Colombia Renewable Energy Policy Handbook Power

Transcription

1 Colombia Renewable Energy Policy Handbook 2017 Report Code: GDAE1105P

2 1 Table of Contents 1 Table of Contents List of Tables Introduction Renewable Energy Policy GlobalData Report Guidance Renewable Energy Policy, Colombia Overview Rural Electrification Fund Fund for the Electrification of Non-interconnected zones Efficient Lighting Program of Rational and Efficient Use of Energy and Other Forms of Non-conventional Energy Policy guideline for the promotion of sustainable biofuels production in Colombia (Conpes 3510) Law 939 to promote the production and promotion of biofuel Law 1665 (2013) and Law 1715 (2014) Financial Incentives and Policy Support for Renewable Energy, Colombia Funds Supporting Investment in Energy Projects Renewable Energy Law, Appendix Market Definitions Installed Capacity Electricity Generation Electricity Consumption Thermal Plant Hydropower Plant Nuclear Renewable Energy Resources Abbreviations Bibliography Methodology Coverage Secondary Research Primary Research Modeling and Forecasting Contact Us

3 4.7 Disclaimer List of Tables Table 1: Abbreviations

4 2 Introduction 2.1 Renewable Energy Policy Renewable energy represents a possible solution to two major global issues: global warming and diminishing fossil fuel reserves. It is sustainable and clean, generally emitting no or very little CO 2, and these factors have led major countries to shift their focus toward the development of renewable energy sources. Renewable energy has the potential to boost the global economy. However, the most important challenge in the deployment of renewable energy is that it is more expensive than conventional fuels. In order to make renewable energy competitive, it is necessary for governments to provide support in the form of favorable policies and incentives. Various governments are establishing regulatory frameworks, policies, and incentives to develop the renewable energy sector, as they increasingly recognize its importance. Renewable portfolio standards, or quota obligations, and Feed-in Tariffs (FiTs) are the two most prominent support mechanisms used to drive the development of the renewable energy market, and most of the countries that recognize this offer one or both of these policy measures. Other incentives, such as capital subsidies, grants, rebates, tax credits, tax exemptions, loans at reduced interest rates, net metering, Renewable Energy Certificates (RECs), and public competitive bidding, are also offered variously by major countries to promote renewable energy capacity building. 2.2 GlobalData Report Guidance The report begins with an introduction to renewable energy policy and its importance in making renewable energy sources competitive with conventional energy sources. It then discusses the major renewable energy policies in Colombia. 4

5 3 Renewable Energy Policy, Colombia 3.1 Overview Colombia is one of the major economies of South America and its main export is petroleum. The Ministry of Mines and Energy (MME) is responsible for policymaking and supervising the electricity sector in Colombia. It regulates trading, transmission, distribution, generation, and interconnection. It also acts as a link between the central government and state utilities. The main function of the Unidad de Planeación Minero Energética (UPME) is to conduct energy planning and advise on and provide implementation of ministerial policies. The energy market in Colombia is based on Law 142 (the Public Utilities Law) and Law 143 (the Electricity Law) of 1994, which divide the power market into four activities: generation, transmission, distribution, and retail. A wholesale power market was implemented in 1995, and power can either be traded through the spot market or through bilateral contracts. Hydropower is the largest power-generating source in Colombia. The country has abundant water resources for hydroelectric power, and in Latin America is second only to Brazil in hydropower potential. Much of Colombia's hydropower generation is located in the mountainous northwestern part of the country. Thermal power coal, gas, and oil is the next largest source of electricity. Colombia has numerous fossil fuel and natural resources, including productive petroleum reserves and extensive coal reserves, which are the largest in South America. They also have significant, but largely untapped, natural gas reserves, mainly located in the Northern Coast and Barranca regions, and in La Guajira department in northern Colombia. The country also has significant wind and solar resources that remain largely unexploited. Last year, the government passed a new law to encourage renewable energy development in Colombia. Some of the incentives introduced state that materials bought for renewable energy projects will be exempt from the national value added tax of 16%. Materials and labor that will have to be imported for renewable energy projects will be exempt from tariffs. There will also be access to public and private funds to finance projects. The country has a target of 6.5% renewable electricity by 2020, excluding large hydro, but the potential for hydropower, which is an established technology in the country, could delay the development of the renewable market, despite new legislation supporting wind and solar. The country is a net exporter of electricity and exports to its neighboring countries, Venezuela and Ecuador Rural Electrification Fund The Rural Electrification Fund was approved in 2003, and the main aim of the program was to provide resources to develop energy projects related to expansion and reinforcement of the electricity service in rural areas. 5

