Electricity sector in Colombia
Encyclopedia
The electricity sector in Colombia
is dominated by large hydropower
generation (65%) and thermal generation (35%). Despite the country’s large potential in new renewable energy technologies (mainly wind
, solar
and biomass
), this potential has been barely tapped. A 2001 law designed to promote alternative energies lacks certain key provisions to achieve this objective, such as feed-in tariffs
, and has had little impact so far. Large hydropower and thermal plants dominate the current expansion plans. The construction of a transmission line with Panama
, which will link Colombia with Central America, is underway.
An interesting characteristic of the Colombian electricity sector (as well as of its water sector
) is a system of cross-subsidies from users living in areas considered as being relatively affluent, and from users consuming higher amounts of electricity, to those living in areas considered as being poor and to those who use less electricity.
The electricity sector has been unbundled into generation
, transmission, distribution
and commercialization since sector reforms carried out in 1994. About half the generation capacity is privately owned. Private participation in electricity distribution is much lower.
Thirty-two large hydroelectric plants and thirty thermal power stations feed electricity into the SIN. On the other hand, the ZNI is mostly served by small diesel generators, many of which are not in good working conditions. At the end of 2005, installed net effective capacity was 13.4 Gigawatt (GW), with the following share by source:
The share of thermal participation in generation has increased since the mid-1990s. This has happened in response to the 1992/1993 crisis caused by El Niño-Southern Oscillation
associated droughts and the high reliance of power generation on hydroelectric installations that lacked multi-year storage capacity. As a result of the new policies adopted by the country, the dominance of hydropower in the generation portfolio has been reduced from 80 percent in the early 1990s to less than 65 percent today. The expansion path involves adding 1,500 MW of new capacity, equally distributed between hydro and thermal sources, by 2011. This will entail investments of US$258 million per year.
(TWh). Hydroelectric plants generated 81.2 percent, thermal plants 18.6 percent and the Jepírachi wind plant 0.1 percent of the total.
Demand is growing by approximately 4 percent annually.
The Puebla Panama Plan includes a project of electric interconnection between Colombia and Panama that will allow the integration of Colombia with Central America. This project, carried out by Interconexión Eléctrica S.A. (ISA) in Colombia and Empresa de Transmisión Eléctrica S.A. (ETESA) in Panama, entails the construction of a transmission line with 300 MW capacity (3% of installed capacity) from Colombia to Panama and 200 MW capacity in the reverse way. The line is expected to become operational in 2010.
As in other countries, the zones outside the interconnected system pose especially challenging conditions for electrification, as well major inadequacies in service provision. This system, whose installed capacity is almost exclusively diesel-based, suffers from major diseconomies of scale as 80 percent of capacity is in plants below the 100 kW threshold.
.
since 1995. The sector is characterized by an unbundled generation, transmission, distribution, and commercialization framework.
The structure of the Colombian energy market is based on Laws 142 (Public Services Law) and 143 (Electricity Law) of 1994. The Ministry of Mines and Energy is the leading institution in Colombia’s energy sector. Within the Ministry, the Unit for Mining and Energy Planning (UPME) is responsible for the study of future energy requirements and supply situations, as well as for drawing up the National Energy Plan and Expansion Plan.
The Regulatory Commission for Gas and Energy (CREG) is in charge of regulating the market for the efficient supply of energy. It defines tariff structures for consumers and guarantees free network access, transmission charges, and standards for the wholesale market, guaranteeing the quality and reliability of the service and economic efficiency. Among others, CREG is responsible for providing regulations that ensure the rights of consumers, the inclusion of environmental and socially sustainable principles, improved coverage, and financial sustainability for participating entities.
The provision of public services (water, electricity, and telecommunications) to final users is supervised by the independent Superintendency for Residential Public Services, or SSPD.
Just three companies - the public companies Empresas Públicas de Medellín
(EEPPM) and ISAGEN, as well as the private EMGESA - control altogether 52 percent of total generation capacity.
