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© IPD Latin America; All Rights Reserved
Renewable Energy in Colombia
Institute of the Americas
Webinar
IPD Latin America
June 18, 2015
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© IPD Latin America; All Rights Reserved
Colombia’s Potential Overview
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Source: Ministry of Mines and Energy, XM and UPME
Areas Connected to the National Interconnected System (SIN) - Densely populated areas (strong population
concentration)
- Installed power generation capacity: 15,513 MW (6th largest in Latin America)
- Heavy dependence on hydro: - 2nd in South America after Brazil - Installed capacity: 10,919 MW (@70% of total
installed capacity) - Electricity produced (March 2015): 4,024
GWh (@71% includes large and small hydro)
Non-Interconnected Areas (ZNI’s) - Remote areas; scattered population - High presence of ethnic communities
(indigenous, African-Colombian) - High poverty rates - Estimated installed generation capacity:
165 MW - Intermittent service (4 to 8 hour service
per day on average)
Colombia’s Electric System (2015)
Central 24.6%
Northwest 15.7%
Coffee R. 4.38%
Valle 12%
Caribbean Coast 19.6%
East 9.45%
Electricity demand per region
Tolima 4.26%
Sur 2.94%
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Two Different Stories
Average cost nationwide. Includes generation, distribution and retail average costs. Does not include impact of government subsidies.
Average Electricity tariff (SIN)
Subsidies (2014): US$ 613 million (S1, S2, S3) Contributions (2014): US$ 338 million (S4, S5, S6, Industrial, commercial and official sectors)
Average electricity cost in ZNI (non-subsidized)
ZNI’s • Heavy dependence on fossil fuels (diesel): US$
3/gallon in average • Subsidies around US$ 75.3 million in 2014: @7% of
MinMinas budget for that year • Low payment capacity: dependence on subsidies
Source: IPD based on IEA, SUI & SIEL
Gov’t subsidies: @US$ 275 MM to cover
differential. Actual contribution: @US$ 500 million (to
cover companies’ deficits)
Gov’t. subsidies electric sector 2014: @US$ 580 million @65% of MinMinas budget
CU= G + T + D + C+ PR + R
Back to slide 13 4
0
0.05
0.1
0.15
0.2
0.25
2010 2011 2012 2013 2014
Other components in tariff
Generation component in tariff
Average residential tariff in US
US¢ kWh
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2010 2011 2012 2013 2014
US¢ kWh
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70%
11%
8%
9%
Hydro* Gas fired Coal fired
Liquids-diesel Dual fired Wind
Biomass
Installed Capacity by Technology National grid 2015
Wind: • 18.4MW • 0.12% Biomass: • 77.2MW • 0.49%
Main factors for current limited renewables (other than hydro) share:
• Abundant water resources • High cost vs. efficiency
• Reliability issues
• Limited to non-existent
knowledge of market regarding renewables potential
*Includes mini-hydro Source: IPD based on UPME
Renewable Energy Participation in Colombia’s Energy Basket
2%
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Wholesale Energy Market Dynamics P
rice
(P
eso
s/ k
W/h
)
Typical Dispatch Model:
0
20
40
60
80
100
120
100 200 300 400 500 600 700 800 900 1000
Plants within
Plants’ declared availability (MW)
G1 G2
G3
G4
G5
Spot Price- (SP) D
eman
d
Price
200
400
600
800
1,000
1,200
1,400
200
400
600
800
1,000
1,200
1-jan 1
-Ja
n
12
-Ja
n
24
-Ja
n
6-F
eb
18
-Fe
b
15
-Ma
r
28
-Ma
r
10
-Ap
r
22
-Ap
r
5
-Ma
y
Pri
ce (
Pe
sos/
kW
/h)
Spot Price
Hydro Coal Scarcity Price
Dual Diesel
Plants to be dispatched P. not dispatched
Source: XM-Approximate figures
Average Price by Technology:
(Spot market)
2
9-M
ay
Gas
Source: IPD based on CREG
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Mini-hydro (<10MW)
168.7
Mini-hydro (between
10-20MW) 296.0
Biomass 268.2
Wind 19.5
Solar (ZNI) 4.5
Solar (tele-communications towers)
4.5
Capacity by Technology (MW)
Renewables Installed Capacity in Colombia’s Electric System
• 760.2 MW installed capacity of renewable energy. This represents around 4.72% of the total installed capacity in the electric system
• Solar solutions mostly for ZNIs
• Only relevant wind generation project: Jepírachi (La Guajira, 2004)
• Most investment for research by the private sector: EPM and Isagen. Technical support of public entities: Colciencias, IDEAM, UPME.