6 The program is being managed by the MME and the annual cost associated with it amounted to $159.93m. This financial support fund, under the law 1376, was amended in 2010 and is applicable up to the end of Fund for the Electrification of Non-interconnected zones This fund was established in 2000 to finance renewable power projects in remote places, local electricity distribution, the interconnection of rural grids, and the renovation of existing infrastructure in remote areas Efficient Lighting Decree 2331 was passed in June 2007 to mandate the use of fluorescent light bulbs in government buildings. Following a modification, Decree 895 was passed in 2008 to mandate that the most efficient light sources available should be used in government buildings. Decree 2501 was passed in It mandated the issuance of technical regulations regarding energy efficiency in government buildings, end-user products, traffic, public lighting, or any other energy transformation products. It was also established that, as of 2010, public housing must incorporate energy-efficient designs in order to be eligible for government subsidies. In September 2008, Decree 3450 prohibited the import, sale, or use of less efficient lighting sources and made the use of efficient lighting sources mandatory, starting from 2011 (Grantham Institute, 2015) Program of Rational and Efficient Use of Energy and Other Forms of Non-conventional Energy The MME adopted Resolution in June 2010 an action plan to develop the Rational and Efficient Energy Use Program (Programa de Uso Racional y Eficiente de Energía y Fuentes No Convencionales, PROURE) as part of Law 697 of It aims to promote energy efficiency, increase the use of renewable energy sources, and facilitate the implementation of related standards, such as tax incentives. The main objective is to build economic, technical, and regulatory conditions that promote energy-efficient goods and services Policy guideline for the promotion of sustainable biofuels production in Colombia (Conpes 3510) It is a document released in 2008 by the Colombian government s National Planning Department through the National Council for Economic and Social Policy. The document reviewed the state of the biofuel industry in the country and the impact various incentives and policies had on the industry since It came up with guidelines and suggestions for policymakers to achieve objectives defined in the document for the biofuel industry in Colombia. 6

7 3.1.6 Law 939 to promote the production and promotion of biofuel Law 939 was approved by the Colombian Congress in December 2004 with the objective of promoting the use of biofuels in diesel engines. The law exempted new palm oil producing farms from certain taxes. It also sought the use of different types of biofuels in diesel engines in the country in certain proportions as mandated by the MME. In addition, global tax exemption has also been granted to biofuels in Colombia as part of Law Law 1665 (2013) and Law 1715 (2014) Law 1665 of 2013 was promulgated to bring the country under the purview of the International Renewable Energy Agency (IRENA) statute, while Law 1715 of 2014 was promulgated with the intent of providing a clear process for establishing renewable power sources and emphasizing the efficient management of energy and a demand-response management system. Specific investment incentives are expected to be announced in 2015 (Grantham Institute, 2015). 3.2 Financial Incentives and Policy Support for Renewable Energy, Colombia Colombia has a very strong renewable energy potential and the highest wind power potential. It did not have a strong renewable energy focus prior to 2013, as it lacked clear-cut policies, although a small amount of funding for renewable energy projects was available Funds Supporting Investment in Energy Projects Finance for the Electrification of Non-interconnected Areas (Financiero para la Energización de las Zonas no Interconectadas, FAZNI) and the National Royalty Fund (FNR) support energy projects. FAZNI funds finance plans, programs, and investment projects for conventional and renewable projects in non-grid-connected zones, usually covering 80% of the project cost. FNR provides financial assistance, mainly in regions affected by mineral extraction. It usually covers 80% of the total project cost Renewable Energy Law, 2014 In 2013, Colombia promulgated Law 1665, which embraced the IRENA statute, in which several broad commitments were made. It stated: Of the annual on-grid power generation, 3.5% will be from renewable sources (excluding large hydro) by Of the annual on-grid power generation, 6.5% will be from renewable sources (excluding large hydro) by Of the annual off-grid power generation, 20% will be from renewable sources (excluding large hydro) by

8 Of the annual off-grid power generation 30% will be from renewable sources (excluding large hydro) by Later, in 2014, Law 1715 was promulgated with the intent of providing a clear process for establishing renewable power sources and emphasizing the efficient management of energy and a demand-response management system. The major focus of the renewable energy law is the integration of self-generated energy, regardless of resource, into the national grid. This was made possible by implementing net metering facilities. The criteria for the identification of self-generating units are still to be identified. Demand-response infrastructure for on-grid consumers is also to be implemented. There are also provisions for off-grid regions in this law, which detail the measures that the government will take to develop non-conventional and renewable sources of power in remote areas. These sources include forestry and agricultural biomass, solid waste, reforestation activities, solar, wave, wind, small hydropower, and geothermal energy. The law included provisions to further develop, execute, and finance PROURE, and to establish best practices for public sector energy efficiency, targets for energy-efficient government buildings, and incentives for the development and implementation of demand-response infrastructure. However, it fails to outline the details of the incentives that would drive the development of renewable energy. In April 2015, the government announced that a draft decree was being prepared for the introduction of tax incentives for renewable power producers. The decree would bring a 50% waiver of income tax for renewable energy generators, for five years. Implementing the incentive plan will cost an estimated $554m, while revenue generation from these measures is expected to be $775m, giving a net profit of $221m. The incentives would be open for solar photovoltaic (PV), wind, small hydro, geothermal, and biomass. Since April 2016, two drafts of the decree have been released for public comments. 8

