Renewable Energy 2024 Comparisons

The electricity market in Colombia was established in the early 1990s under the concept of public utilities, aimed at stimulating private investment in large-scale power generation and transmission infrastructure. This shift came after decades of a state-owned industry marked by political interference and energy insecurity, including widespread outages and a year-long period of energy rationing in 1992. Given this context and the country’s geographic suitability for water reservoirs, the industry was built around the principle of reliability. Since 1994, the electricity mix has relied heavily on large hydroelectric and thermoelectric power generation, resulting in a power mix of approximately 70% hydroelectric and 30% thermal for the following 20 years.

However, in response to the climate change crisis and increasing vulnerability to the El Niño phenomenon – which has led to volatile electricity prices – Colombia decided to diversify its energy mix to include non-conventional renewable sources. Significant reforms to the original legal framework and a cultural shift began in 2014, marking the start of the country’s energy transition.

This transition gained momentum with the passage of the Renewable Energy Law 1715, reaching a pivotal moment in 2019 with the first-ever awards of large-scale wind and solar projects through both the Reliability Charge Auction and the Renewable Energy Auction. This was accompanied by landmark cross-border mergers and acquisitions of renewable projects. These milestones helped Colombia achieve its initial target of 2.5 GW in renewable energy, setting the stage for a new energy mix and laying the foundation for the country’s emerging renewable energy market.

Today, Colombia’s shift from fossil fuels to renewable energy is actively progressing. It is driven by recent legislation, government policies, and regulatory frameworks aimed at increasing the share of renewables in the energy mix, supported by approximately USD3.1 billion in private investments, mostly in solar and wind projects.

While hydropower still accounts for 63% of the country’s power capacity, solar energy is rapidly gaining traction, now comprising 6% of the total 20 GW installed capacity. New solar developments already outpace hydropower initiatives by more than a two-to-one margin, making solar the leading source in Colombia’s energy transition across all segments, including Centralised Generation (CG) and Small-Scale Production (SCP).

Colombia’s energy transition also aims to further diversify the energy mix by incorporating wind, biomass, hydrogen, large-scale battery storage, and nuclear energy. Targets outlined in the National Energy Plan include achieving a 12% share of non-hydro renewables by 2050 and a 20% reduction in CO2 emissions by 2030. Efforts to phase out coal and reduce dependence on fossil fuels are supported by tax incentives for investments in renewable energy and energy efficiency projects.

Significant efforts are also underway to bring end users to the forefront of the transition by empowering them with options for independent production, providing energy efficiency incentives, and promoting “prosumer” initiatives at a community level (Comunidades Energéticas). A more consumer-centred energy policy is being developed as the foundation for several proposed government reforms.

All these initiatives align with Colombia’s commitment to international climate change agreements and sustainable development goals. However, despite these advances towards an energy transition and environmental sustainability, Colombia faces the challenge of maintaining its energy security, which has been on a declining trend since 2017, according to the World Energy Council’s Energy Trilemma Index.

Hydropower remains the most significant renewable energy source in Colombia, accounting for 63% of the total installed power capacity and 75% of electricity production. However, solar energy is emerging as the leading source in the country’s energy transition across all scale segments, with the number of new solar initiatives registered with the government now doubling those of hydropower.

In the past year, solar projects for Centralised Generation (CG) have reached a 6% share of the country’s 20 GW total installed capacity and contribute 1.54% of the total 117,000 GWh of electricity production. Currently, 1.3 GW of solar capacity is operational, 587 MW is in the testing phase, and early-stage developments account for an additional 14.1 GW. In the Small-Scale Production (SCP) segment, solar energy represents 84% of installed capacity, growing at an average rate of 4 MW per month since 2023. Innovative solar technologies integrated into buildings, such as Building-Integrated Photovoltaics (BIPV) like Solarflex by Solestructuras, are emerging to address the structural limitations of approximately 70% of Colombian rooftops. The first-of-its-kind 114 kWp semiflexible lightweight solar project for a large food chain became operational in March 2024, and anticipates 1,5 MW for 2025.

Biomass is the next most prominent renewable source, although it holds less than 1% of the installed capacity market share. It primarily serves the agricultural and industrial sectors by converting organic waste and by-products into electricity through combined heat and power plants (Cogeneradores), which supply both private domestic use and exports to the grid.

Colombia also has world-class wind potential, particularly in La Guajira in the northern region. A pipeline of large-scale wind projects totalling 3 GW, most awarded in the 2019 auctions, is currently under construction. These projects are progressing toward completion while overcoming challenges related to grid infrastructure expansion, environmental procedures, and local community engagement. They are approximately 50% complete and are expected to come online by 2025.

In 2021, Colombia allocated its first grid-scale battery storage project with a capacity of 50 MW. However, various macroeconomic factors, including global supply chain disruptions and post-pandemic effects, have posed challenges for the project. It is currently awaiting approval from the Colombian government for an extension of its commercial operations date.