(with Electrocosta and Electrocaribe), Endesa (in Bogotá
) and Empresas Públicas de Medellín
(EPM).
(ESMAP), exploitation of the country’s significant wind potential alone could cover more than the country’s current total energy needs.
During the 1980s, the sector suffered a crisis, similar to most countries in Latin America. The crisis was the result of subsidized tariffs, political influence in the state companies, and the delays and cost overruns of large generation projects.
In 2001, Law 697, which promotes the efficient and rational use of energy and alternative energies, was promulgated. This law was regulated by Decree 3683, issued in 2003. The law and the decree contemplate important aspects such as the stimulus to education and research in renewable energy sources (RES). Nevertheless, the program created under this law lacks fundamental aspects to impulse the development of RES significantly, such as a regulatory support system to encourage investment, the definition of policies to promote renewable energy, or quantitative targets for the share of renewable energy.
Limitations such as the ones above present an important legal vacuum for renewable energy in Colombia. While there have been a few initiatives concerning efficient and rational use of energy (design of the Colombian program of normalization, accreditation, certification and labeling of final use of energy equipment, and promotion of carburant mixture for vehicle use and massive use of natural gas), there have been no recent initiatives related to new renewable energy technologies.
In 2005, the average residential tariff was US$0.0979 per kWh, slightly below the LAC
weighted average
of US$0.115. The average industrial tariff was US$0.0975 per kWh, slightly below the LAC
weighted average
of US$0.107.
Subsidies are also given to provide diesel for power production in non-grid-connected zones. While diesel in the interior of the country can cost in the order of US$0.8/gal, in remote areas it can cost in the order of US$4.5/gal because of high transport costs.
The subsidy stratification system in Colombia has proven fairly ineffective at channeling subsidies towards the poor. Although the scheme is broad in its coverage and excludes no more than 2 percent of the poor for services with broad coverage such as electricity, water and sanitation, there are also high leakage rates. Some 50-60 percent of subsidy beneficiaries are from the top half of the income distribution and, moreover, only 30-35 percent of subsidy resources are captured by the poor. Nevertheless, the performance of this subsidy scheme varies depending on the service considered, being water the sector with the poorest performance and telephony the one with the best behavior.
(1) Power Purchase Agreement
In summary, the overall investment needs in the electricity generation, transmission and distribution sector total US$767 million per year. About 60 percent of that relates to maintenance obligations and payment of Power Purchase Agreement (PPA) guarantees, and the remaining 40 percent to new investment in generation and transmission. These investment needs are completely related to the SIN and do not take into account the needs associated with the ZNI.
The Fund for the Electrification of Non-interconnected Zones (FANZI), was established in 2000 to assist isolated regions in the zones outside the interconnected system. It contemplated both the expansion of existing networks and the establishment of stand-alone solutions.
In 2003, a special fund known as Rural Electrification Fund (FAER), of similar characteristics to the FAZNI, was established to subsidize investment in rural areas of the interconnected system. The fund was designed to collect a surcharge of US$0.40 per MWh of electricity sold to the wholesale market, which would yield approximately US$18 million per year. Projects are presented to the FAER by the local government authorities. In order to be eligible, they must form part of the local development plan and the investment plan of the corresponding distribution utility and must also pass through the national project screening and evaluation system.
Electrification projects also receive support from the Program for Network Normalization (PRONE) that draws its resources from the National Development Plan funds.
The Institute for the Investigation and Application of Energy Solutions (IPSE) supports the Ministry of Mines and Energy in its efforts to promote rural electrification.
With 66 registered electricity producers, private companies own 60 percent of the installed generation capacity and account for 43 percent (measured in number of consumers) to 49 percent (measured in kWh sales) of energy supplied to the interconnected grid. Transmission is carried out by seven different public companies, while distribution and commercialization are in the hands of over 60 companies, both public and private.