(Includes national grid and ZNIs)
Includes national grid, non-connected areas –ZNIs-- and others Source: UPME
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Source: UPME and IDEAM: “Colombia’s Wind and Wind Energy Atlas”(2006)
Wind potential
Renewables Potential in Colombia
Current projects: • Jepírachi Wind Farm (19.5MW Current) (EPM+WB) • 3 projects registered in UPME (projected 474 MW)
• Casa Eléctrica, Irrapia, Carrizal (Jemeiwaa Ka)
Wind
Region Potential (MW)
La Guajira Peninsula* 21,000
Caribbean Coast 20,000
Santander and N. Santander
5,000
Huila 2,000
Boyacá 1,000
Risaralda-Tolima 1,000
Source: IPD based on UPME and IDB *Potential in La Guajira remains throughout the year. In other regions, dependent on season.
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Source: UPME and IDEAM: “Colombia’s Solar Radiation Atlas”(2004)
High irradiance levels throughout the year across the country (4.5 kWh/m2 avg.) Areas with highest potential located far away from the national grid: strong potential in ZNIs. Estimated potential (kWh/m2/year) La Guajira Peninsula: 1,960 - 2,340 Eastern Llanos: 1,440 - 2,160 Caribbean Coast: 1,260 - 2,340
Renewables Potential in Colombia
Solar
<5 6 7>
Arica, Chile 6.78
Mexicali, Mexico
5.90
La Guajira, Colombia
5.77
Geraldtown, Australia
5.80
Tacna, Perú 5.68
Luxor, Egypt 5.98
Position vis-à-vis other regions with significant irradiance in the world (in kWh/m2/per day in average):
Largest existing project: Éxito Panorama solar project (508 kW), Barranquilla.
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Case Study: Exito Panorama, Barranquilla
- Largest solar plant in Colombia (online in March 2015)
- Exito moving towards efficient energy solutions: energy savings + reputation
- 508 kW installed at CO$ 2,000 million (@US$ 800,000)
- @US$ 1,570 per installed kW
- For self-consumption only, no plans to sell surpluses to the grid
- Not enough incentives to install more capacity and sell? Net metering system not attractive?
Source: IPD based on Google Maps
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Very limited development of geothermal power potential in Colombia Extremely little knowledge of this potential Only one well drilled to date: Nereidas-1, Nevado del Ruiz volcano area; dry hole Areas with identified high potential: Nariño, Cauca, Huila, Caldas, Risaralda ISAGEN is taking the lead on research and potential studies. Two existing projects: o Nevado del Ruiz Volcanic Massif Project-
Caldas-Risaralda depts. (ISAGEN) • Pre-feasibility assessments concluded • Projected 50MW installed capacity
o Tufiño - Chiles Binational Project, Nariño
dept. (ISAGEN-CELEC EP, Ecuador) • Cross-border agreements signed • Pre-feasibility assessments initiated
Source: Ingeominas and ANH: “Colombia’s Geothermal Map”(2008)
Renewables Potential in Colombia
Geothermal
Ring of fire:
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Policy and Regulation Where We Stand
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• IDEAM projects less rain precipitation for: 2011-2040 (climate change)
• El Niño
• Increasing social and environmental licensing challenges for large-scale hydro-electric generation plants
System Reliability
• Back-up system mainly based upon thermal fired plants (gas, coal and diesel). With appropriate incentives, renewables could become an economically feasible and environmentally friendly source of supply. Reliability is the issue.