Geothermal energy, green hydrogen, tidal energy, and nuclear power are all in the early stages of development. These sources present significant investment opportunities, given Colombia’s volcanic regions, two coastlines, and the critical need to ensure grid reliability and stability amid an evolving electricity mix.

The renewable energy market in Colombia has experienced a dynamic and challenging landscape over the past 12 months, shaped by a complex political environment and unusual dynamics within energy authorities. These include the lack of quorum at the Energy Regulatory Commission (CREG) and a series of high-uncertainty reforms announced by the government.

As a result, the latter part of 2023 and 2024 have been characterised by jurisdictional and legislative activism, reflecting the natural democratic process. This period has demonstrated the institutional strength of Colombia, with effective checks and balances exercised by the judicial and legislative branches over the Executive. It has been an enriching year, particularly from a legal perspective, reaffirming the importance of the Rule of Law.

Judicial reviews in 2023 included key decisions impacting the energy transition process, such as the annulment of the Renewable Energy Auctions’ Decree 570 by the Council of State in September 2023, and the declaration of unconstitutionality of the Executive Superpowers’ Decree 1276 by the Constitutional Court in November 2023.

Two additional rulings in 2024 further underscore the judiciary’s efforts to ensure government compliance with the Rule of Law. First, Judge 54 of the Administrative Circuit of Bogotá issued an injunction requiring the CREG to produce regulatory adjustments related to the modification of the commercial operations date (COD) for energy projects under development. Second, the Administrative Tribunal of the Atlantic ordered a public hearing to review the retroactive energy losses billing in the latest tariff regulatory scheme for the northern region (Region Caribe), which has been causing significant increases in energy bills and distress among local communities.

On the legislative front, the Fifth Permanent Constitutional Commission of the House of Representatives created a Special Follow-Through Commission, led by Congress members Ana Monsalve and Juan Fernando Espinal, in October 2023. This innovative initiative aims to provide institutional support for large-scale renewable energy projects under development and construction by facilitating co-operative action among government agencies and monitoring their progress.

These efforts highlight the importance of the energy transition in Colombia and the commitment of its institutions to uphold the Rule of Law. Consequently, the renewable energy market continues to mature and advance towards greater sophistication across all segments.

From the first cross-border M&As for large-scale renewable energy projects in 2019 to the most recent deals in 2024, the author has witnessed significant evolution in Colombia’s renewable energy market. Below are key trends in acquisitions, based on more than USD150 million in aggregated transactions represented by the firm over the past five years:

• “Ready to Build” (RTB) risk allocation is still evolving. It is expected to align with commercial agreements between business teams, reflecting the development context as perceived by each party at the time of negotiation.
• Relying on “benchmarks” or “market provisions” can be useful when transaction contexts are similar, but this is rarely the case in the rapidly changing environment of renewable energy projects. A one-size-fits-all approach may not address the specific circumstances of each project effectively. Instead, openly discussing needs and solutions for each case offers a more practical way to manage the inherent uncertainty in renewable energy project development.
• Social and environmental considerations now extend beyond local compliance. They are increasingly influencing negotiations, particularly regarding due diligence and human rights. In some cases, positive social and environmental impacts are also becoming factors in negotiations as we begin to see transactions on the impact investing spectrum.
• Provisions that allow for mediation (amigable composición under Colombian law) of specific technical, regulatory, or environmental disputes, such as RTB achievement, are becoming valuable resources for negotiation teams to handle uncertainty while advancing transaction agreements.
• Collaborative and flexible mindsets, rather than adversarial and rigid approaches, are key. Open discussions about each party’s expectations and concerns, along with the early involvement of multidisciplinary environmental and regulatory teams, build trust and facilitate reaching common ground.

Key Laws and Regulations Governing the Energy Market in Colombia

The electricity market in Colombia operates under a comprehensive framework of laws and regulations designed to manage the generation, transmission, distribution, and trading of electricity. This framework applies to all energy sources, including renewables, and is complemented by specific regulations addressing renewable energy, environmental, and social requirements.

Electricity Market Legislation

The legislative foundation for Colombia’s electricity market was established in the early 1990s to stimulate private investment in power generation and transportation. This followed decades of state-owned industry plagued by politicisation and energy insecurity, including a year-long energy rationing period in 1992. During the last 30 years, the industry has been focused on large hydro and thermoelectric capacity, resulting in a power mix of approximately 70% hydro and 30% thermoelectric. Key laws include the following.

• Law 142 of 1994 (Public Utilities Law) – regulates public utility services, including electricity, defining principles, rights, and obligations for service providers and consumers, and setting rules for tariffs and service conditions.
• Law 143 of 1994 (Electricity Law) – provides the legal foundation for the electricity sector by liberalising the market to allow private sector participation in generation, transmission, distribution, and commercialisation. It also establishes the Energy and Gas Regulatory Commission (CREG) and the Ministry of Mines and Energy as key regulatory bodies.

Recent Reforms for Renewable Energy

In response to climate change and vulnerability to phenomena like El Niño, Colombia decided to integrate non-conventional renewable sources into its energy mix. This shift is supported by recent reforms.