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
is dominated by large hydropower
Hydropower
Hydropower, hydraulic power, hydrokinetic power or water power is power that is derived from the force or energy of falling water, which may be harnessed for useful purposes. Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as...
generation (65%) and thermal generation (35%). Despite the country’s large potential in new renewable energy technologies (mainly wind
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....
, solar
Solar power
Solar energy, radiant light and heat from the sun, has been harnessed by humans since ancient times using a range of ever-evolving technologies. Solar radiation, along with secondary solar-powered resources such as wind and wave power, hydroelectricity and biomass, account for most of the available...
and biomass
Biomass
Biomass, as a renewable energy source, is biological material from living, or recently living organisms. As an energy source, biomass can either be used directly, or converted into other energy products such as biofuel....
), this potential has been barely tapped. A 2001 law designed to promote alternative energies lacks certain key provisions to achieve this objective, such as feed-in tariffs
Feed-in Tariff
A feed-in tariff is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology...
, and has had little impact so far. Large hydropower and thermal plants dominate the current expansion plans. The construction of a transmission line with Panama
Panama
Panama , officially the Republic of Panama , is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The...
, which will link Colombia with Central America, is underway.
An interesting characteristic of the Colombian electricity sector (as well as of its water sector
Water supply and sanitation in Colombia
Water supply and sanitation in Colombia has been improved in many ways over the past decades. Between 1990 and 2004, access to sanitation increased from 82% to 86%, but access to water increased only slightly from 92% to 93%.. In particular, coverage in rural areas lags behind. Furthermore, despite...
) is a system of cross-subsidies from users living in areas considered as being relatively affluent, and from users consuming higher amounts of electricity, to those living in areas considered as being poor and to those who use less electricity.
The electricity sector has been unbundled into generation
Electricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...
, transmission, distribution
Electricity distribution
File:Electricity grid simple- North America.svg|thumb|380px|right|Simplified diagram of AC electricity distribution from generation stations to consumers...
and commercialization since sector reforms carried out in 1994. About half the generation capacity is privately owned. Private participation in electricity distribution is much lower.
Installed capacity
Electricity supply in Colombia relies on the National Interconnected System (SIN) and several isolated local systems in the Non-Interconnected Zones (ZNI). SIN encompasses one third of the territory, giving coverage to 96 percent of the population. The ZNI, which covers the remaining two thirds of the national territory, only serves 4 percent of the population.Thirty-two large hydroelectric plants and thirty thermal power stations feed electricity into the SIN. On the other hand, the ZNI is mostly served by small diesel generators, many of which are not in good working conditions. At the end of 2005, installed net effective capacity was 13.4 Gigawatt (GW), with the following share by source:
- Large hydropower: 63.92 %
- Thermal (gas): 27.41%
- Thermal (coal): 5.2 %
- Small hydropower: 3.08 %
- Mini-gas: 0.17 %
- CogenerationCogenerationCogeneration is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat....
: 0.15 % - Wind: 0.07 %
The share of thermal participation in generation has increased since the mid-1990s. This has happened in response to the 1992/1993 crisis caused by El Niño-Southern Oscillation
El Niño-Southern Oscillation
El Niño/La Niña-Southern Oscillation, or ENSO, is a quasiperiodic climate pattern that occurs across the tropical Pacific Ocean roughly every five years...
associated droughts and the high reliance of power generation on hydroelectric installations that lacked multi-year storage capacity. As a result of the new policies adopted by the country, the dominance of hydropower in the generation portfolio has been reduced from 80 percent in the early 1990s to less than 65 percent today. The expansion path involves adding 1,500 MW of new capacity, equally distributed between hydro and thermal sources, by 2011. This will entail investments of US$258 million per year.
Production
Total electricity production in 2005 was 50.4 Terrawatt-hourWatt-hour
The kilowatt hour, or kilowatt-hour, is a unit of energy equal to 1000 watt hours or 3.6 megajoules.For constant power, energy in watt hours is the product of power in watts and time in hours...
