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Competition in Colombia Sparks Renewable Energy Expansion

Following more than a year of coordination with NREL and the U.S. Agency for International Development (USAID), Colombia will host its first renewable energy auction in 2019. The use of auctions to procure renewable energy has already been adopted by many of Colombia’s South American neighbors and approximately 50 countries worldwide. For Colombia, it is an opportunity to bring in low-cost, non-hydro renewable energy while promoting investment in the country’s energy sector.

Diversifying its energy mix to include more solar and wind is a priority in Colombia. The country depends on hydroelectricity for nearly 70% of its energy, making dry years especially harsh: El Niño-induced droughts in 2016 forced Colombians to ration their energy during peak hours. Further, coal and gas plants are paid a premium to operate during non-drought years to support the grid when hydro energy cannot. Now the country has found a solution that strengthens the energy system with an eye toward international investment.

Following the 2017 decision to host an auction, the Government of Colombia Ministry of Mines and Energy connected with USAID for guidance. Although an auction is a speedy solution to boosting capacity, significant effort was spent customizing the program to Colombia.

“The puzzle,” said David Hurlbut, NREL senior analyst and economist, “is how to craft an auction process that will provide the right price signals to wind and solar developers to invest and get their capacity on the ground. And how to do this in an environment where they’d be competing with hydropower for 6 years, then providing generation during shortage conditions through the El Niño years”.

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