• Law 1715 of 2014 (Renewable Energy Law) – promotes non-conventional renewable energy sources and provides fiscal incentives such as tax deductions, VAT and customs duty exemptions, and accelerated depreciation. It also allows self-producers to sell surplus electricity to the public grid.
• Law 1955 of 2019 (National Development Plan 2018–2022) – introduces the Green Energy Quota, mandating that 8–10% of energy traded in the wholesale market must be renewable. It also permits bundling of generation, trading, and distribution activities within the same utility company.
• Law 2099 of 2021 (Energy Transition Law) – aims to accelerate the energy transition by incentivising investments in renewable energy and energy efficiency, and setting the regulatory framework for hydrogen and energy storage.
• Law 2294 of 2023 (National Development Plan 2022–2026) – introduces the concept of Energetic Communities, allowing end-user groups to generate, commercialise, or efficiently use energy from renewable sources, potentially with public funding.

Principal Regulations Governing the Energy Market

Centralised generation

• CREG Resolutions 054 and 055 of 1994 – regulate electricity commercialisation and generation in the national interconnected system (SIN).
• CREG Resolutions 024 and 025 of 1995 – regulate commercial aspects of the wholesale market and establish the Network Code.
• CREG Resolutions 071 of 2006 and 130 of 2019 – address the methodology for Reliability Charge remuneration and define market principles for energy contracts.
• CREG Resolutions 060 and 75 of 2019, 101 047 and 101 049 of 2024 – regulate solar and wind plant connections, transportation capacity, and deviations from variable plants.
• UPME Resolution 528 of 2021 – establishes procedures for connection requests to the SIN and allocation of transport capacity.

Independent production

CREG Resolutions 24 of 2015, 096 of 2019, 174 of 2021, 148 of 2021, and 101-011 of 2022 – regulate large-scale self-generation, distributed generation, and connection of solar and wind plants.

Upcoming Changes

The following are upcoming changes to note.

• Reform to the Public Utilities Law (Law 142 of 1994 Bill 222 of 2024 Senate) – proposed by the government to create user-centric legislation and strengthen public service provision, but may increase government control over the sector.
• Bill 091 of 2024 Senate – establishes procedures for legal easements for non-conventional renewable energies.
• Draft Decrees and Resolutions – propose modifications to energy policies, including self-generation guidelines, electricity rate reductions, and modifications to the Commercial Operation Date (COD) procedure.

Environmental and Social Requirements

Energy projects in Colombia must also comply with environmental and social regulations.

• Law 99 of 1993 (Environmental Law) – establishes the National Environmental System (SINA) and promotes sustainable development and natural resource protection.
• Decree 1076 of 2015 – consolidates environmental and sustainable development regulations.
• Additional norms – include various guidelines and methodologies for environmental studies and consultations.
• Prior Consultation Process (PCP) – governed by Sentence SU123 of 2018, Decree 2353 of 2019, Executive Order 08 of 2020, the Escazú Agreement Law 2273 of 2022, and Sentence T-039 of 2024, the PCP is a fundamental right for local communities.

AMC has successfully supported clients in obtaining environmental licences, permits, and PCPs for approximately 1 GW in renewable energy projects, utilising a proprietary methodology to ensure efficient and comprehensive pre-clearance of environmental studies and effective support during the permitting processes.

Primary Regulators for Renewable Energy in Colombia

In Colombia, several key regulatory bodies oversee renewable energy activities.

Ministry of Mines and Energy (MME)

The MME is responsible for formulating and implementing energy policies, including those related to renewable energy. It sets the national energy policy and strategic objectives for the sector.

Energy and Gas Regulatory Commission (CREG)

CREG regulates the electricity and natural gas markets. It establishes tariffs, operational rules, and technical standards for energy markets, including renewable energy projects.

Mining and Energy Planning Unit (UPME)

UPME handles the planning and forecasting of Colombia’s energy and mining sectors. It provides technical analysis, research, and data to support energy policy formulation. Its functions include:

• managing grid access – evaluates technical feasibility and ensures alignment with grid development plans;
• issuing interconnection concepts – determines connection feasibility and conditions for projects; and
• tracking project development – monitors project status, compliance, and milestones.

XM Compañía de Expertos en Mercados S.A. E.S.P. (XM)

XM operates Colombia’s National Interconnected System (SIN) and manages the Wholesale Energy Market (MEM). Its duties include:

• system operation and dispatch – integrates renewable energy sources into the grid;
• monitoring compliance – ensures adherence to the Grid Code for all generation types;
• co-ordinating renewable integration – develops strategies for balancing supply and demand, minimising curtailment, and optimising renewable resource use.

National Operation Council (CNO)

CNO oversees the operation, reliability, and safety of the electricity system. It sets technical standards and grid codes, integrating renewable resources while maintaining grid stability.