(TWh). Hydroelectric plants generated 81.2 percent, thermal plants 18.6 percent and the Jepírachi wind plant 0.1 percent of the total.
Demand
In 2005, total electricity consumption was 48.8 TWh, which corresponds to an average energy consumption per capita of 828 kW·h per year. Consumption per sector is divided as follows:- Residential: 42.2 %
- Industrial: 31.8 %
- Commercial: 18 %
- Official: 3.8 %
- Other uses: 4.3%
Demand is growing by approximately 4 percent annually.
Imports and exports
Colombia is a net power exporter. In 2005 the country exported 1.76 TWh of electricity to Ecuador (3.5% of total production). It imported only very small volumes of electricity from Venezuela and Ecuador (0.02 TWh each). According to the Ministry of Mines and Energy, exports are estimated to increase at 5 percent annually.The Puebla Panama Plan includes a project of electric interconnection between Colombia and Panama that will allow the integration of Colombia with Central America. This project, carried out by Interconexión Eléctrica S.A. (ISA) in Colombia and Empresa de Transmisión Eléctrica S.A. (ETESA) in Panama, entails the construction of a transmission line with 300 MW capacity (3% of installed capacity) from Colombia to Panama and 200 MW capacity in the reverse way. The line is expected to become operational in 2010.
Access to electricity
In 2005, the interconnected electricity system served 87 percent of the population, a percentage that is below the 95 percent average for Latin America and the Caribbean. In Colombia, electricity coverage is 93 percent in urban areas and 55 percent in rural areas. About 2.3 million people do not have access to electricity yet.As in other countries, the zones outside the interconnected system pose especially challenging conditions for electrification, as well major inadequacies in service provision. This system, whose installed capacity is almost exclusively diesel-based, suffers from major diseconomies of scale as 80 percent of capacity is in plants below the 100 kW threshold.
Interruption frequency and duration
Service quality in Colombia, as measured by service interruptions, is much lower than the average for Latin America and the Caribbean. In 2005, the average number of interruptions per subscriber was 185.7, far above the regional average of 13 interruptions. The duration of interruptions per subscriber was 66 hours, also far above the regional average of 14 hours.Distribution and transmission losses
Losses in transmission and leaks are still a concern, even if the total amount has decreased in the last years. Distribution losses in 2005 were 16 percent, compared to 13.6% average in LACLAC
-Places:* Los Angeles County in California* La Crescenta, California, unincorporated area in Los Angeles County* California State Prison, Los Angeles County...
.
Policy and regulation
Colombia has had a liberalized energy marketEnergy market
Energy markets are those commodities markets that deal specifically with the trade and supply of energy. Energy market may refer to an electricity market, but can also refer to other sources of energy...
since 1995. The sector is characterized by an unbundled generation, transmission, distribution, and commercialization framework.
The structure of the Colombian energy market is based on Laws 142 (Public Services Law) and 143 (Electricity Law) of 1994. The Ministry of Mines and Energy is the leading institution in Colombia’s energy sector. Within the Ministry, the Unit for Mining and Energy Planning (UPME) is responsible for the study of future energy requirements and supply situations, as well as for drawing up the National Energy Plan and Expansion Plan.
The Regulatory Commission for Gas and Energy (CREG) is in charge of regulating the market for the efficient supply of energy. It defines tariff structures for consumers and guarantees free network access, transmission charges, and standards for the wholesale market, guaranteeing the quality and reliability of the service and economic efficiency. Among others, CREG is responsible for providing regulations that ensure the rights of consumers, the inclusion of environmental and socially sustainable principles, improved coverage, and financial sustainability for participating entities.
The provision of public services (water, electricity, and telecommunications) to final users is supervised by the independent Superintendency for Residential Public Services, or SSPD.
Generation
Colombia has 66 registered electricity producers. Private companies own 60 percent of the installed generation capacity and account for 43 percent (measured in number of consumers) to 49 percent (measured in kWh sales) of energy supplied to the interconnected grid.Just three companies - the public companies Empresas Públicas de Medellín
Empresas Públicas de Medellín
Empresas Públicas de Medellín was established 55 years ago as a residential public utilities company which, initially, only served the inhabitants of Medellin, its hometown...
