Markets

Colombia takes another step towards solar growth


09 May 2018 by Adam Critchley, Solarplaza

With a resolution allowing for distributed generation and a long-term power auction planned for this year, the country is set to become South America’s newest serious solar player.


Colombia Parliament


Colombia’s energy and gas regulator CREG published new regulations in March for small-scale solar power generators of capacity up to 5 MW, allowing for the sale of surplus energy to the national grid. These regulations are expected to boost the take-up of the technology among households and businesses.

Colombia is looking to increase its solar generation capacity to reduce the country’s reliance on hydroelectric power, having learned lessons from regional neighbour Brazil. This South American giant is also heavily hydro-dependent, and has suffered electricity generation shortfalls due to droughts.

In April, CREG touted the new regulations at a series of presentations in the cities of Bucaramanga and Barranquilla, aimed at explaining the self-generation rules contained in Resolution 030 that allow for the sale of excess self-generated energy to the grid. 
Both of those cities are situated in the country’s north, considered the best region for solar in a study carried out by the government’s energy and mining planning unit (UPME), which published an atlas of solar and wind potential in April. 

According to the study, La Guajira department, in the northeast, has the highest irradiation potential, of 2,190KWh/m2/year, followed by the Atlantic coast, with 1,825KWh/m2/year, and the Orinoco River region, with 1,643KWh/m2/year.


La Guajira

La Guajira department


“In general, the 030 law is something very positive, because at last we have clarity, and it allows us to understand the steps that need to be taken to export energy to the grid,” according to Marc Tremel, general manager at Colombinvest, a solar solutions provider offering design, engineering, consultancy, installation, training and maintenance services in the South American country.

However, he bemoaned that one aspect of Resolution 015 - which was issued in January of this year and established the methodology for payments to small-scale generators for surplus energy supplied to the grid - needs to be modified. 

“Resolution 015 states that all generation projects above 100 KW need to have a back-up contract with the grid operator,” Tremel told Solarplaza.

“That means the operator decides whether or not to back a project. That’s a negative aspect, because if we establish a power-purchase agreement (PPA) with a client for a project for 150 KW, it’s economically less favourable, and it would actually be preferable to have a 100 KW project, just to get out of having to pay for the back-up contract,” he added.

“The market is maturing. We are still lacking a lot of international players, but there is now much interest in the Colombian solar market.”

“The back-up contract is something that nobody supported, except for grid operators or those with distribution and transmission businesses, because it represents a barrier to development.”

However, he said he hopes that, with presidential elections taking place this year, this aspect of Resolution 015 will be modified by the new government when it takes office.

Colombia has lagged behind its Latin American neighbours in solar development and remains outside the regional top ten in terms of installed solar capacity, which is topped by Chile. But it has made moves to increase solar power generation, such as tax breaks introduced as part of a law passed in 2014, which companies have taken advantage of to advance the development of rooftop solar arrays.
“The market is maturing. We are still lacking a lot of international players, but there is now much interest in the Colombian solar market,” Tremel said.


Medellin


Upcoming auction

Last November, the CREG announced that the country’s first electric power auction for utility-scale projects would be held this year, designed to spur growth of the country’s solar and other non-conventional renewables capacity. In March it published the guidelines for the long-term contracts, but a date for the auction has yet to be set.

“We are foreseeing an interesting future with the announcement that there will be an electric power auction, and we expect to see the rules announced soon. That will bring a significant solar contribution,” Tremel said, estimating that the auction could add around 300 MW to the country’s solar capacity.

However, with the auction’s format, conditions and bidding rules still to be announced, uncertainty remains as to how much capacity will be on offer, and under what terms. 

“We don’t yet know if the auction in Colombia will be held in US dollars, for example. And that will have an effect, because projects in dollars will be more difficult to finance, and therefore prices will not drop as low as they have done in Mexico, for example, because the cost of financing has such an influence on this kind of projects,” Tremel said. 

“We are foreseeing an interesting future with the announcement that there will be an electric power auction, and we expect to see the rules announced soon. That will bring a significant solar contribution."

Auctions held in Argentina and Mexico last year produced the lowest prices so far in Latin America for US dollar-denominated solar projects. 

“Up to now, everything has been done in pesos in Colombia,” he said.