Superintendence of public utilities (Superservicios)

Superservicios supervises public utility services, including electricity. It ensures compliance with regulations, protects consumer rights, oversees financial performance, conducts audits, and enforces sanctions. Its duties include:

• compliance monitoring – enforces legal and technical standards;
• consumer protection – ensures service quality and handles complaints;
• financial oversight – evaluates the financial stability of energy providers;
• auditing and inspection – conducts audits to verify regulatory compliance;
• sanctioning – imposes fines or corrective measures for violations; and
• promoting transparency – ensures clear communication from service providers.

These authorities collaborate to foster a regulatory environment that supports the development of renewable energy in Colombia, each playing a distinct yet complementary role.

Scope of Regulated Activities

In Colombia, all activities related to the generation, transmission, distribution, and trading of electricity – across both Centralised Generation (CG) and Small-Scale Production (SSP) – are subject to regulation under the public utilities regime described in 2.1 Governing Law and Upcoming Changes. This regulatory framework applies uniformly to all technologies, including renewable energy.

Regulations and Restrictions for CG

Power plants with a capacity of 20 MW or more must submit their energy production for grid integration through a Daily Dispatch clearance mechanism which is a system to assure theoretically efficient prices at the Spot Market. It requires generators to provide a day-ahead bid for a 24-hour energy price, with the lowest-priced offers being cleared up to the required capacity to meet demand. Generators with higher-priced offers (or “without merit”) are not allowed to deliver their energy on the day. Therefore, generators must be aware that their revenue will depend on whether they meet the Daily Dispatch merit and the price at their bilateral supply agreements, which they can enter freely with other generators or traders except for those serving regulated users. Generators without merit purchase the energy to serve their bilateral supply agreements at the Spot Price but are paid the agreement price. For this reason, parties to bilateral supply agreements should also be aware of commitment conditions, for example, some agreements require the generator to honour the price only if it meets the Daily Dispatch merit (Pague lo Generado). Generators meeting the Daily Dispatch without a bilateral agreement are paid the Spot Price, which is set by the last generation offer required to meet demand.

Grid Connection Procedure for CG

As of 2021, new procedures for grid access were established through CREG Resolution 075 and UPME Resolution 528. Under these regulations, new generation offers must submit a connection and physical availability study to UPME and await the results of the grid capacity allocation algorithm (MACC). This algorithm classifies requests into two categories: those requiring grid expansion (Line 1) and those that do not (Line 2).

Originally, the regulations mandated that results be published by September 30 each year, with connection approvals for Line 1 projects issued by December 20, and Line 2 approvals by October 31. However, there have been significant delays at UPME, with moratoriums issued annually, the most recent being CREG Resolution 101 017 of 2023. As of now, responses to connection requests from 2023, due by July 2024, remain unresolved, and new connection requests have been suspended for 2024.

Regulations and Restrictions for Other Types of Electricity Production

Power plants under 1 MW are not subject to the Daily Dispatch system, and these plants have three options for selling electricity:

• To a trader serving the regulated market without a public tender, at the Spot Price minus the current FAZNI (Fund for Electrification of Non-Interconnected Zones) for the consumption month, provided there is no economic linkage between the buyer and seller.
• Through public tenders conducted by traders serving the regulated market (SICEP), based on price merit.
• To generators or traders for use exclusively by Non-Regulated Users, at freely negotiated prices.

For plants between 1 MW and 20 MW, participation in Daily Dispatch is optional. They can sell energy to:

• traders serving the regulated market through public tenders, with awards based on price merit; and
• generators or traders for use exclusively by Non-Regulated Users, at freely negotiated prices.

Additionally, CREG Resolution 174 of 2021 outlines specific regulations for the sale of energy by self-generators and distributed generators. Notably, different rules apply to those using renewable sources (FNCER) compared to traditional sources.

Grid Connection for Other Types of Electricity Production

Since 2021, CREG Resolution 174 has established distinct grid access procedures for self-generators and distributed generators. Connection requests must be submitted through UPME’s single window, but local grid distributors handle them according to specific timelines and procedures. These procedures are categorised into three groups based on installed capacity and type of producer.

• Small-scale self-generators and distributed generators with capacities under 10 kW.
• Small-scale self-generators and distributed generators with capacities between 10 kW and 100 kW.
• Self-generators and distributed generators with capacities between 100 kW and 1 MW, and large-scale self-generators with a declared maximum capacity under 5 MW or those without energy surpluses.

In Colombia, there are no specific restrictions on the ownership and transfer of renewable energy assets. However, companies operating in the electricity sector must adhere to the general competition and antitrust regulations established by Law 1340 of 2009. Companies also are obligated to comply with vertical and horizontal integration limitations, transmission unbundling requirements, and restrictions on energy transactions between affiliated or related parties. Relevant regulations in this context include CREG Resolution 128 of 1996, CREG Resolution 022 of 2001, CREG Resolution 60 of 2007, CREG Resolution 095 of 2007, and CREG Resolution 130 of 2019.

Additionally, stakeholders should be aware that transferring renewable energy assets may result in the loss of and obligation to repay tax incentives granted under Law 1715 of 2014, even though such transfers are not explicitly restricted.