(EEPPM) and ISAGEN, as well as the private EMGESA - control altogether 52 percent of total generation capacity.
Transmission
Transmission in the National Interconnected System is carried out by seven different public companies, four of which work exclusively in transmission (ISA, EEB, TRANSELCA and DISTASA). The remaining three (EEPPM, ESSA and EPSA) are integrated companies that carry out all the activities in the electricity chain (i.e. generation, transmission and distribution). The largest company is Interconexión Eléctrica S.A. (ISA), which belongs to the government.Distribution and commercialization
Currently, there are 28 pure commercializing companies; 22 distribution and commercialization ones; 8 ones that integrate generation, distribution and commercialization; and 3 fully integrated ones. The three largest players in commercialization are Unión FenosaUnión Fenosa
Unión Fenosa, S.A., is a large Spanish company dedicated to the production and distribution to end users of gas and electricity. It has installed capacity of 11,120 megawatts of power and 8.9 million customers. The headquarters are in Madrid and the chairman is Pedro López Jiménez...
(with Electrocosta and Electrocaribe), Endesa (in Bogotá
Bogotá
Bogotá, Distrito Capital , from 1991 to 2000 called Santa Fé de Bogotá, is the capital, and largest city, of Colombia. It is also designated by the national constitution as the capital of the department of Cundinamarca, even though the city of Bogotá now comprises an independent Capital district...
) and Empresas Públicas de Medellín
Medellín
Medellín , officially the Municipio de Medellín or Municipality of Medellín, is the second largest city in Colombia. It is in the Aburrá Valley, one of the more northerly of the Andes in South America. It has a population of 2.3 million...
(EPM).
Renewable energy resources
Colombia has 28.1 MW installed capacity of renewable energy (excluding large hydro), consisting mainly of wind power. The country has significant small hydro, wind, and solar resources that remain largely unexploited. According to a study by the World Bank’s Energy Sector Management Assistance ProgramEnergy Sector Management Assistance Program
The Energy Sector Management Assistance Program is a global, multi-donor trust fund administered by the World Bank and co-sponsored by 13 official bilateral donors...
(ESMAP), exploitation of the country’s significant wind potential alone could cover more than the country’s current total energy needs.
Early history
The first historical landmark in the establishment of electric supply dates back from 1928, when Law 113 declared the exploitation of hydroelectric power of public interest. The system worked in a centralized manner, in which vertically integrated state companies maintained a monopoly in their corresponding regions. A public company, ISA, exchanged electricity among the different regional systems.During the 1980s, the sector suffered a crisis, similar to most countries in Latin America. The crisis was the result of subsidized tariffs, political influence in the state companies, and the delays and cost overruns of large generation projects.
1994 reforms
At the beginning of the 1990s the government took steps to modernize the electricity sector, opening it to private participation. The restructuring was carried out through Laws 142 (Law of Public Services) and 143 (Electricity Law) of 1994, which defined the regulatory framework for the development of a competitive market. The new scheme, designed by the CREG, was implemented from July 1995 onwards.Law 697 of 2001
Colombia has an ambitious reform agenda in the power sector. The country seeks to encourage foreign investment, with an emphasis on hydrocarbons and power capacity expansion; simplify modalities for small-scale energy projects; and renew interest in non-conventional renewable energy technologies with a regulatory framework to facilitate a gradual change in the energy mix.In 2001, Law 697, which promotes the efficient and rational use of energy and alternative energies, was promulgated. This law was regulated by Decree 3683, issued in 2003. The law and the decree contemplate important aspects such as the stimulus to education and research in renewable energy sources (RES). Nevertheless, the program created under this law lacks fundamental aspects to impulse the development of RES significantly, such as a regulatory support system to encourage investment, the definition of policies to promote renewable energy, or quantitative targets for the share of renewable energy.
