Solar panels and wind turbines generating electricity.
Solar panels and wind turbines generating electricity. | Credit: AdobeStock

Renewable Energy Auctions Support Colombia’s Climate Targets

By Thomas Black, Jairo Gutierrez

Colombia’s large mountains and tropical latitude yield significant annual rainfall that has propelled Colombia to develop one of the largest hydropower capacities in the world. For years, over 70 percent of Colombia’s electricity supply came from hydropower. But droughts intensified by the climate crisis have made hydropower less reliable. With more climate impacts on the horizon, Colombia has committed to diversifying its energy mix

As many countries fall short of meeting bold international climate commitments in the global transition to clean energy, Colombia provides a model for other countries to adopt. Colombia is making historic strides toward the goal of being carbon neutral by 2050. As one of nine Latin American countries working toward a target of 70 percent renewable energy use by 2030, Colombia aims to contribute 4 gigawatts of renewable energy to its total energy mix supporting the 2030 regional goal. With its renewable energy targets and a growing share of wind and solar resources, Colombia is designing a future power system that is fundamentally different from that of today—one that uses new technologies, embraces new actors and investors, and creates new opportunities to enhance energy security, affordability, and reliability. 

Colombia’s Renewable Energy Auctions

The Government of Colombia, with the help of the USAID, has deployed energy auctions as a policy tool to reach climate targets, procure renewable energy at competitive prices, and ensure a more resilient energy supply for the country. 

A renewable energy auction is a competitive procurement process that enables countries to find the most cost-effective renewable energy projects in their domestic market. In an auction, energy project developers bid against each other to supply energy through long-term contracts at the lowest possible price. Awards are generally made based on bids submitted by participating energy providers according to transparent award rules.

Regardless of market maturity, auctions help policymakers achieve sustainable cost reductions while spurring private investment, creating local jobs, reducing corruption in the procurement process, and reducing emissions. Compared to negotiated procurements, auctions allow for faster project execution and enable policymakers ease in scaling for multiple projects and rounds. Through a thoughtful and strategic design process, policymakers can take steps to attract robust competition and diverse bidders, mitigate risk with currency fluctuations, and prevent gaming and delays in project completion.

Through USAID’s Scaling Up Renewable Energy (SURE) project, USAID assisted the Government of Colombia with a full range of services to prepare for, design, promote and implement auctions, making sure that government and private sector partners were supported in every step of the process. SURE also worked with Colombian policymakers to develop a regulatory framework that attracted private investors. 

Success of Colombia’s Renewable Energy Auctions

Through USAID’s SURE program, the Government of Colombia developed an auction process to help buyers—in this case, distribution utilities—add wind and solar power to their energy portfolios. SURE helped Colombia draft policies and regulations that fit the country's context and policy vision.

On October 26, 2021 Colombia successfully held its third renewable energy auction with support from USAID. Eleven new large-scale solar projects were selected through the auction's competitive process, which is expected to bring about $875 million of investment and will generate 796.3 megawatts (MW) of capacity at an average price of approximately $40.56 per megawatt hour. 

Located in nine of Colombia's provinces, the projects will create around 4,700 jobs and reduce carbon dioxide emissions by approximately 465,000 tons per year.

Colombia’s Minister of Mines and Energy, Diego Mesa, publicly expressed appreciation for USAID's support.

Using renewable energy auctions, in total Colombia achieved historically low prices for renewable energy, securing over 2,170 MW of new wind and solar power at prices 15 to 25 percent lower than previous contracts. These renewable projects will attract $2 billion in private investment, save up to $228 million in annual electricity costs, and create new local jobs and business opportunities in a region hit hard by climate change.

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Learn More about Renewable Energy Auctions

USAID partner countries can receive support in implementing this important policy tool to reach climate targets, procure renewable energy, and reduce power system integration costs

Country
Colombia
Sectors
Energy
Strategic Objective
Integration
Topics
Carbon, Emissions, Climate Change Integration, Climate Finance, Climate Policy, Clean Energy, Grid Integration
Region
Latin America & Caribbean

Thomas Black

Thomas Black has led renewable energy and climate change mitigation projects at USAID/Colombia since November 2016. Thomas manages U.S. government support programs for the Government of Colombia in the integration of solar and wind power into the national grid, as well as distributed solar power on and off grid, focusing on the reduction of regulatory and institutional barriers to new investment and on the potential to open these markets to US investment, products, and services. Thomas holds a Master’s Degree in Latin American Economics and a Bachelor’s Degree in Economics from the University of Texas at Austin.

Jairo Gutierrez

Jairo Gutierrez is an international energy consultant with 28 years of experience in the power sector in assignments supporting government agencies, private companies, and banks in the U.S., Africa, Latin America, the Middle East, and Southeast Asia.  He is the Project Lead for the Colombia work under USAID’s SURE project, promoting installation of large-scale grid-connected renewable energy with a focus on competitive procurement, system integration, and capacity building. Mr. Gutierrez holds a B.S. in Electrical Engineering and a master’s degree in Business Management.

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