In Colombia, there are no limitations or prohibitions to foreign participation or investment in the electricity sector. However, all companies involved in the electricity sector are subject to the general competition and antitrust regime provided for in Law 1340 of 2009, also to vertical and horizontal integration limitations as well as transmission unbundling restriction, and to energy purchases between affiliated or related parties limitations, imposed by different regulations. Relevant norms are CREG 128 of 1996, CREG 022 of 2001, CREG 60 of 2007, CREG 095 of 2007, and CREG 130 of 2019.

Key Features of the Renewable Energy Production Sector in Colombia

Market structure

Colombia’s electricity market operates under a centralised, single-node system based on the marginal price merit principle, which applies uniformly to all generation sources. While the market structure was initially designed to favour legacy generation, efforts have focused on integrating non-conventional renewable energy sources (FNCER) into this existing framework, rather than creating a separate structure.

Key parties and assets

Government entities

• Mining and Energy Planning Unit (UPME) – UPME is responsible for grid expansion, access procedures, and monitoring the progress of energy projects. It previously conducted renewable energy auctions, awarding nine wind and 16 solar large-scale projects valued at approximately USD3.1 billion. However, the Council of State annulled Decree 570 in September 2023, halting the auction mechanism until new regulations are issued.
• XM Compañía de Expertos en Mercados S.A. E.S.P. (XM) – a subsidiary of ISA Intercolombia, XM manages Colombia’s National Interconnected System (SIN). It oversees new Certificate of Operation Date (COD) bonds, executes them when applicable, and ensures compliance with operational norms for all energy projects, including renewables, as prerequisites for achieving COD and securing grid capacity.
• National and Regional Environmental Authorities (ANLA and CARs) – these authorities enforce environmental policies, manage protected areas, and ensure compliance with environmental laws through permits and oversight. They play a crucial role in promoting sustainability and mitigating climate change.
• National Authority for Prior Consultation (DANCP) – DANCP determines whether a renewable project requires prior consultation with affected communities. It co-ordinates and facilitates these processes, ensuring that communities’ rights and cultural integrity are respected.
• Financiera de Desarrollo Nacional (FDN) – as Colombia’s development bank, FDN promotes and finances infrastructure projects. In 2020, it partnered with Davivienda to finance the Bosques Solares de los Llanos solar project, the first large-scale renewable project in Colombia financed through project finance.

Industry players

• Asociación de Energías Renovables Colombia (“SER Colombia”) – SER Colombia advocates for renewable energy growth, influencing policies and regulatory frameworks. It has been instrumental in shaping competitive market mechanisms for renewable projects, including the auctions under Decree 570 of 2018. Members of SER Colombia developed all awarded projects in the 2019 and 2021 auctions.
• Interconexión Eléctrica S.A. E.S.P. (ISA) – ISA, a major energy company, plays a vital role in integrating renewable sources into the national grid through its transmission infrastructure.
• Grupo Energía de Bogotá (GEB) – GEB invests in and expands transmission infrastructure for renewable projects. Notably, the Colectora project in La Guajira aims to connect wind and solar farms to the grid, facilitating the distribution of clean energy.
• Recurrent Energy – a subsidiary of Canadian Solar, Recurrent Energy focuses on solar and energy storage projects. In Colombia, it is developing the first grid-scale 50MW battery project awarded in 2021.
• EPM (Empresas Públicas de Medellín) – EPM, a major utility company, is significant for its investments in transmission grids and hydroelectric power. The Hidroituango hydroelectric plant, at 2400 MW, is set to become Colombia’s largest renewable energy source, contributing over 10% of the country’s installed capacity.
• National Operation Council (CNO) – CNO sets operational norms for the testing stages of all energy projects, including renewables, as a prerequisite for grid connection and achieving COD.

Applicable Rules and Regulations

For details on the relevant regulations, refer to 2.1 Governing Law and Upcoming Changes.

Electricity production from biogas is in place with a small-scale installed capacity of approximately 6 MW from Biogas Doña Juana and Tequendama companies.

For detailed insights into specific heat power, refer to 1.2 Renewable Energy Technologies.

Biomass accounts for less than 1% of the installed capacity market share in Colombia. It primarily supports the agricultural and industrial sectors by converting organic waste and by-products into electricity using combined heat and power plants (cogenerators). This biomass energy production is notably utilised by companies in the sugar industry, including Manuelita, Providencia, Riopaila, La Cabaña, Risaralda, and Mayaguez.

Colombia has a strategic agenda for advancing the hydrogen economy, as outlined in the Ministry of Mines and Energy’s roadmap released in September 2021. This roadmap includes a series of 60 actions and milestones, such as achieving 1 to 3 GW of electrolyser installed capacity, ensuring that at least 40% of industrial consumption comes from low-emission hydrogen, capturing 50,000 tons of carbon from fossil hydrogen, and deploying 2,500 to 3,500 hydrogen vehicles along with 50 to 100 public hydrogen refuelling stations. This emerging energy source is crucial to Colombia’s decarbonisation efforts.

