Contents

Introduction: Electricity System Put to the Test

Starting in late 2015, Colombia experienced of the most severe El Niño cycles in recent history. The weather phenomenon caused intense droughts and heat waves that put the Andean country's electrical system under immense strain.

Concurrent with the weather-related challenges, four power plants shut down expectedly for diverse reasons - technical breakdowns (Flores IV), financial problems (Termocandelaria), a court injunction related to environmental issues (El Quimbo), and a fire (Guatapé). Moreover, due to high demand, gas-fired thermoelectric plants, which serve as backup for the hydro-dependent grid during droughts, had trouble securing fuel and, in many cases, had to burn expensive oil-derived alternatives.

Colombia's energy crisis peaked in March 2016. At the beginning of that month, the energy and mines minister resigned after criticism over the government's slow reaction to the crisis (as well as an influence peddling investigation). President Juan Manuel Santos implemented an energy savings campaign, called Apagar Paga, warning that the country was on the verge of power rationing. During March, thermoelectric plants generated a record 51% of Colombia's electricity, compared to an annual average of around 25-30%.

Fortunately, by the end of April, El Niño began to wind down, and the government was able to end its savings campaign. The local power grid had weathered the crisis without implementing the extreme rationing measures that Colombia's neighbor Venezuela was forced to do over the same period.

Apart from El Niño, Colombia has, over the last year, continued to struggle with the impacts of low oil prices on its hydrocarbons-dependent economy, including the depreciation of the peso and rising inflation. In January 2016, after a drawn-out tender process, the government finally sold its controlling stake in Isagen, Colombia's third largest generator, to a private consortium led by Brookfield Asset Management for US$2.2 billion.

During 2016, the country also rolled out a US$800 million rural electrification program and tendered various transmission projects to shore up dispatch in the most vulnerable areas of the grid. In November, the government signed a revised peace deal with the FARC guerrilla group, salvaging the historic agreement - the result of four years of negotiation - after it was rejected in a national referendum earlier in the year.

This report provides an overview of the Colombian power sector and examines the main issues it faces at the start of a new year, including the promotion of alternatives electricity sources, changes to the market model, the expansion of the transmission and distribution (T&D) network, and the supply of natural gas for thermoelectric generators.

Figure: Electricity Consumption
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