Non-conventional renewables currently make up just 3 percent of Colombia’s installed generation capacity, but more than 1 GW of solar projects are in the pipeline, according to the country’s electricity information system (SIMEC). These are to be developed by companies such as Rea Solar, Sowitec, Grenergy and local firms SmartSolar and Energitel, among others.

Colombia’s largest public utility, Empresas Públicas de Medellín (EPM), announced in April that it had commenced the installation of a 100 KW floating solar power plant at the Guatapé dam near Medellín. This will be the country’s first floating PV project, and is expected to generate around 145 MWh per year as a pilot project.

When announcing the project, EPM said the array would determine the viability of future floating solar power generation projects. The company made its first foray into solar in January with a rooftop project at a Medellín shopping centre, anchored by a 15-year PPA.


Cartagena


Transmission upgrades

Colombia has begun a transmission line build-out in a bid to avoid distribution bottlenecks, a problem that stymied solar projects in Chile, as their inability to connect to the grid and feed off-takers deterred investment.
Among such projects is Plan5Caribe, launched by the mining and energy ministry (MINMINAS) and comprising five measures aimed at strengthening transmission and distribution in Colombia’s Caribbean region, and which earmarked investment of 4 trillion Colombian pesos (1.1bn euros). 
The scheme includes investment in transmission, distribution and substation construction, as well as subsidies for low-income households to assist in the payment of their electricity bills.
The most recent Plan5Caribe actions included a tender awarded to Colombian firm Celsia, which will execute seven transmission projects to facilitate the development of solar projects in the northern departments of Bolívar, Atlántico, Córdoba, Cesar and La Guajira. 

The company will also build five substations, upgrade eleven others, and roll out 50km of distribution lines.

Celsia developed the 9.8MW Solar Yumbo plant, Colombia’s first PV facility, which came online in September 2017 and is located in the Valle del Cauca department, in the country’s west, generating around 16.5 GWh per year. 


"The government’s projection for solar capacity additions - around 200 MW by 2031 - is very conservative, and very far from the market reality."

Growth prospects

According to Colombia’s grid operator XM, of the country’s total 16.8 GW of generation capacity, non-conventional renewables account for 0.1 GW - but will account for more than 3 GW by 2023. However, 10 GW worth of connection requests for solar and wind projects have already been received.

Tremel believes the government’s projection for solar capacity additions - around 200 MW by 2031 - is very conservative, and very far from the market reality.

Celsia began the construction of its second PV plant in March. Located in the northern department of Bolívar, the 8.8 MW facility expects to supply 7,400 households.

According to UPME, solar represents 88.3 percent of all applications to build small-scale energy generation projects. Up until November last year, 273 solar projects were registered since 2014, when law 1715 came into effect, granting tax breaks for solar installation. To date, 147 companies were selected to benefit from such tax breaks.

UPME’s director Ricardo Ramírez Carrero was quoted by local media as saying in December that, although wind outpaces solar in terms of total capacity for new projects, small-scale solar for rooftop industrial, business and residential properties make up the majority of all projects.

And rooftop growth is expected to accelerate as a result of Resolution 030, as consumers begin selling surplus energy to the grid, he told El Tiempo newspaper.



Solar installation remains out of reach for many households in Colombia, however, particularly in rural areas, where access to subsidies lessens their incentive to switch to solar to lower their electricity bills. As a result, rooftop solar growth will likely be faster among the wealthier residential segment, who have higher electricity bills and the purchasing power to install arrays.

And it will likely be coastal cities, such as the Atlantic seaport of Barranquilla, where air conditioning is necessary and which results in higher electricity costs, that will lead growth in residential solar installation, in contrast to the higher altitude cities of Bogotá and Medellín.

"Rooftop growth will likely be strongest among commercial and industrial enterprises."

Rooftop growth will likely be strongest among commercial and industrial enterprises. As an example, confectioner Ítalo has deployed 1,080 panels on its Bogotá factory, generating 490 MW per year and supplying 13 percent of the plant’s power needs. Already the largest solar array in the capital, the company hopes to still further expand the system.

However, one obstacle to growth remains the unsuitability of many rooftops to support solar arrays, according to UPME, a factor that will slow deployment and require greater investment.


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