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Executive Summary
Colombia’s installed electric power generation capacity currently stands at 17,726 MW, with hydro accounting for 68 percent, gas-and coal-fired power plants accounting for 31 percent, and the remaining one percent from wind and cogeneration units. In October 2019, Colombia’s Mining and Energy Planning Unit (UPME) awarded contracts for nine wind and five solar projects, worth an estimated USD2.2 billion, to seven developers. The developers will sign a 15-year power purchase agreement (PPA) for 1.29 GW of wind and solar capacity due to be commissioned by January 1, 2022. The projects will contribute to the country’s aim generate 2.5GW of solar, wind and biomass energy by 2022.
After the approval of Law 1715 in 2014, the government has maintained its efforts to promote private ventures in large scale, renewable energy projects. The implementation of new regulatory measures supports a suitable environment for unconventional renewable power projects to be competitive and increase the reliability of the power grid system, in addition to developing sound smart meter infrastructure by 2030.
Colombia is also positioning itself to be a leader in electric mobility for the next decade. Terpel, a Colombian gas station company, inaugurated the first electric charging service point in Colombia in November 2019.
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Current Market Trends
Colombia’s great diversity of resources will be utilized to comply with the energy transformation goals 2050 outlined in the National Energy Plan.
Colombia has a great wealth of unconventional renewable energy resources, such as the sun and wind. The country’s greatest source has been identified in the Caribbean, in La Guajira, one of the most economically vulnerable areas in the country. The wind energy potential that can be produced there is 1.2 times higher than the installed capacity of the national interconnected system.
The country has been working for the past four years to strengthen La Guajira as the largest source of wind energy in the country. As a result, nine wind projects from the auction conducted in 2019 will be built in La Guajira by 2022.
The government is currently preparing an upcoming procurement process to implement a large-scale battery energy storage system (50 MW) in the Caribbean region (Atlantico). This region currently suffers from reliability and service quality issues. The project is scheduled to be commissioned by June 30, 2022.
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Recent Market Trends
The ongoing non-conventional renewable energy projects will contribute to Colombia’s aim to generate 2,500 MW of solar, wind and biomass energy by 2022. The projects will correspond to 12% of Colombia’s installed electric power generation capacity.
U.S. companies are willing to participate or expand in Colombia’s energy sector, whether in renewables, conventional sources, or other services.
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Competitive Landscape
American companies such as AES have had a strong presence in Colombia for many years. Principal competitors of U.S. businesses in Colombia are from China, Mexico, Brazil, Germany, Spain and India. These six countries made up 56% market share in 2019, and the U.S. contributed to 17% market share.
Although American products are considered high quality and are in demand, U.S. goods are often more expensive than other imported products. Colombia is a price driven market.
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Best Prospects for U.S. Exporters
U.S. companies are competing with Chinese, Latin American, and European companies in the renewable energy market. Chinese companies, due to low prices, continue to dominate; however, the foreign-owned portion of the local renewable energy power generation market offers opportunities for U.S. companies, in the following products:
- Energy storage
- Solar photovoltaic systems
- Wind power systems
- Smart meters and demand response systems
- Turbine generator sets
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Market Entry Strategies
Colombian law does not require foreign firms to secure local representation for private sector sales. However, local companies prefer to deal with foreign firms that have a local representative to ensure access to after-sales services and the availability of spare parts. The one exception to this law is for sales to the government. Foreign bidders selling to the government are required to have legal representation in Colombia.
To secure an agent, representative, or distributor, the foreign company must execute a contract that meets the provisions of the Colombian Commercial Code. This contract must be registered with the Chamber of Commerce in the city where the agent/representative is located. Agency or representation agreements do not require government approval.
An agent or representative differs from an appointed distributor. The former is legally associated with the principal and may enter into legal agreements on the principal’s behalf, while the latter may act independently from the principal. Distributors may purchase items from a foreign supplier or wholesaler and then sell them locally at their own discretion and risk.
The U.S. Commercial Service recommends that U.S. companies consult a local attorney to execute an agency or distribution contract and to thoroughly vet the prospective partner by conducting a background check. The U.S Commercial Service offers due diligent services through our International Company Profile (ICP).
Formality, personal relationships and trust are key ingredients for a long-lasting contract. Colombians want to know their supplier or business partner personally before deciding whether he or she is trustworthy. U.S. companies seeking agents, distributors, or representatives in Colombia should consider contacting the U.S. Commercial Service office to request assistance in entering the Colombian market.
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Regulations / Registration Process
In order to develop a renewable energy project in Colombia, environmental approval is needed from Colombia’s National Environmental Licenses Authority (ANLA). For products in this renewable energy market there is no specific need for registration, but it is very important to follow the rules for shipping these products to Colombia.
Companies interested in exploring procurement opportunities with Ecopetrol (the National Oil Company) can review them here. This includes renewable energy projects.
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Technical Barriers & Tariffs
Law 1715 of 2014 regulates the integration of non-conventional renewable energies into the National Energy System, and also seeks to promote efficient energy management, which includes both energy efficiency and demand response.
Currently, the government is working towards a greater implementation of renewable energy by having lower taxes and fewer procedures in all its processes. Colombia is currently offering automatic exclusion of VAT in the acquisition/imports of solar panels and other equipment for solar systems.
There are not any restrictions or non-tariff barriers on renewable equipment at this time.
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U.S. Commercial Service Information
Ms. Norcia Ward, Commercial Assistant
U.S. Embassy in Bogota, Colombia
Email: Norcia.Ward-Marin@trade.gov
