Since Gustavo Petro became president of Colombia last summer, hopes around the future of the country’s renewable energy sector have risen. Petro has repeatedly stated that he wants to move away from oil and gas to focus on Colombia’s vast green resources, promoting investment in the renewable energy sector. But can fossil-fuel-reliant Colombia really move away from coal, oil, and gas in favor of renewable alternatives that much more quickly than other countries?
Several major fossil fuel operations across Colombia were forced to close in 2020 due to the global pandemic. At that moment, Colombia was not ready for its fossil fuel operations to come to a halt, with few other opportunities available for workers to turn to. Nevertheless, the pandemic experience provided an opportunity for change in a country that had previously relied heavily on coal, oil, and gas production. After several coal mines shut in 2020, Petro promised the towns along the country’s coal corridor that they would be integral to the green transition, in a future where coal, oil, and gas remain underground.
Petro’s election campaign was based around a socially progressive, environmentally conscious agenda that promoted renewable energy over fossil fuels and focused on sustainable development, promising Colombia “a green, not a black future.” And, if Petro’s promise is kept, Colombia could be the biggest fossil-fuel-dependent country in the world to respond to the International Energy Agency (IEA) calls to no longer invest in fossil fuels. Paola Yanguas-Parra from the Technical University of Berlin's FossilExit Group explained “There's really very few countries in the world that have said anything regarding this 'leave it on the ground' idea.”
Until now, the production of fossil fuels has been of extreme economic importance to Colombia, with between 40 and 50 percent of its exports coming from coal and oil. With taxes from the partially state-owned oil firm Ecopetrol providing around 9 percent of the government’s income. And while Petro is enthusiastic about the potential for Colombia’s shift to green, the country will have to carry out a complete overhaul of its grid system, as well as electrify industry, homes, and transport. The government will also have to consider the 109,000 workers in the energy industry, as well as the rights of the indigenous communities living on land that could be used for renewable energy development.
Colombia has been gradually developing its renewable energy capacity for almost a decade, with Congress passing a law to promote the building of renewable energy projects in 2014. But by 2021, less than 1% of energy in the country came from renewable sources. And while former president Iván Duque introduced a general energy transition policy, his government also continued to promote the production of fossil fuels to support the economy.
But Colombia is getting help from external actors to develop its renewable energy sector. In February, the Climate Investment Funds (CIF), one of the world’s largest multilateral climate funds, announced it would be lending Colombia $70 million at a low interest rate, to invest in its green transition. The funds will be used to build infrastructure to help renewable electricity reach communities and businesses, including battery storage and transmission lines. The government hopes that the funding will help to attract a further $280 million from development banks and carbon finance markets. Based on this figure, it expects to stop 1.6 million tonnes of carbon dioxide from being released, or around 1 percent of Colombia’s annual carbon emissions.
This month, Colombia’s National Hydrocarbons Agency (ANH) is expected to invest over $135 million in gaining a better understanding of the country’s renewable energy potential. This funding is part of the government’s four-year development plan, currently being debated in Congress. The government has already pledged not to grant any new hydrocarbon exploration and production contracts, although it will allow companies to continue operations under existing licenses.
Colombia’s solar power capacity has been steadily increasing in recent years, with ambitious plans for the future. The country’s National Mining and Energy Planning Unit (UPME) announced the results of a renewable energy auction in March this year, stating that it had assigned a total capacity of 7.493 MW. It said that 5.774 MW of this total had been awarded across 147 solar projects. This follows several previous successful actions since Colombia’s first renewable energy auction in 2019, where the UPME allocated 2.2 GW of solar and wind capacity.
But it’s not all clear sailing, as a report released in April showed that nearly two-thirds of Colombia’s renewable energy projects due online in 2023 and 2024 are currently facing delays, largely due to growing political and regulatory risk concerns. The study, from the renewable energy association SER Colombia, revealed that just 28 of 80 projects are “advancing without problems.” Many have slowed due to complications in being granted environmental permits issued by licensing authority ANLA. New tax burdens, competition restrictions, and macroeconomic factors, including high interest rates and currency depreciation, have also created challenges.
Colombia has significant potential to develop its renewable energy sector and has already introduced favorable policies to support this development. However, with an economy that continues to rely heavily on fossil fuels, President Petro will have to ensure economic stability and alternative employment to achieve a successful green transition. Further, while the country is attracting high levels of investment in its renewable energy sector, it must improve its complex regulatory and tax systems if it hopes to accelerate the development of its green energy capacity.
By Felicity Bradstock for Oilprice.com
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