Diversified Energy Basket
• Need to reduce diesel use and fiscal burden (Back to slide 4)
• Increase electricity supply service hours in ZNIs
• Expand coverage
• Economic development in a post-conflict scenario
ZNIs
• International agreements: IRENA membership (Law 1665/2013, Sentence C-332/ 2014)
• Lack of clear political champion, apart from UPME
• Not a priority in Congress
• Not all stakeholders want to see renewables succeed
Politics?
Turning to Renewables?
Turning to Renewables
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2001
Efficient energy use /
renewable energy
declared as policy priority
(Law 699/2001)
2003
PROURE* is created
Decree 3683/2003
2008
Co-generators allowed to sell energy
surplus
2010
PROURE** Action
Plan 2010-2015
May/ 2014
‘Renewables Law’
1715/2014
Mar/2015
Regulation for self-
generators
CREG resolution 024/2015
2015
Regulation on
incentives scheme
Targeted for May; Pending
Main Developments
*PROURE: Indicative Action Plan for Rational Use of Energy and Non-Conventional Renewable Energy Sources **Specific goals and objectives are established for the 2010-2015 period 14
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Law 1715/2014
Promote power
generation based on REs Integrate REs
into the country’s
power system (grid and
ZNIs).
Incentives to investment in
RE projects
Eliminate market
barriers for RE’s
Sustainable development
Emissions reduction
Energy supply security
The Renewables Law
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Looking Forward Opportunities & Challenges
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Moderate
Hydro Gas Coal Minor (<20MW) Co-generation Wind Solar Geothermal Others*
Optimistic
Pessimistic
Total installed capacity:
23,150 MW
Renewables: @10-15%
Total installed capacity:
21,676 MW
Renewables: @6-7%
Total installed capacity:
21,402 MW
Renewables: @2%
Highlights • Government views its projections as conservative
• Government expects Law 1715 to have a greater impact • Will the system be prepared if expectations are fulfilled?
Scenarios of Law 1715’s Impact on Colombia’s Electric Sector
17 *Hydro include small-scale generation plants (@3% of installed capacity)
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Opportunities and Challenges: National Grid
• Counter seasonal cycles • Diversification of back up sources of supply • Future incentives?
• Tax • Reliability charge-type incentive
being discussed
• Slow regulation development progress/ enough political will?
• Incentives not enough for broad levels of activity
• Lobbying and opposition from traditional generators
• No political interest to offer up subsidies other than fiscal incentives
• Prior consultation/licensing (Jepírachi took 3 years)
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Opportunities and Challenges: ZNIs
• Opportunity to boost economic activity in
neglected areas • Wind and solar more efficient and cheaper than
diesel
• Counter seasonal cycles
• Potential use in economic activities (i.e. oil, gas & mining activities)
• Post-conflict strategy?
• Poor State presence in areas with highest potential: security, social issues
• Presence of ethnic communities: prior consultation issues
• Logistical challenges
• Who will pay?
• Government role in the future?
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Other regional experiences
Incentive scheme Country
Fiscal Other
Peru -Income tax, import tariffs, early recovery of VAT / selective addt’l taxes on contaminant fuels
-Biannual auction system -Accelerated depreciation -Long-term contracts
Chile -Bidding mechanisms provide access to subsidies, grants, and tax reductions
-Electric utility quota obligation (5%) -Geo-referenced platform -Others
Brazil -Equipment exempted from Industrial Products Tax (IPI) VAT -Reinfa (under discussion)
-National Bank for Economic and Social Development offers favorable financing conditions -Long-term contracts
Mexico -Tax Deductions (state level) -Clean energy certificates
-100% accelerated depreciation -Estampilla postal” -Energy bank
Colombia (under discussion) Income, VAT, tariffs Accelerated depreciation
Regional highlights: Major interest in RE developments Net-metering schemes Issue of access to financing Colombia: Ways to go to improve incentives Limited public/ state commitment
Sources: IPD based on KPMG and national legislation 20
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Financing options
• Local banks? – Little familiarity with renewable energy/ energy efficiency projects
– Difficult and costly to get financing
– Government active role needed to incentivize local banking involvement
• Multilaterals? – No specific financing options identified for renewables in Colombia to date
– Dependent on regulations and other developments
• Government support unlikely to assist/ support financing in Colombia
• Little government/multilateral-bilateral discussions to date
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