Auction Design Support to Colombia

  • Featured Story

    Renewable Energy Auctions: Colombia’s Journey

    Colombia joins its Latin American neighbors in utilizing renewable energy auctions to competitively procure electricity at record-low prices. Read the story

USAID is helping Colombia develop policy, regulatory, and business environments to procure renewable energy through auctions. The auction represents an opportunity to bring low-cost renewable energy to Colombia, while promoting investment in its energy sector.

Creating a Resilient and Secure Energy Supply

Historically, Colombia has relied on its rivers for cheap and plentiful power. Large-scale hydroelectric plants provided the majority of Colombia’s electricity needs. In fact, hydropower currently supplies nearly 70 percent of the country’s electricity, but has become increasingly vulnerable to weather variability, specifically the hot, dry conditions associated with El Niño. Colombia’s over-reliance on hydropower is now a critical energy security issue.

Fortunately, Colombia is rich in renewable energy resources and has some of the greatest wind and solar potential in Latin America. The Government of Colombia recognizes that a diversified energy market, including the addition of large-scale variable renewable energy (VRE), is key to establishing a reliable and resilient energy supply.

Improving Financial Viability through Private Investment

Globally, the most significant barrier to developing variable renewable energy is attracting private investment. Fortunately, reverse auctions provide a solution by offering stable, long-term contracts to generators who in turn compete to deliver the lowest price to the buyers (electricity retailers and distributors). The Government of Colombia will only award contracts to the lowest priced projects. Other countries in Latin America, including Mexico, Brazil, Chile, and Argentina have implemented successful energy auctions with low bid prices. Colombia noted these regional successes and began to establish a framework in 2018 to hold reverse energy auctions on an aggressive timeline.

Implementing Reverse Energy Auctions

Drawing on USAID’s international experience in developing competitive markets for renewable energy in Mexico and elsewhere, USAID, through the Scaling Up Renewable Energy (SURE) project, is supporting Colombia in the technical design of a two-sided, reverse auction for renewable energy development.

  • USAID assisted in preparing the draft and final policy documents and corresponding regulations.
  • USAID convened seven workshops focused on educating the prospective buyers of the electricity, with participation from more than 40 Colombian utilities and government partners.
  • USAID coordinated with Bloomberg New Energy Finance to hold events in Bogota and New York City focused on attracting U.S. private sector developers to bid in the auction. In total, 150 companies participated in the events, expressing keen interest in Colombia’s auction.

Colombia’s Ministry of Mines and Energy (MME) held the country’s first variable renewable energy auction on February 26, 2019. However, due to antitrust requirements set to ensure sufficient competition, the auction resulted in no awards. After the February auction, USAID interviewed 12 auction participants (6 buyers, 6 sellers) and completed an assessment to suggest recommended changes for future auctions. MME revised the auction rules and is preparing a second auction with awards to be announced in late October 2019. USAID continues to offer targeted technical assistance during the auction process to attract investment, transition toward a more diversified electricity sector, and drive down costs for consumers.

Resources

  • UPME

    Long-Term Energy Auction No. 02-2019

    Colombia’s National Mining and Energy Planning Unit (UPME) provides information regarding its second energy auction on its website (in Spanish, with English translation by Google). Visit UPME’s auction website

  • Guidance

    Energy Auction No. 02-2019 Bidding Rules

    USAID, under its technical assistance to Colombia, is providing this unofficial English translation of the auction’s bidding rules as a general reference. Read the rules

  • Guidance

    Long-Term Energy Supply Agreement PPA (v. 2.0)

    USAID, under its technical assistance to Colombia, is providing this unofficial English translation of Colombia’s Long Term Power Purchase Agreement as a general reference. Read the agreement

  • Fact Sheet

    Snapshot of Colombia’s First Long-Term Energy Auction

    Colombia held its first variable renewable energy auction on February 26, 2019, resulting in no awards. Colombia will hold another auction in 2019 after revising the auction rules. Read the fact sheet

  • Guidance

    Energy Auction No. 01-2019 Bidding Rules

    USAID, under its technical assistance to Colombia, provided this unofficial English translation of the first auction’s bidding rules as a general reference. Read the rules

Emerging markets are leapfrogging the developed world in the pursuit of renewable energy, expanding energy access to millions of people around the globe. Along the way, they are reinventing the national electric grid and developing the policies and institutional, regulatory and technical solutions needed to provide sustainable, reliable electricity for future generations.

USAID advances these efforts through the Scaling Up Renewable Energy (SURE) project, assisting partner countries in accessing the technical assistance needed to rapidly and effectively implement five critical interventions for scaling up renewable energy rapidly and effectively — strategic energy planning, grid integration, competitive procurement, renewable energy zones and smart incentives.

Last updated: February 03, 2020

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