Electrical Power Systems
A Top Export Prospect for Colombia

The above statistics are unofficial estimates
Sources: Association of Power Generation Companies, National Planning Department, Energy and Gas Regulatory Commission, Mining and Energy Planning Unit and World Trade Atlas

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Overview

The Electrical Power Systems market continues to represent an excellent opportunity for U.S. exporters, as Colombia imported USD 954 million in 2010 (up from USD 815 million in 2009), with a U.S. market share of 33.4 percent. Other competitors include: China (14 percent), Germany (10.3 percent), Mexico (7.9 percent), Brazil (7.5 percent), among others.

CS Bogota anticipates continued growth, given Colombia’s expanding economy which will drive the demand for more electricity across all industrial sectors. The projected economy GDP growth is estimated in 5.5 percent for 2011, and between 4.5 and 5.1 percent for 2012.

It is important to highlight the significant growth of Chinese imports during the last five years. Chinese companies’ main competitive advantage is lower cost compared to similar equipment from established vendors. However, the lower quality, high shipment costs and reliability of Chinese equipment are considerable disadvantages. U.S. equipment suppliers benefit from long-standing compliance with industry standards, reliability, lower shipment costs, innovation, and a favorable exchange rate.

At the end of 2010, Colombia’s installed electric power generation capacity reached 13,289 MW, of which 64.1 percent were hydro power plants while thermal and co-generation facilities produced the remaining 35.9 percent (gas, coal-fired power plants, wind power, and cogeneration facilities).

During 2010, electricity generation in Colombia reached 56,148 Giga Watt-hour, 2.7 percent more than in 2009, with more than 66.9 percent from hydro power plants due to increased rainfall levels caused plants to switch over to thermal sources.

The Energy and Gas Regulatory Commission (CREG) enacted a “Reliability Charge” that recognizes the availability of generation assets to insure “firm generation capacity - OEF” under critical conditions. This offers a major incentive to develop new power projects in Colombia, as seen during the various power auctions under this new market-oriented mechanism generated new power plant commitments, mostly hydro-based plants, increasing the share of hydro-based generation to 72 percent with the incorporation of Porce III and IV, El Quimbo, HidroSogamoso and Pescadero-Ituango, totaling more than 4,000 MW.

Several large Colombian power companies, including Interconexion Electrica (ISA), Empresas Publicas de Medellin (EPM), ISAGEN S.A., and Empresa de Energia de Bogota (EEB) are evaluating expansion projects to other Andean Countries (Bolivia, Ecuador, and Peru) and Central American countries. The proposed power interconnection with Panama could lead to new power projects in Central America.

The Colombian Government is also promoting the use of renewable energy sources, especially for off-grid and isolated areas. Also under development is a regulatory framework to expand the use of energy efficient systems and create awareness for the rational use of energy, including building more cogeneration facilities. Efforts are underway to promote private ventures in the areas of solar, wind, geothermal, and small-hydro systems. If successful, these projects allow for the use of energy in sustainable community projects. EPM owns the country’s only wind power plant (Jepirachi) located in La Guajira. This is a 19.5 MW facility, with financial support from the World Bank’s Prototype Carbon Fund’s greenhouse gas reduction credits. Other electric utilities are interested in pursuing renewable energy projects (mainly wind). Another non-traditional project is the Amoya run-of-river hydro project that is expected to produce some 80 MW of electricity and additional environmental benefits aimed at protecting the peak areas in the surrounding mountains.

On November 5, 2010, the government issued Decree 4114 that reduced import duties for a range of products, including those for the electric power generation sector, to an average of five percent. In addition, if the US-Colombia Trade Promotion Agreement is approved, U.S. equipment exporters will be more competitive as 65 percent of products will receive immediate duty-free treatment with the remaining tariffs phased out over ten years. In addition, the ban on remanufactured products will be lifted.

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Sub-Sector Best Prospects

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Opportunities

The outlook for the Colombian electricity sector is promising since the government is planning to develop several new power generation projects, mostly hydro, to accommodate the expanded demand through 2018. Additionally, the government is exploring prospects to become a major exporter of electricity (including goods and services) to the Andean region and Central America.

Some solid business prospects exist as a result of the market trend to continue using hydroelectric plants with gas-fueled thermal energy generators, including cogeneration systems. Also, electricity trading and distribution companies are focusing on reducing losses by acquiring leading-edge management and control systems technologies.

Another promising business opportunity is the Rural Energy Program aimed at providing electrical power to off-grid areas using renewable energy systems such as solar, wind, and small and medium scale hydro plants. This program calls for new generation systems and improving existing systems. The government has taken steps to secure funding for the program. This sector will continue to consolidate.

To assist with these government efforts, the U.S. Trade and Development Agency has awarded feasibility study grants for a 50 MW geothermal power plant (ISAGEN), for a 20 MW landfill waste-to-energy facility, and for a proposed solar-wind power project.

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Resources

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