ecuador. According to the Ministry of Mines and Energy, exports are estimated to increase at 5 percent annually.
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 Interconexión Eléctrica S.A. in Colombia and Empresa de Transmisión Eléctrica S.A. in Panama, entails the construction of a transmission line with 300 MW 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 Latin America and the Caribbean. 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.
As in other countries, the zones outside the interconnected system pose especially challenging conditions for electrification, as well major inadequacies in service provision. This system, whose installed capacity is almost exclusively diesel-based, suffers from major diseconomies of scale as 80 percent of capacity is in plants below the 100 kW threshold.

Service quality

Interruption frequency and duration

Service quality in Colombia, as measured by service interruptions, is much lower than the average for Latin America and the Caribbean. In 2005, the average number of interruptions per subscriber was 185.7, far above the regional average of 13 interruptions. The duration of interruptions per subscriber was 66 hours, also far above the regional average of 14 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, compared to 13.6% average in Latin America and the Caribbean.

Responsibilities

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 and 143 of 1994. The Ministry of Mines and Energy is the leading institution in Colombia's energy sector. Within the Ministry, the 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.
The 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 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 to 49 percent 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. The remaining three are integrated companies that carry out all the activities in the electricity chain. The largest company is Interconexión Eléctrica S.A., 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. The three largest players in commercialization are Unión Fenosa, Endesa and Empresas Públicas de Medellín.

Renewable energy resources

Colombia has 28.1 MW installed capacity of renewable energy, 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, exploitation of the country's significant wind potential alone could cover more than the country's current total energy needs.

History

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, exchanged electricity among the different regional systems.
During the 1980s, the 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.

1994 reforms

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 through Laws 142 and 143 of 1994, which defined the regulatory framework for the development of a competitive market. The new scheme, designed by the CREG, was implemented from July 1995 onwards.

Law 697 of 2001

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 education and research in renewable energy sources. Nevertheless, the program created under this law lacks fundamental aspects to impulse the development of RES significantly, such as a regulatory support system to encourage investment, the definition of policies to promote renewable energy, or quantitative targets for the share of renewable energy.
Limitations such as the ones above present an important legal vacuum for renewable energy in Colombia. While there have been a few initiatives concerning efficient and rational use of energy, there have been no recent initiatives related to new renewable energy technologies.