When analysts not too long ago heralded the 2010s as "Latin America's decade," Colombia stood out as one of the major success stories. Its economy was among the fastest growing in the region, and the country was a favored destination for foreign direct investment (FDI), especially its booming oil and gas sector.

The Colombian government had also finally managed to gain the upper hand with the guerillas, paramilitaries and drug traffickers that had threatened to destabilize the country in the violent decades prior. The biggest paramilitary organization, the AUC, demobilized in 2006. In 2012, the Farc, the largest active guerilla group, began formal peace talks with the Colombian government.

The peace negotiations with the Farc continue to this day in Cuba. However, Colombia and Latin America in general now face economic headwinds - in particular, lower commodities prices and a strengthening US dollar. The region's strong growth of the last decade and a half has started to cool off. For Colombia, the recent collapse in oil prices is particularly worrisome since crude accounted for more than 50% of its exports in 2014, while the oil industry drew in some 30% of FDI that year.

On the bright side, Colombia does not face any internal political or economic crises of the same magnitude as those currently afflicting some of its neighbors, such as Brazil. The International Monetary Fund (IMF) expects the Colombian economy to grow 3.5% this year and 3.7% in 2016, below its average of 4.8% during the last 10 years but well above the regional forecasts (0.5% and 1.7%, respectively).

Electricity use in Colombia has historically followed economic growth, and the current deceleration seems to be no exception. Consumption has shown some signs of slowing this year but remains robust overall, up 3.4% year-on-year in the first seven months.

The power sector's long-term growth forecast looks strong as well. The most conservative government estimates have electricity use and peak demand growing at an annual average of 3% and 2.4%, respectively, through 2029.

At 15.5GW, the Colombian power grid is small, considering that it serves a country of 47.7 million, the third-most populous in Latin America. This is largely due to its low per capita power use, even by regional standards - 1,334 kWh/year, according to BNamericas estimates - as well as the economy's comparatively low level of industrialization.

The system has maintained comfortable reserve margins despite adding only 2.2GW of new capacity over the last 10 years. Its peak load hit 9.55GW in 2014 and had actually declined the year before. Based on these figures, Colombia should not face an energy crunch in the short term. Planned and existing generation plants are expected to cover its power needs over the next few years.

However, the system's reliance on hydroelectricity leaves it vulnerable to weather conditions, and authorities are exploring options to diversify the electricity matrix. Over the medium to long term, the challenges that Colombia will face include choosing and incorporating new power sources, ensuring that its backup thermoelectric power plants have access to fuel, and expanding and reinforcing the transmission and distribution infrastructure.

Figure: Annual Growth

Figure: Monthly Growth


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