Incentives and benefits

Colombia

To what extent are corporate PPAs presently deployed and what sort of structure do they take?

A CPPA could be sold to a corporate buyer via a utility company or through a self-generation scheme. 

CPPA via a utility company takes the form of a Financial PPA in the sense that not physical delivery is required (a volume imbalance implies that the generator could buy the difference at the wholesale energy market). 

CPPA via a self-generation scheme takes the form of o Physical PPA. 

Financial PPAs between a corporate user and a generator are allowed by regulation and they can be negotiated over-the-counter or through the exchange market organized by the Colombian Stock Exchange (so called, DERIVEX). However, they are not commonly used because of additional regulatory costs that makes the deal not appealing in mostly all cases.

Do the country's regulators allow corporate owners to purchase (1) directly from a facility, or (2) from a choice of suppliers?

There are no restrictions for long-term CPPAs executed between participants of the Wholesale Energy Market (namely generators and retailing companies). However, there are restrictions for a generator to sell CPPA to large scale users, as only a retailing company can enter into a CPPA with a large-scale user.

Other than the generator and the off-taker, are any third parties commonly party to the PPA structure (e.g. a utility or other market agent)?

Not normally; sometimes guarantors are involved.

Is a generator permitted to sell electricity directly to an end user? If so, do they require a licence or other form of authorization?

No, pursuant to Law 143 of 1994 and regulation issued by the Colombian Energy Regulator, it is forbidden for a generator to sell energy to an end consumer. Although only retailing companies are entitled to sell energy to an end consumer, vertical integration between generation and retailing activities is permitted. As mentioned before, only under a self-generation scheme could an Independent Power Producer sell energy to an end consumer and no license or other form of authorization is required.

Colombia

What are some of the technical, political, financial or regulatory challenges to corporations adopting green energy in the short/medium term in your country and how have these challenges been overcome (or how can they be overcome)?

Social issues with ethnic communities

As a multicultural country, Colombian natural resources used to produce clean energy are almost always around or in the territory of ethnic communities (i.e. wind in La Guajira, hydroelectric projects in Antioquia). Before undertaking any activity of exploration or exploitation of natural resources, which are on the lands of these peoples, a prior consultation (consulta previa) should be carried out with the affected community to guarantees their effective participation, through a scenario aimed at guaranteeing their fundamental rights. This process might take longer than expected and without its achievement it is impossible to obtain the permits and licenses required for the project. Projects which have successfully achieved this process have hired NGOs, and private agencies to advise them on the process. 

Environmental issues

As a rule, the use of exploitation of renewable natural resources requires the prior granting of a permit, authorization or concession by the competent environmental authority. In certain parts of Colombia, environmental entities take a lot of time to analyze and issue environmental licenses. It is important to file license and permits papers as soon a feasible in order to avoid delays.

Interconnection procedure

Domestic law enables vertical integration between generation, distribution and retailing activities. Thus, the grid owner might have an incentive to obstruct access. Additionally, grid technical conditions might impose an additional challenge for the interconnection of a new renewable generation unit because in such cases the regulator might require a prior investment from the grid owner to update or expand the grid before authorizing the interconnection.

Colombia

Are there any anticipated regulatory changes which will alter the regulatory landscape for corporate green energy and corporate PPAs?

The Ministry of Energy has recently launched a Mission of energy transformation and modernization of the electricity industry: roadmap for the energy of the future. The Mission has already recommended to the Ministry to enable CPPAs directly negotiated and executed between a corporate buyer and an Independent Power Producer.

In December 2020 the Ministry of Energy will launch the roadmap and will establish If such recommendation will be included in the regulatory agenda for 2020.

Colombia

To the extent corporate PPAs are deployed, how are prices, terms and risks affected?

To the extent corporate PPAs are deployed, in whose favour will the risks typically be balanced?

A CPPA could be sold to a corporate buyer via a utility company or through a self-generation scheme.

Colombia

Does your country operate a balancing responsibility scheme?

Yes.

If your country operates a balancing responsibility scheme, who is the balancing authority and do the generator and offtaker typically undertake balancing themselves?

The authority in charge of balancing the system in the day-ahead spot market is the system operator XM S.A. E.S.P., pursuant to Resolution 24 of 1995 (The Wholesale Energy Market Code). All generators are responsible for primary reserve and shall contribute with AGC services and it becomes a regulatory cost for such units that are uncapable to adjust output in response to change in load. Besides AGC there is no other regulation in place imposing Balancing Responsible Party obligation.

Colombia

What significant transactions/deals have taken place in the last 12-18 months?

• EPM S.A. E.S.P announced in March 20 that it won the auction bidding for the “CaribeMar” portion of assets formerly belonging to the utility company “Electricaribe”. This transaction has not closed yet but it is excepting to be closed before the end of this year. This deal has been the largest energy sector transaction of the year, the most important in the history of EPM.  
• Enerpereira S.A. E.S.P. won the auction for “CaribeSol” equivalent to the other portion of the assets belonging to Electricaribe.  DLA advised Enerpereira in this auction and it is suitable for publication.
• Brookfield sold to Northland Power the utility company Empresa de Energía de Boyacá (known as EBSA) at USD$1,05 billions. 
• EDP Renewables (EDPR) a global leader in the renewable energy sector and one of the world’s largest wind energy producers, has secured two 15-year Power Purchase Agreements (PPA) at the recent renewable auction organised by the Colombian Government (2019).
• Trina Solar sold to TPG three solar projects of 100MW each. These projects are in stage of construction and were awarded long term PPAs at the recent renewable energy auction. These projects were part of a larger transaction involving assets in Europe and Latin America.

What transactions/deals are anticipated to come to market in the next 12-18 months?

The Government announced last year its decision to privatize the largest transmission company in Colombia- Interconexión Eléctrica S.A. (known as ISA) which is the grid owner of 80% of the transmission grid. The expected value of the transaction is about USD$ 2,7 billion.