Small-Scale production (SCP) in Colombia is capped at 1 MW of installed capacity. These producers are allowed to export energy to the grid under the conditions outlined in CREG Resolution 174 of 2021. Specific rules for self-generators and distributed generators using renewable sources (FNCER) apply, including a mandatory purchase of distributed electricity by traders integrated with the local grid operator. The purchase price is determined by the spot price plus 0.5% of energy losses, as calculated by a prescribed formula.

Other regulations applicable to small-scale self-generation and distributed generation are discussed in 2.3 Regulated Activities.

Solar SCP has become a leading choice for both large corporations and small-to-medium-sized businesses (SMBs) in their energy transition. Solar SCP now represents 84% of installed capacity, with an average growth rate of 4 MW per month over the past year. Innovative solar technologies, such as Building-Integrated Photovoltaics (BIPV) like Solarflex by Solestructuras, are addressing the challenge of rooftop weight limitations – around 70% of Colombian rooftops – by providing lightweight, flexible solar solutions. A notable example is the first-in-kind 114 kWp semi-flexible solar project for a major food chain, which went live in March 2024, and its 1,5 MW projection for 2025.

In Colombia, electricity transmission is divided into three segments based on grid voltage levels: national transmission (220 kV and above), regional transmission (57.5 kV to less than 220 kV), and distribution (below 57.5 kV). In 2019, the Colombian regulator included grid-scale battery storage projects in the transmission sector under Resolution CREG 98 of 2019, aiming to address current grid challenges.

Transmission is regulated as a natural monopoly with fixed income, while Distribution operates under a price cap regime. Under Laws 142 and 143 of 1994, all grid owners and operators must adhere to the principle of free access and facilitate the interconnection of other utilities and users, including renewable energy generators.

Key Parties

Key parties are as follows.

• Mining and Energy Planning Unit (UPME) – responsible for managing grid expansion and access procedures for energy projects in Colombia and monitoring their construction progress.
• Interconexión Eléctrica S.A. E.S.P. (ISA) – the largest electricity transporter in Colombia and Latin America, and the sole owner of XM Compañía de Expertos en Mercados S.A. E.S.P. (XM).
• EPM (Empresas Públicas de Medellín) – the second-largest transmission company in Colombia, holding approximately 33% of the market share.
• Grupo Energía de Bogotá (GEB) – third in market share with 25% in transmission. GEB plays a crucial role in expanding transmission infrastructure to integrate renewable energy, exemplified by its Colectora project, which connects wind and solar farms in La Guajira.
• Recurrent Energy – a global renewable energy developer and subsidiary of Canadian Solar. In Colombia, Recurrent Energy is advancing the renewable sector with the development of the country's first grid-scale 50 MW battery project, awarded in 2021.

Regulatory Challenges

Uncertainty surrounding grid connections is a significant challenge for renewable energy projects in Colombia. Historically, under the open access principle established by CREG Resolution 106 of 2006, about 90% of installed capacity was connected to the grid. However, recent regulations have introduced stricter requirements. New regulations, primarily Resolutions CREG 75 and UPME 528 of 2021, mandate that new generation projects submit a connection and physical availability study to UPME and await results from the grid capacity allocation algorithm (MACC). The MACC prioritises connections into two groups: those requiring grid expansion (Line 1) and those not requiring expansion (Line 2).

Originally, CREG 75 stipulated that connection request responses should be made public by September 30 each year, with approvals for Line 1 by December 20 and for Line 2 by October 31. However, delays at UPME and annual moratoriums, including the most recent in CREG Resolution 101 017 of 2023, have led to significant backlogs. As of now, responses for connection requests filed in 2023 are still pending, and new requests are not being accepted in 2024.

The country faces a shortage of execution capacity to handle the volume of renewable energy requests. Substantial stakeholder engagement is essential to address these gaps and improve grid access certainty for all parties involved.

In 2019, Colombian regulators incorporated grid-scale battery storage projects into the transmission sector under Resolution CREG 98 of 2019, aimed at alleviating current grid challenges. Unlike in other countries, curtailment is not a significant issue in Colombia at this stage and is not specifically regulated.

To address generation stress during scarcity periods, Colombia has implemented regulatory incentives for flexibility and demand-side management. These measures are part of the reliability charge mechanism and focus on releasing pressure on generation rather than directly addressing grid congestion.

Colombia accounts for a specific regulation of transportation and storage of gas from renewable sources such as biogas, or unconventional sources, such as biomethane, which is closer to natural gas. Its regulatory framework is set forth in CREG Resolution 240 of 2016. Biogas is transported by exclusive infrastructure, while bomethane may be transported through natural gas pipelines complying with applicable regulations and quality standards.

