How Colombia's US$250bn development plan will impact the energy sector

Colombia's congress on Tuesday began poring over the government's 2023-26 national development plan, a document that will form the blueprint for President Gustavo Petro's four-year presidency. 

The plan involves investments of 1.15tn pesos (US$247bn) and aims to drastically reduce poverty, accelerate a shift to clean energy and assign almost 3Mha of land to poor families for agricultural production.

Proposals include the separation of the police force from the defense ministry, wider access to free higher education, the introduction of in-kind transfers for social programs and new incentives for investments in carbon neutral energy sources. 

One of the most controversial points is a plan to grant Petro extraordinary powers to sign decrees and new regulations governing publicly owned electric power utilities and activities related to coca farming. 

Funding for the plan will come from tax revenue and fossil fuel royalties, according to officials. 

The 166-page document needs the approval of congress before it can be signed into law and it could face resistance from some factions.  

Despite having forged a coalition that allowed for the passage of a tax reform bill last year, Petro has encountered stern opposition to his proposed pension and health reforms.

Key energy sector takeaways

Subsidies

The government is seeking to overhaul an electricity subsidy system that has traditionally allocated funds to low-income neighborhoods. The plan will instead allocate funds on a per-household basis, irrespective of where they are located, with the energy ministry focusing on income rather than location to measure vulnerability.

"This reassignment will be subject to the use of digital technologies for intelligent measurement of electrical energy consumption and the implementation of subsidy targeting methodologies that, by improving current inclusion errors, make it possible to have the resources required to cover the cost of this measure," according to the proposal.

Public service provisions

Power and gas regulator Creg will define new parameters for the provision of electricity services to users in areas that are not connected to the national interconnected system (SIN).

The government said the move will prioritize broader coverage, set lower costs for users and offer more flexible billing systems, among other changes. 

Renewable energy transfers

The proposal includes a requirement that generators of power plants with capacity exceeding 10MW must transfer the equivalent of 6% of gross sales to a public program that will provide resources for ethnic communities and territorial entities. 

Coal, firewood phase out

The energy ministry will step up efforts to replace firewood, coal and waste with clean energy for household use. 

Measures include the connection of users to public gas distribution networks and the provision of access to fuels such as biogas or “other energy transition sources.”

National registry

The plan also proposes the creation of a national registry for the reduction of greenhouse gas emissions, paving the way for stimulus packages for private firms investing in carbon-neutral projects instead of fossil fuels. 

The plan can be seen here, and related information here and here.