Emerging PV Markets: Analysis and Insights

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Demand analysis of emerging PV markets: Colombia of South and Central America

Country profile

Colombia is a South American country with a population of 49.6 million. The country’s economy has showed signs of recovery in recent years, with its GDP having doubled from 2017 to 2.658% in 2018. The Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) predicted that Colombia’s economy will be turning around between 2019 and 2020, with its GDP expected to grow by around 3%. While Colombia’s economy is expected to fare better, its economic growth could proceed at a snail’s pace because the economic collapse of the neighboring Venezuela may bog down Colombia and the country has years of debt to clear. Moody’s, an international rating agency, assigns a bond credit rating of Baa2 to Colombia, categorizing its economic outlook as stable

In terms of Colombia’s climate, over 80% of its land lies 1,000 meters below the sea level.  The temperature averaged 24 °C in lowlands and ranges from 6 to 12 °C in high-altitude regions. In Colombia, the rainy season outlasts the drought season throughout the year. The drought season lasts from December to March in the Caribbean coast region and from June to July in southern Colombia but virtually does not occur in the Pacific coast region. Colombia receives a daily solar radiation of 4.5 kWh/m2.

Renewable energy development in Colombia

Since its presidential elections drew to a close in mid-2018, Colombia has been led by a new government more active than its predecessors in promoting renewable energy. The newly installed government has launched the National Development Plan (NDP) 2018-2022, which sets a goal of achieving 1.5 GW of installed renewable energy capacity between 2018 and 2022, with most of the capacity to be sourced from solar PV and wind power.

Auctions are the primary means of fostering renewable energy development in Colombia. This February, the Colombian government held the country’s first renewable energy auction, but has selected no project at the end due to the failure of some project developers to comply with the bidding terms. The country held another auction in June, and has  released results in October. The successful bidders are required to put their assigned projects into grid connected operation by 2022.

Meanwhile, the government has taken actions necessary to step up its effort to develop renewable energy. It has introduced a renewable energy quota system for power distributors. The Ministry of Mines and Energy published Resolution 40715 this September, requiring all utility firms to have at least 10% of power they distribute coming from renewable sources. The resolution also stipulates that utility firms must buy green energy under a power-purchase agreement (PPA) that spans at least 10 years. This measure will take effect in 2022.

The government has also set up a plan to scale up the grid infrastructure between 2019 and 2023. The transmission expansion plan seeks to meet growing demand for renewable energy by arranging the deployment of existing power plants, newly installed plants, and distribution feeder circuits.

As of the end of 2018, 401 MW of renewable energy capacity (with hydropower excluded from the mix) was installed, a 23% increase from a year earlier. Most of the installed capacity originates from bioenergy. Over the past several years, solar PV has a growing share in Colombia’s renewable energy mix thanks to the launch of relevant policies; the share of wind power, on the other hand, has remained constant.

Cumulative installed renewable energy capacity in 2018

Solar policies and outcomes in Colombia

The development of the Colombian renewable energy industry began in 2014, when Law 1715 was instituted to grant VAT and import tariffs exemptions for renewable energy facilities. The PV sector, which used to depend on net metering scheme, has seen government’s investment in large-scale projects on the strength of decreasing solar costs. In 2017, Colombia’s first utility-scale solar plant, which has an installed capacity of 9.8 MW, came online.

Then with a stated goal of installed renewable energy capacity to achieve under the NDP 2018-2022 and the continued efforts of the newly elected government to develop renewables came the introduction of Law 30 in August 2018, which simplifies the procedure for commissioning distributed generation projects and helps owners of PV systems better understand how power stations and subsidy scheme work. 

In October, the Colombian government concluded the country’s first large-scale renewable energy auction with 1.3 GW of projects being procured. The tender awarded 350 MW of solar to Trina Solar and allocated 950 MW of wind at a final average bid price of COP 95.65/kWh (USD 0.028/kWh). The winning eight projects include three solar parks and five wind power plants, and they are entitled to a 15-year PPA and must be connected to the grid by 2022.

Since the amount of renewable energy capacity allocated through the auction is bringing Colombia closer to the renewable energy goal of 1.5 GW set by the NDP 2018-2022, the government is not likely to issue another tender for the short term, but focuses on completing the tendered projects until 2022.

Forecast on Colombia’s cumulative installed renewable energy capacity

Colombia–China trade: module import and export

From January to August, Colombia imported 65 MW of Chinese modules; this small import volume of modules might be used largely in independent-power-producer and distributed generation projects. With the recent completion of a large-scale auction, module pull-in will probably begin to take place next year. So, more Chinese modules would be shipped to Colombia next year.

Chinese module shipment to Colombia from January to August 2019

Conclusion

Colombia pledges to achieve 1.5 GW of installed renewable energy capacity by 2022. The newly elected government has reformed the policy for distributed projects and hosted the nation’s first large-scale renewable energy auction, which has assigned 1.3 GW of capacity.

Chinese modules shipped to Colombia was mostly intended for use in IPP and distributed projects. Module pull-in in preparation of these projects—which were just allocated after the auction ended in October and will entail planning, financing, and PPA signing before they get off the ground—may not manifest itself until next year. The pull-in is likely to intensify as the deadline for the renewable energy goal approaches

Taking all things into consideration, the Colombian PV market has potential for development. Yet, since Colombia is coming close to achieving its 2022 goal of renewable energy capacity thanks to a recent auction, there would not be any additional auction for the short term and the government will focus on having the auctioned projects installed and commissioned. Moreover, it remains to be seen whether Venezuela’s economic woes, which are undermining Colombia’s economic growth, will have any impact on the development of the Colombian renewable energy industry. 

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