The biogas market is at early-stage development. The sugarcane industry leads in bioenergy production by using biogas as fuel and producing ethanol mixed with gasoline for the transport sector. The palm oil industry generates biogas through anaerobic digestion of wastewater, rich in methane (50%–60%), which is used for thermal or electrical generation (Cogeneración). The pig farming sector uses organic waste through biodigesters, processing 1,200 tons of effluents daily and generating 600 m³/h of biogas with 63% methane content, equivalent to 576,000 kWh per month. Other initiatives in agro-industrial sectors like brewing and dairy use organic matter, processing 1,935 m³/day of biogas and developing purification technologies, producing 400 m³/h with 60% methane.

Biomethane is emerging as an ideal complement to natural gas in the country. The first biomethane plant of the country came online in October 2023, thanks to a USD5 million investment by EPM to serve around to 40,000 homes.

Geothermal source is recognised as a renewable source (FNCER) under Law 1715 of 2014. For detailed insights into specific heat power, refer to 1.2 Renewable Energy Technologies.

Please refer to 1.2 Renewable Energy Technologies, 3.4 Hydrogen and Other Biofuels and Renewables and 4.3 Gas.

The trade and supply of electricity involve purchasing large blocks of energy from the wholesale energy market and reselling it to end users through energy traders.

This activity is complementary to the utility regime established by Laws 142 and 143 of 1994. The applicable regulations are outlined in Resolutions CREG 56 of 1994, 24 of 1995, 180 of 2014, 119 of 2007, 156 of 2011, 38 of 2014, 80 of 2019, 130 of 2019, 031 of 2021, and 101 008 of 2023. The electricity trading market is competitive, open, and accessible, handling approximately 80,000 GWh per year with 137 registered traders to date.

The market is divided into two segments:

• Unregulated market – for consumers with an installed capacity of 100 kW or a monthly average consumption of 55,000 kWh. These consumers can negotiate electricity prices freely with any utility.
• Regulated market – for smaller users, where electricity prices are subject to a regulated price cap. Traders serving this market must purchase energy through public tenders (SICEP) as mandated by CREG 130 of 2019 to ensure the most efficient electricity prices for end users.

Consumers across all segments and locations are free to choose their electricity trader. Among the largest traders, ENEL serves 19% of the unregulated market, while VATIA covers 47% of the commercial borders for the regulated market.

Under Law 1955, the Green Energy Quota requires that a minimum of 8–10% of all electricity purchased by traders comes from renewable sources. CREG 101 008 of 2023 permits traders to conduct SICEP tenders for all types of soucers energy and also exclusively for renewable energy. Different regulations apply to self-generators and distributed generators using renewable sources (FNCER) compared to those using traditional sources.

Electricity trading in Colombia is undergoing a significant transformation, driven by innovative venture capital which is well-funded, user-focused, and cutting-edge digital platforms that are reshaping how users interact with electricity. Companies like BIA, which entered the market in 2022, exemplify this change. In less than two years, BIA has captured 8% of the commercial borders for the regulated market and trades approximately 30 GWh for around 2,500 users. Through advanced tools such as smart meter infrastructure and modern energy retailing model, this start-up helps consumers manage their energy usage more efficiently and sustainably.

Please refer to 4.3 Gas.

Please refer to 4.4 Heat.

Please refer to 1.2 Renewable Energy Technologies, 3.4 Hydrogen and Other Biofuels and Renewables and 4.3 Gas.

RECs

Colombia is currently developing a market for renewable energy certificates (RECs) driven primarily by industry initiatives and voluntary participation rather than regulatory mandates. For instance, XM Compañía de Expertos en Mercados S.A. has launched the EcoGox blockchain platform to ensure the registration, traceability, and verification of renewable energy origins. Through this platform, RECs can be purchased by end users or utilities seeking to claim the benefits or attributes of the underlying green energy. However, a 2023 survey of renewable energy producers indicates that REC adoption in Colombia is still in its early stages.

While the REC initiative is not specifically regulated in Colombia, its use could fall under consumer protection laws related to advertising and environmental claims. Given international concerns about the effectiveness and legitimacy of RECs – particularly regarding additionality, environmental impact, and their focus on social and environmental aspects rather than direct electricity representation – interested parties should also consider Decree 1369 of 2014 and other legislative efforts aimed at preventing greenwashing, to manage potential risks and liabilities.

PPAs

Corporate Power Purchase Agreements (PPAs) are gaining significant traction in Colombia, particularly the “Private Wire PPAs”, where a corporate offtaker directly receives electricity from assets installed nearby, bypassing the traditional power grid. This trend is fuelled by the economic and environmental benefits of Private Wire PPAs. They not only support the viability of renewable energy projects but also help offtakers meet their energy and sustainability goals, making them effective tools for navigating the energy transition.

However, it is important to note that while Private Wire PPAs offer advantages, they are not explicitly covered under Colombian electricity trading regulations. The sale of electricity is a strictly regulated activity, and existing norms do not encompass Private Wire PPAs except between affiliates.

In practice, some Private Wire PPAs are being misused to support self-production structures or asset purchases and installation services, often leveraging economic benefits such as VAT exemptions. This is drawing the attention of authorities and leading to litigation. Issues under scrutiny include data privacy, VAT compliance, the frustration principle, overbilling, and overall regulatory adherence.