Limitations such as the ones above present an important legal vacuum for renewable energy in Colombia. While there have been a few initiatives concerning efficient and rational use of energy (design of the Colombian program of normalization, accreditation, certification and labeling of final use of energy equipment, and promotion of carburant mixture for vehicle use and massive use of natural gas), there have been no recent initiatives related to new renewable energy technologies.
Tariffs
The electricity market in Colombia has regulated and non-regulated segments. The regulated market, which is directly contracted and supplied by distribution companies, applies to industrial, commercial, and residential users with power demands under 0.5MW. In this market, the tariff structure is established by the regulatory agency CREG. In the non-regulated market, consumers with power demands of 0.5 MW and above can negotiate freely and contract their supply in the wholesale market (i.e., spot and contracts markets) directly or through commercial entities, distributors, or producers.In 2005, the average residential tariff was US$0.0979 per kWh, slightly below the LAC
LAC
-Places:* Los Angeles County in California* La Crescenta, California, unincorporated area in Los Angeles County* California State Prison, Los Angeles County...
weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...
of US$0.115. The average industrial tariff was US$0.0975 per kWh, slightly below the LAC
LAC
-Places:* Los Angeles County in California* La Crescenta, California, unincorporated area in Los Angeles County* California State Prison, Los Angeles County...
weighted average
Weighted mean
The weighted mean is similar to an arithmetic mean , where instead of each of the data points contributing equally to the final average, some data points contribute more than others...
of US$0.107.
Subsidies and cross-subsidies
By law all urban areas in Colombia are classified in one of six socio-economic strata, which are used to determine the level of tariffs for electricity, water and other services. According to that system, consumers living in areas considered as poor - and consumers using low amounts of electricity - receive electricity and natural gas at subsidized tariffs. These cross-subsidies are almost entirely (approximately 98 percent) financed by consumers living in areas considered as being relatively affluent and who use more electricity. The cross-subsidies cover about 25 percent of the electricity and gas bill of low-income consumers. A special fund that covers the remaining amount not covered by consumers provided US$21.8 million in 2005. On average, 7.5 million people a month benefited from this fund. In addition, the fund provided subsidies of COP$ 17,159 million (US$7.4 million) to 1,808,061 natural gas users.Subsidies are also given to provide diesel for power production in non-grid-connected zones. While diesel in the interior of the country can cost in the order of US$0.8/gal, in remote areas it can cost in the order of US$4.5/gal because of high transport costs.
The subsidy stratification system in Colombia has proven fairly ineffective at channeling subsidies towards the poor. Although the scheme is broad in its coverage and excludes no more than 2 percent of the poor for services with broad coverage such as electricity, water and sanitation, there are also high leakage rates. Some 50-60 percent of subsidy beneficiaries are from the top half of the income distribution and, moreover, only 30-35 percent of subsidy resources are captured by the poor. Nevertheless, the performance of this subsidy scheme varies depending on the service considered, being water the sector with the poorest performance and telephony the one with the best behavior.
Investment
A 2004 report by the World Bank estimated the following power sector investment needs for Colombia up to 2010:| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | Total | Average annual | |
|---|---|---|---|---|---|---|---|---|
| Maintenance | 310 | 310 | 310 | 310 | 310 | 310 | 1,860 | 310 |
| Rehabilitation | 43 | 43 | 43 | 43 | 43 | 43 | 258 | 43 |
| PPAs (1) | 113 | 113 | 113 | 113 | 113 | 113 | 678 | 113 |
| Generation | 82 | 331 | 388 | 306 | 248 | 190 | 1,545 | 258 |
| Transmission | 86 | 85 | 85 | 0 | 0 | 0 | 256 | 43 |
| Total | 634 | 882 | 939 | 772 | 714 | 656 | 4,597 | 767 |
(1) Power Purchase Agreement
In summary, the overall investment needs in the electricity generation, transmission and distribution sector total US$767 million per year. About 60 percent of that relates to maintenance obligations and payment of Power Purchase Agreement (PPA) guarantees, and the remaining 40 percent to new investment in generation and transmission. These investment needs are completely related to the SIN and do not take into account the needs associated with the ZNI.
