Colombia Adopts Law Promoting Renewable Energy, Energy Efficiency and Demand Response

Jun 5, 2014

Colombian President Juan Manuel Santos announced in mid-May 2014 the enactment of Law 1715/2014, a measure meant to promote the development and use of renewable energy sources through their integration into the Colombian power market.  The measure is advanced as a tool for achieving economic development, reducing greenhouse gas (GHG) emissions and ensuring domestic energy security.  Law 1715/2014 (the “Law”) also aims to promote efficient energy management, prescribing actions in both energy efficiency and demand response (DR).  Nexant reviews below the general areas the Law covers, and provides some context on Colombia’s energy sector.

The Law establishes the legal framework and identifies the instruments to promote the use of non-conventional energy sources, particularly renewable sources, and to foster investment and research in, as well as development of, so-called “clean technologies,” namely those relating to power generation, energy efficiency and DR.  Additionally, the law points to courses of action Colombia may take to comply with international commitments it has undertaken in the areas of renewable energy, efficient energy management and GHG emissions reductions, as contemplated under Law 1665/2013, i.e., the Colombian law that adopts the International Renewable Energy Agency (IRENA) statute.

Specifically, the Law addresses areas such as:

  • Non-Conventional Energy Sources, including provisions describing how the government will promote (i) power generation from such non-conventional energy sources (e.g., nuclear energy and renewables), (ii) small- and large-scale self-supply and distributed power generation, and (iii) non-diesel power generation in non-interconnected zones (Zonas no Interconectadas (ZNIs)), in addition to provisions on the creation of the Non-Conventional Energy and Efficient Energy Management Fund, aimed at financing initiatives in this area;
  • Investment in Energy Projects, including provisions granting incentives for investment in generation of power from non-conventional and renewable energy sources;
  • Non-Conventional Renewable Energy Sources, including provisions detailing measures the government will take to foster the development of and promote (i) energy generated from forestry and agricultural biomass, and solid waste, (ii) reforestation activities, and (iii) solar, wave, wind, small hydroelectric and geothermal energy, in addition to provisions covering education and training and international cooperation in the area of non-conventional renewable energy sources; and
  • Efficient Energy Management, including provisions requiring the government to (i) further develop, execute and finance the Rational and Efficient Energy Use Program (Programa de Uso Racional y Eficiente de Energía y Fuentes No Convencionales (PROURE)), (ii) employ a best practices approach to public sector energy efficiency, (iii) establish objectives for energy efficient government buildings, (iv) craft regulatory mechanisms to incentivize DR, and (iv) devise plans for the areas of energy efficiency and DR.

The Law also includes language addressing (i) the development and promotion of non-conventional energy sources and energy efficiency and DR specifically in ZNIs, (ii) mechanisms to foster research in non-conventional energy sources, energy efficiency and DR, and (iii) harmonization of environmental requirements for the further development of non-conventional energy sources.

President Juan Manuel Santos’ support for the Law responds to critical deficiencies in Colombia’s energy sector in general and the power market in particular.  Colombian Senator José David Name, who introduced the Law, asserts in an open letter that Colombia’s Interconnected National System (Sistema Nacional Interconectado (SNI)) covers merely 48.1 percent of the country’s territory, leaving large swaths of Colombians located in ZNIs dependent in large part upon power generated from diesel, although solar panels and small hydroelectric do contribute in ZNIs, but to a lesser degree.  Additionally, only 2 percent of Colombia’s reported 14,684 MW installed capacity corresponds to non-Hydro and non-thermal (e.g., LPG, LNG, motor fuel and coal) energy sources.  This generation resource mix, combined with the power situation in the ZNIs, provides ample room for growth in Colombia of non-conventional energy sources, particularly environmentally-friendly renewables that are cost-competitive with their conventional alternatives.