Given the regulated nature of electricity in Colombia, Private Wire PPAs may open the door to painful economic effects, such as tax reclassification, for example, as shown in recent case law Innovaguir v Dian in which the Council of State upheld the tax authority collecting VAT over the complete agreement value. It is crucial to choose safe, consistent and coherent legal and regulatory frameworks when considering energy-related agreements in Colombia.

Onshore solar project development in Colombia, across both large- and small-scale segments, is advancing rapidly. To date, early-stage solar developments total 14.1 GW. Centralised solar projects account for 6% of the 20 GW total installed capacity and 1.54% of the 117,000 GWh total production. Over the past year, 1.3 GW of new solar capacity has come online, with 587 MW currently in the testing phase. In the Small-Scale Production (SCP) segment, solar installations are growing at an average rate of 4 MW per month since 2023. Notably, a pioneering 114 kWp semi-flexible, lightweight solar project for a major food chain went live in March 2024, with 1,5 MW projection for 2025.

The permitting process for solar developments can take between three and five years, depending on project scale, the need for grid expansion, environmental licences, and prior consultation processes. This complexity arises from the involvement of various authorities and third parties at each permitting stage. Securing a location is relatively straightforward, often involving private agreements with landowners who are increasingly open to exploring renewable energy options, including those on actively productive lands. Even when judicial easements are necessary, they are typically obtained within acceptable timeframes – although some locations require specific due diligence. Common challenges in project development include site overlaps and the presence of local communities, which can affect project timelines. Ultimately, grid access is one significant issue.

For detailed insights into specific project development trends, refer to 1.3 Renewable Energy Market and Recent Developments.

Colombia is actively pursuing its offshore wind potential, as outlined in the Ministry of Mines and Energy’s roadmap launched in May 2022. This plan highlights the Caribbean coastline’s substantial offshore wind power potential, estimated at 109 GW, with approximately 50 GW in La Guajira, one of the highest accumulations globally.

On 27 October 2023, the country initiated its first Offshore Wind Energy Round, managed by the National Hydrocarbons Agency (ANH). This round offers temporary occupation permits for up to eight years, with the possibility of extension, to evaluate project feasibility in designated areas along the Caribbean Coast (Polygons A and B). Interested parties must submit their qualification documents by 27 September 2024, with the competitive process expected to conclude by December 2025.

Colombia is making notable progress in establishing standard practices for securing non-recourse debt agreements to finance renewable energy projects across various scales. The 27 MW Bosques Solares de los Llanos power plant, developed in 2020, and the 503 kWp Nuestro Urabá solar SCP from 2017, stand as early benchmarks in large-scale and small-scale solar projects, respectively.

A key legal consideration for financing renewable energy projects in Colombia, compared to other project-financed assets such as road infrastructure, is that activities under the utilities regime carry the sole risk of investors. The Colombian government and state do not provide debt guarantees.

Another important legal factor is the development process, including the nature of permits required for construction, and the electricity market framework within which the project will generate revenue. While Power Purchase Agreements (PPAs) are generally reliable and facilitate “bankable” renewable energy projects, Private Wire Corporate PPAs face more complex legal, regulatory and economic implications under Colombian law.

Recent cases include Innovaguir v Dian, in which the Council of State upheld the tax authority collecting VAT over the complete agreement value, and Axia v Familia, in which the Court of Appeals of Medellin cast doubt on the compliance of Private Wire PPAs, which show the importance of choosing safe, consistent and coherent legal and regulatory frameworks when considering energy-related agreements in Colombia.

Law 1715 of 2014 introduced four key tax incentives to promote investment in non-conventional renewable energy and energy efficiency projects in Colombia. These incentives include VAT and customs duty exemptions, accelerated depreciation, and a special income tax deduction of 50% of the investment value. These benefits are available to income taxpayers in Colombia and are designed to support both renewable energy and energy efficiency projects. According to Law 2099 of 2021, these incentives are set to remain in effect for a 30-year period, starting 1 July 2021.

For projects requiring an environmental licence, decommissioning is addressed within the environmental impact study submitted to the environmental authority as part of the permit application. This study regulates both decommissioning and the disposal of renewable energy installations. Other environmental permits may also include provisions for decommissioning and disposal. Additionally, Law 1672 of 2013 introduced regulations for managing electronic and electrical waste (RAEE), and the Ministry of Environment and Sustainable Development has developed the National Policy for Comprehensive RAEE Management, along with a suite of related regulations.

The transition from fossil fuels to renewable energy sources in Colombia is consistently advancing, driven by recent legislation, government policies, and regulatory frameworks aimed at increasing the share of renewables in the energy mix. This transition is further supported by private investments in renewable energy projects, primarily solar and wind, totalling approximately USD3.1 billion.

Colombia is also focusing on empowering end users in the transition process by promoting independent production alternatives, offering energy efficiency incentives, and enhancing community-scale initiatives known as Comunidades Energéticas. This shift towards a more consumer-centred energy policy forms the basis for several proposed government reforms.