Financing of rural electrification
There are three different funds and programs that support rural electrification in Colombia, each established at a different time with different purposes, and all administered by the Ministry of Mines and Energy. At the end of 2006, the Ministry of Mines and Energy had approved a total of US$23.3 million rural electrification funds from these three funds and programs directed to benefit 14,965 families.The Fund for the Electrification of Non-interconnected Zones (FANZI), was established in 2000 to assist isolated regions in the zones outside the interconnected system. It contemplated both the expansion of existing networks and the establishment of stand-alone solutions.
In 2003, a special fund known as Rural Electrification Fund (FAER), of similar characteristics to the FAZNI, was established to subsidize investment in rural areas of the interconnected system. The fund was designed to collect a surcharge of US$0.40 per MWh of electricity sold to the wholesale market, which would yield approximately US$18 million per year. Projects are presented to the FAER by the local government authorities. In order to be eligible, they must form part of the local development plan and the investment plan of the corresponding distribution utility and must also pass through the national project screening and evaluation system.
Electrification projects also receive support from the Program for Network Normalization (PRONE) that draws its resources from the National Development Plan funds.
The Institute for the Investigation and Application of Energy Solutions (IPSE) supports the Ministry of Mines and Energy in its efforts to promote rural electrification.
Summary of private sector participation
Colombia has had a liberalized energy market since 1995. The sector is characterized by an unbundled generation, transmission, distribution, and commercialization framework.With 66 registered electricity producers, private companies own 60 percent of the installed generation capacity and account for 43 percent (measured in number of consumers) to 49 percent (measured in kWh sales) of energy supplied to the interconnected grid. Transmission is carried out by seven different public companies, while distribution and commercialization are in the hands of over 60 companies, both public and private.
| Clean Development Mechanism Clean Development Mechanism The Clean Development Mechanism is one of the "flexibility" mechanisms defined in the Kyoto Protocol . It is defined in Article 12 of the Protocol, and is intended to meet two objectives: to assist parties not included in Annex I in achieving sustainable development and in contributing to the... (CDM) projects in the electricity sector in Colombia, with overall estimated emission reductions of 107,465 te per year. The Jepírachi project, in the Uribia region, is Colombia’s first and only wind farm. This 19.5 MW project is expected to displace an estimated 430,000 t until 2019. The Jepírachi project is now in its fourth year of operation. It generated about 144 GWh and displaced about 48,500 te from February 2004 to August 2006. The other two registered projects are the Santa Ana Hydroelectric Plant, in the Bogotá’s suburb Usaquén Usaquén Usaquén is a residential and commercial locality in northern Bogotá, capital of Colombia. Although it is designated on maps as Bogotá's #1 locality, it was a separate municipality of Cundinamarca until 1954, when it was annexed into the city. Today, Usaquén is home of more than 480.000 inhabitants... , with estimated emission reductions of 20,642 te per year; and the La Vuelta and La Herradura Hydroelectric Project, in the Antioquia Department Antioquia Department Antioquia is one of the 32 departments of Colombia, located in the central northwestern part of Colombia with a narrow section that borders the Caribbean Sea. Most of its territory is mountainous with some valleys, much of which is part of the Andes mountain range... , with estimated emission reductions of 69,795 te per year. Inter-American Development BankThe Inter-American Development BankInter-American Development Bank The Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean... has currently one energy project under implementation in Colombia, the Porce III Hydroelectric Power Plant, owned by Empresas Públicas de Medellín and approved in October 2005. This is a US$900 million project, of which the IDB is contributing US$200 million. In addition, the IDB is supporting the Colombia-Panama electric interconnection project through US$1.5 million financing for the feasibility studies phase. External links
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