Colombia has emerged as a leader in clean energy transition policy making and is an inspiring example of a fossil fuel producing country committed to climate action, based on a long-term decarbonisation pathway and a policy of energy and economic diversification and a just transition.
In the context of the National Energy Plan 2020-2050, launched in 2016, Colombia started a journey to diversify its energy resources and ensure a reliable energy supply by promoting wind, solar and geothermal in the country’s electricity mix.
At COP26, Colombia presented a net zero target and an ambitious Nationally Determined Contribution (NDC), aiming at a 51% reduction in greenhouse gas (GHG) emissions by2030. These ambitions are reflected in the long-term strategy, the E2050 Strategy, the Energy Transition Law and the Climate Action Law. To implement its targets, Colombia uses a robust system of climate change management plans across government with targets assigned to each sector, including for energy (PIGCCme). The Energy Transition Law expanded policy actions and tax benefits to energy efficiency and low-carbon energy technologies, including geothermal, carbon capture and storage (CCS), and hydrogen. Colombia’s national oil company, Ecopetrol (Empresa Colombiana de Petroleos), is supporting the shift to low-carbon energy with investment plans for clean energy technology.
In 2023, Colombia’s energy transition policy is at another crucial turning point, as the government targets the gradual shift to net zero, shifting away from an extractive industry model heavily dependent on oil and coal exports towards a more diversified clean energy economy based on investments in renewable energy sources, critical minerals and hydrogen.
Colombia enjoys a strong natural resource base. Renewables accounted for more than a third of total final energy consumption in 2020, thanks to the significant role of conventional hydropower and bioenergy. In 2021, renewable energy accounted for 25% of Colombia’s total energy supply and for 29% of final consumption, substantially above the IEA average of 14% and made up 75% of electricity generation (compared to the IEA average of 30%).
The government continues to expand non-conventional renewable energy, largely through long-term auctions for large-scale solar and wind developments. Extensive renewables potential in the La Guajira region should help advance rural electrification and close the energy access gap. Concentrated in the northern regions, which has a 50gigawatt (GW) offshore wind potential, renewables can also provide the clean energy needed to
jump-start Colombia’s hydrogen production. Colombia’s geothermal development also enjoys substantial potential along the Pacific ring of fire.
In 2023, work is under way on updating the National Energy Plan (PEN) towards 2050, in line with Colombia’s new National Development Plan 2022-2026 (PND) and energy and climate goals towards decarbonisation. The new PEN is an opportunity to build greater coherence of policy planning and set clear energy efficiency and clean energy technology targets for 2030. Based on the different long-term energy scenarios for the energy sector, the PEN should confirm the possible targets and investment needed for the technology shift towards a more digital, decentralised and decarbonised energy sector as an enabler of broader sustainable development. The PEN should also identify the needed investments in energy research, development and innovation in Colombia.
Greater competition in energy markets is important to attract needed investments. Ecopetrol continues to account for two-thirds of the activity in the oil and gas sector. Colombian energy market design and policy have followed a fundamentally market-driven approach since the mid-1990s, when the power sector was unbundled and opened to private investment. However, market power persists in the electricity sector due to the integration of generation and retail. Power system planning, new grids and regulation will be required to accompany the shift from today’s hydro-dominated power market to a more flexible and diverse market design. An initial auction for battery storage was successful to optimise the use of the transmission grid.
Colombia has a largely decarbonised power sector thanks to the significant role of hydropower and bioenergy. Electricity demand is expected to increase as a result of economic growth and the electrification of end-use sectors, an opportunity to decarbonise the transport sector over time. A stronger focus on energy efficiency is needed to reduce emissions and support affordable clean energy. A diversified mix of generation technologies will emerge and opportunities for efficiency need to be harvested.
Clarity is also needed on the targets and policies for different new clean energy technologies, for example the deployment of CCS and geothermal, in line with long-term plans. Technology roadmaps for these areas would provide clarity for policy actions. Clarifying responsibilities and consistently applying them in planning documents, especially in energy efficiency, where responsibilities are widely dispersed would improve implementation.
Colombia’s high degree of income inequality influences energy policy making. Despite recent progress, in 2021, 3% of the population did not have access to electricity. Colombia still has 1 million families, or 6% of households, relying on firewood for cooking, lacking access to modern cooking fuels. Around 45% of the country’s population lives under the poverty line. This is most evident for La Guajira, where indigenous groups make up 42% of the total population. Over time, the government has developed energy pricing and subsidy mechanisms covering gasoline and diesel, electricity, natural gas, and liquefied petroleum gas (LPG). These arrangements need to be structured to avoid discouraging energy efficiency while boosting the uptake of clean energy and targeting the needs of vulnerable groups.
When preparing the PND in 2022, the government placed a strong focus on engaging the entire society in the country’s energy transition to generate consensus. This is critical to translate policy goals into support for infrastructure projects on the ground, ensure social justice and support vulnerable communities. The IEA supports Colombia’s agenda for a just energy transition. Experience from the IEA’s Global Commission on People-Centred Transitions provides useful learnings for the government of Colombia, helping to boost local economic benefits and the transition to clean energy and new job opportunities.
These include suggestions on job development and skills shifts, notably for employment in fossil sectors, and the range of new jobs in such future industries as renewables, hydrogen and critical minerals.
Colombia’s transition will involve ramping up investments in clean energy while compensating for declining oil/gas/coal export revenues. The oil sector has contributed an annual average of close to 2% of gross domestic product (GDP) and 13% of the total income of the national government in the last ten years, from tax revenues, dividends and royalties. The government’s reliance on this income will have to be taken into account in elaborating transition pathways for the hydrocarbon sector. Drawing on the experience of clean energy transition leaders such as Norway, it will be critical to communicate the role of oil rents to be used to support investments in the clean energy transition. The government aims to create a fund from fossil fuel sector royalties and taxes to finance clean energy initiatives. Colombia has extensive reserves of copper, nickel and cobalt, all critical to the global energy transition. Colombia can build on its well-established mining sector to diversify into new minerals. To reap this potential, mining activities must adhere to high environmental, social and governance standards and generate tangible benefits for affected local communities.
Security of supply should be a priority for the government during the transition. Continued attention is needed to ensure the resilience of the country’s electricity and natural gas/oil supplies, including during periods of seasonal droughts and in isolated areas. Colombia’s hydropower has low runoff storage capacity but good flexibility for balancing higher shares of variable renewables. There is high interannual variability from extreme weather events (droughts or rainfall). Availability needs to be ensured with sufficient dispatchable capacity.