9 4 Appendix 4.1 Market Definitions refers to the rate of production, transfer, or energy use, usually related to power. It is measured in Watts (W) and often expressed in kilowatts (kw) or Megawatts (MW). It is also known as real power or active power Installed Capacity Installed capacity refers to the generator s nameplate capacity as stated by the manufacturer, or the maximum rated output of a generator under given conditions. It is given in MW on a nameplate affixed to the generator Electricity Generation Electricity generation refers to the process of generating power from other forms of energy. It also refers to the amount of power produced, expressed in Gigawatt hours (GWh) Electricity Consumption Electricity consumption is the sum of power generated, plus imports, minus exports and Transmission and Distribution (T&D) losses. It is measured in GWh Thermal Plant A thermal power plant is a plant in which turbine generators are driven by burning fossil fuels Hydropower Plant A hydropower plant is a plant in which the turbine generators are driven by falling water Nuclear Nuclear power is the energy released from the fission of nuclear fuel in a reactor Renewable Energy Resources Renewable energy resources are those that provide energy that is naturally replenished but limited in the amount of energy available per unit of time. Biomass, geothermal, solar, small hydropower, and wind are examples of renewable resources. 9

10 4.2 Abbreviations Table 1: Abbreviations FAZNI Financiero para la Energización de las Zonas no Interconectadas FNR National Royalty Fund IRENA International Renewable Energy Agency MME Ministry of Mines and Energy PROURE Programa de Uso Racional y Eficiente de Energía y Fuentes No Convencionales UPME Unidad de Planeación Minero Energética VAT Value Added Tax Source: GlobalData 4.3 Bibliography Grantham Institute (2015). Climate Change Legislation in Colombia. Grantham Institute. Available from: Methodology GlobalData dedicated research and analysis teams consists of experienced professionals in marketing, market research, consulting background in the energy industry and advanced statistical expertise. GlobalData adheres to the Codes of Practice of the Market Research Society ( and the Strategic and Competitive Intelligence Professionals ( All GlobalData databases are continuously updated and revised. The following research methodology is followed for all databases and reports. 4.5 Coverage The objective of updating GlobalData coverage is to ensure that it represents the most up to date vision of the industry. We track hundreds of Alternative energy news sources on a daily basis. Using this news flow and regular interaction with the industry experts, we identify the key trends being witnessed by the industry. These can be market opportunity, industry consolidation, technological break-through, policy updates, etc. Our articles and reports investigate these trends in detail and evaluates the market implication of these trends Secondary Research The research process begins with exhaustive secondary research on internal and external sources being carried out to source qualitative and quantitative information relating to each market. The secondary research sources that are typically referred to include, but are not limited to: Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings 10

11 Industry trade journals and other literature Internal and external proprietary databases National government documents, statistical databases and market reports News articles, press releases and web-casts specific to the companies operating in the market Primary Research A primary research effort further substantiates findings and information captured through desk research. This aspect of the research program serves both as a means of obtaining updates regarding issues such as changes in policy frameworks, power sector development, and as a quality control mechanism. GlobalData conducts hundreds of primary interviews a year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions: Provides first-hand information on the market size, market trends, growth trends, competitive landscape, future outlook Helps in validating and strengthening the secondary research findings Further develops the analysis team s expertise and market understanding Primary research involves interactions and telephone interviews as well as face-to-face interviews for each market, category, segment and sub-segment across geographies. The participants who typically take part in such a process include, but are not limited to: Industry participants: CEOs, VPs, business development managers, market intelligence managers and national sales managers Outside experts: Investment bankers, valuation experts, research analysts and key opinion leaders specializing in the power industry Modeling and Forecasting In case of data gaps and especially while forecasting the market, we use in-house models to forecast the data. Historic data and the analysis of trends within it form the basis of all forecasting methodology. Various qualitative and quantitative factors are usually taken into account for estimating the future growth. The forecasted data is validated through various industry experts and back-of-envelope check is also done. 11

12 4.6 Contact Us If you have any queries about this report or would like further information, please contact at the below given telephone numbers or address. North America: Europe: Asia Pacific: Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that GlobalData delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such GlobalData can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. This report is a licensed product and should not to be reproduced without prior permission. The information in this document has been extracted from etrack by a registered user. GlobalData holds no responsibility for the loss of original context and for any changes made to information following its extraction. All information was current at the time of extraction, although the original content may have been subsequently updated. 12