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Energy in Colombia Future Trends Analysis

The Colombian energy value chain is poised for significant shifts in the near future (2024-2025 and beyond), primarily driven by the global energy transition, national policy objectives, and the need to address existing infrastructure and resource challenges. The main trends identified are the accelerated deployment of non-conventional renewable energy sources, the critical need for modernization and expansion of electricity transmission and distribution grids, the nascent development of new energy vectors like green hydrogen, and the strategic evolution of the traditional hydrocarbon sector amidst declining reserves. These trends will profoundly impact the various segments of the value chain, from generation and transmission to distribution and commercialization.

Detailed report on main trends:

1. Accelerated Deployment of Non-Conventional Renewable Energy (NCRE)

This is a central and rapidly advancing trend. Colombia is actively diversifying its energy mix beyond its traditional reliance on hydropower and thermal sources by significantly increasing the installed capacity of solar and wind power. Solar energy is emerging as a leading source in the country's energy transition, with new initiatives doubling those of hydropower. By 2024, Colombia reached 2 GW of installed renewable capacity, with 19 new projects expected by 2025 adding 670 MW. Companies like Celsia are aggressively investing in and acquiring solar and wind projects, and Enel Colombia is progressing with the construction of significant solar parks like Guayepo III and Atlántico. This trend is supported by government policies, including renewable energy auctions and tax incentives for renewable energy projects.

2. Modernization and Expansion of Electricity Grid Infrastructure

The rapid growth of NCRE, often located in resource-rich but remote areas, highlights the urgent need to modernize and expand the electricity transmission and distribution grids. Transmission limitations and delays are currently a major bottleneck hindering the integration of new renewable capacity, particularly in regions like La Guajira. Colombia has announced major power transmission projects as part of its 2024-2028 expansion roadmap aimed at modernizing the grid and supporting energy transition goals. Investments are also being directed towards upgrading distribution networks to improve service quality, meet growing demand, enhance resilience, and reduce losses, especially in areas like Bogotá, Cundinamarca, and the Caribbean coast. Regulatory changes are being explored to facilitate grid modernization and recognize investments in new technologies.

3. Development of New Energy Vectors and Decarbonization Technologies

While still in early stages, there is a growing focus on developing new, cleaner energy carriers and technologies for decarbonization. Green hydrogen is a key area of exploration and potential development, leveraging Colombia's renewable resource potential. Ecopetrol is strategically focusing efforts and investments on green hydrogen pilots and carbon capture, use, and storage (CCUS), aiming to anticipate international trends and create new economic opportunities. Several early-stage hydrogen projects are in preparation, with efforts underway to accelerate investment and development in this sector. Biomass is another renewable source with potential, primarily serving industrial sectors through cogeneration. Geothermal energy is also in the early stages of development.

4. Strategic Evolution of the Hydrocarbon Sector

The traditional hydrocarbon sector, dominated by Ecopetrol, faces the challenge of declining reserves and a global push towards decarbonization. While maintaining production and exploring for new reserves remains important for energy security and fiscal revenues, Ecopetrol is also strategically shifting towards energy transition initiatives. The decision to not continue with hydraulic fracturing pilot projects signals a move away from certain unconventional resource development methods. The sector is also exploring ways to enhance efficiency and reduce emissions in existing operations and is considering the role of natural gas as a transition fuel.

5. Regulatory and Policy Adjustments

The Colombian government and regulatory bodies (MME, CREG, UPME) are actively involved in shaping the energy sector's future through policy formulation, regulation, and planning. Proposed regulatory changes aim to streamline processes for renewable energy projects, address grid access issues, and strengthen public service provision, although regulatory uncertainty and delays in permits and licenses remain challenges for investors. Efforts are also underway to promote energy efficiency, empower end-users through initiatives like "prosumer" schemes, and create energy communities.

Table of potential impact of the trends:

Trend Impact on Exploration and Production (Hydrocarbons) Impact on Midstream (Hydrocarbons) / Transmission (Electricity) Impact on Downstream (Hydrocarbons) / Generation (Electricity) Impact on Distribution and Commercialization (Energy)
Accelerated NCRE Deployment Limited direct impact, but potentially shifts long-term investment focus away from fossil fuels. Increases pressure on transmission grid capacity, requiring expansion and upgrades to evacuate power from new renewable plants. Significant increase in non-conventional renewable generation capacity (solar, wind), diversifying the energy mix. May lead to decreased reliance on thermal generation over time, but firm capacity will still be needed. Changes the energy mix being distributed and commercialized. Creates opportunities for new business models related to distributed generation and energy communities. Could impact demand for traditional fuels.
Grid Modernization and Expansion No direct impact. Reduces transmission bottlenecks, enabling better integration of renewable energy and improving grid reliability. Creates opportunities for investment in advanced grid technologies. Supports the viability of new renewable projects by providing necessary evacuation pathways. Enhances grid stability for all generation sources. Improves service quality, reduces technical losses, increases grid resilience, and enables the integration of distributed energy resources and e-mobility infrastructure.
Development of New Energy Vectors (e.g., Green Hydrogen) Potential for new exploration/production methods related to hydrogen sources (e.g., geothermal) or CCUS. Requires development of new infrastructure for transportation and storage of hydrogen and captured CO2. Creates opportunities for new production facilities (e.g., green hydrogen plants co-located with renewables). May eventually impact the demand for traditional fuels in certain sectors. Potential for new distribution networks or fueling infrastructure for hydrogen. May change energy consumption patterns in end-use sectors like transport and industry.
Strategic Evolution of Hydrocarbon Sector Focus on efficiency in existing fields and potential shift in exploration priorities. Threat of declining reserves requires strategic response. May see reduced investment in new pipeline capacity if production declines significantly. Increased focus on integrity and security of existing assets. Continued importance of refining, but potential for integration with decarbonization technologies like CCUS. Role of natural gas as a transition fuel in power generation may continue. Continued importance of fuel commercialization and gas distribution, but facing long-term pressure from electrification and alternative fuels.
Regulatory and Policy Adjustments Impacts licensing and investment decisions for exploration and production. Influences tariffs and investment incentives for transmission expansion and operation. May streamline permitting for grid projects. Shapes the investment environment for new generation projects (including renewables) through auctions, incentives, and permitting processes. Determines tariff structures, rules for grid connection (prosumers, energy communities), and incentives for energy efficiency and new technologies at the end-user level.

References

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