ENERGÍAS ALTERNAS Y LA GENERACIÓN …...ENERGÍAS ALTERNAS Y LA GENERACIÓN DISTRIBUIDA EN COLOMBIA 32nd IAEE International Conference Regulatory Feasibility Analysis of Policy Mechanisms

REGULACIÓN PARA INCENTIVAR LAS ENERGÍAS ALTERNAS Y LA GENERACIÓN

DISTRIBUIDA EN COLOMBIA

32nd IAEE International Conference

Regulatory Feasibility Analysis of Policy Mechanisms to Foster Renewable Energy in

the Colombian Power SectorSergio Botero,

Universidad Nacional de Colombia

Angela Inés Cadena, Daniel Vesga, Luis Ignacio Betancur.Universidad de los Andes

ISAGEN - Colciencias



International ExperienceClassification Regulatory Mechanism

Mandatory Policies General Rules and regulationsObligations/Standard Portfolio

Economic Policies

Tax incentivesFeed-In TariffsSubsidies, concession or capital refundThird Party Financing Fossil fuel taxes

R & D Policies Research and Development

Management and Operation Policies

Tender SystemGovernment purchasesGreen PricesRenewable Energy Certificates (RECs)Voluntary MarketsPublic AwarenessRural ElectrificationNet metering



Country Analysis

Economic and population indicators

Energy and environmental indicators

Energy Mix

Renewable Power

Regulatory and Policy Measures



Driving Forces

Diversification

Energy dependance reduction

Environmental concerns

Local technology development

Long-term energy and economic policies.

Current policies in Colombia

General Rules and Regulations

Tax incentives, exemptions or refunds

Research and Development

Rural Electrification





Selected policy instruments for assessment

Design • Standard Portfolio • Feed-in Tariffs

Economic and Environmental impact assessment• Portfolio (wind, geothermal, biomass, solar)• Feed-in Tariffs• Externalities



RES – MARKAL Colombia

Imports

Mining

Exports

Sources

Refineries

Electricityproduction

Demandtechnologies

Residential

Processes

ConversionDemanddevices

Demands

Commercial

Industrial

Transportation

Other sectors

Reference Energy System (RES)



Conclusions Markal

The analyzed measures imply an increase in power price for end users

Supply security restriction (minimum % of thermal generation) favours geothermal and biomass generation.

Although Colombian law difficults technology-bias incentives. In case of implementing any of these mechanisms, care must be taken in design.



Regulatory viability of proposed mechanisms

Laws and regulations on power as a domiciliary public service (utility)

• Technology – neutral Legislation• Free entrance• Power purchase from traders and non–regulated customers

must be with lowest price bidding. • Dispatch rules are price-based• The power market is price-based both for bilateral markets and

for pool transactions. • There is the possibility to qualify biddings with other

criteria, but so far it has not been applied. • Regulations for “minor plants”• Relliability charge



Regulatory viability of Standard Portfolio

Commercializers supply a percentage of its demand with renewable energy

• Not applicable within current rules. Lowest price criterion

• Subsidies are only valid for lower income users

• Fossil fuel tax fund can only be used as “social investment”(specific destination tax). Must be ordered by national law, with initiative from the finance minister.

• “Environmental protection” should be undestood as “social investment”. Legal viability risk , this interpretation could be considered non-constitutional.



Regulatory viability of Feed-in Tariff

Viable: tax exemption to generators. A lower tariff is obtained without subsidies. This has been applied in Se viene haciendo en biocombustibles

A quota system has been already established by the government for biofuels (ethanol and biodiesel).



Regulatory viability of Feed-in Tariff

Energy price guaranteed to generator.• Not applicable within current rules. Lowest price criterion • The regulatory comission (CREG) can not fix an obligation as

a percent of price.

• All minos plants should be treated equally, but competing for prices.



Regulatory Scenarios and implementation strategies



Scenario Analisis

The end of oil ageBack to centralized expansion



The End of Oil Age

High sustained oil prices (US$150/Bl)Pressure on Natural Gas

• Gas line with Venezuela• LNG port in Venezuela• VNG development

Oil and gas exploration unsuccessfulGovernment see Wind and Geothermal power as feasible options“Green World” High investment in renewables. Increase in REC valueRenewable projects are financially viable



Strategy 1: Keep current policy

Keep current tax incentives

Keep technology neutrality

Develop renewable energy in non interconnected Areas



Back to Centralized Expansion

High growth and investments high power demand

Government supporto to hydro projects

New objective: energy resource diversification

Government stablish “minimum expansion sequences”. Developers get into “Controlled billing”

Consequence: two geothermal projects and wind power development

Overcost is absorved with goverment oil funds.

Five -year periods are set to foster renewable projects.



Strategy 2a: gradual policy development

5 to 10 years

Technology-neutrality and minimum-cost criteria are modified

Standard Portfolio implementation

New resources are allocated for specific technologies

Fund creation• Oil resources• National budget resources

Creation of a Renewable Energy Credits market



Stratey 2b: Agressive policy development

Feed-in Tariffs implementation

Fund creation (similar as in 2a)• Oil resources• National budget resources

Internalization of externalities



Conclusions

International situation favours Renewable Energy

Slow local implementation

There is interest in renewables from developers, but it is difficult to materialize

Yes to incentives, but without distortions

Feed-in tariff systems have achieved the best results in Renewable Energy development



Conclusions

Quota systems are less efective, but are more adaptable to the market.

Future technology development will improve renewables competitiveness.

Current laws (technology neutrality and minimum cost) do not allow implementation of policy mechanism.

Natural Niche: Non interconnected areas.

THANK YOU

GRACIAS

Documents

ENERGÍAS ALTERNAS Y LA GENERACIÓN …...ENERGÍAS ALTERNAS Y LA GENERACIÓN DISTRIBUIDA EN COLOMBIA 32nd IAEE International Conference Regulatory Feasibility Analysis of Policy Mechanisms