EnablingFrameworkWindPowerColombia.pdf

Isaac Dyner, Yris Olaya and Carlos J. Franco

CeiBA Complejidad, Naional University of Colombia

An enabling framework for wind

power in Colombia: what are the

lessons from Lain America?

Introducion

Abstract

his article examines the existing environment for

power generation in Colombia and identiies policy

requirements for increasing the share of Renewable

Energy Technologies (RETs), speciically wind power.

As high capital costs are one of the main barriers to

investing in wind power, we focus on the regulatory

incentives for investment in power generation.

his article discusses the existing framework for

enabling wind power in Colombia. Although the

Colombian framework does not speciically target wind

power, it provides tax reductions for renewables. So far,

such policy has favoured conventional technologies

(including hydro), at the expense of renewable

energy technologies. Other Latin American countries

including Brazil, Mexico, Chile and Costa Rica have

achieved fast deployment of wind energy technologies

by combining feed in tarifs with other incentives such

as portfolio standards and tax reduction. he Brazilian

case is an example of how adequate incentives can

add wind energy technologies to a power system that

relies mostly on hydro sources. Based on this evidence,

we propose a policy for promoting renewables in

Colombia by using schemes that combine feed-in

tarifs and portfolio standards to make initial progress

by 2020.

Colombia’s hydroelectricity potential is among the

highest in the world (WEC, 2004). Energy policy in

Colombia has aimed at developing these resources: by

2010, hydro power’s share of total generation capacity

was 63%, and it supplied between 70% and 80% of

the demand connected to the transmission grid (XM,

2010). Although this policy has had positive results in

terms of costs and eiciency of supply (Larsen et al.,

2004), the high dependence on hydro power makes

the system vulnerable to climatic variations (UPME,

2009; Larsen et al., 2004). hermal generation,

with a 33% share of total installed capacity, balances

the l uctuations of hydropower generation. In a

dry year, when hydropower cannot operate at full

capacity, thermal power plants generate up to 50%

of total demand, whereas in average rainy conditions,

thermoelectricity dispatch might be as low as 15-20%

of the total (UPME, 2009; XM, 2010).

sector in Colombia has a relatively low carbon

footprint, and the main reason for seeking a larger

share of RETs is technology diversii cation and, as

discussed above, security of supply.

Figure 1. New generation capacity between

1997 and 2010 and expected additions to

2018 (results from auctions).

During the last i fteen years, gas-powered plants have

been the preferred option to back up power generation

during periods of peak demand and during the dry

season in Colombia. More than 1400 MW of gas-i red

generation capacity has been built since 1994, making

up 28% of installed generation capacity in 2010, and

accounting for 84% of thermal capacity (UPME,

2009). Combined-cycle gas turbines (CCGT) have

shorter lead times and lower capital costs than large

hydro plants; this, along with the incentives given to

thermal plants between 1997 and 2005, made CCGT

a commercially attractive option for increasing the

reliability of power supply in Colombia.

h e potential for RETs deployment in Colombia is

high but has not been fully estimated. Water sources

suitable for small hydro plants (less than 20 MW) are

abundant, as is solar radiation. More research is needed

to assess the wind potential of the whole country, but

the coastal region of La Guajira, where Jepírachi, the

only wind farm, is located, has proven potential for

generating commercial wind power as high as 18 GW,

according to Vergara et al. (2010). Because the capital

costs of wind power are relatively high compared to

other options, policy-makers in Colombia tend to

consider it a viable option to generate energy in of -

grid zones, rather than a technology that can contribute

to power supply in the interconnected power sector

(UPME, 2009). Nevertheless, evidence from the only

wind power project in Colombia suggests that wind

power technology can increase the reliability of power

supply in the dry seasons. In particular, wind l ow

variations in La Guajira, Colombia, balance seasonal

and hourly variations of water l ows, and ef ectively

increase the availability of energy (ESMAP, 2009).

Regulatory incentives for remunerating capacity

expansions that increase security of supply and the

reliability of the interconnected system date from 1994.

h ese incentives have been modii ed and adjusted to

the changing conditions of the Colombian market

(Larsen et al., 2004; Dyner et al., 2007). By dei nition,

this mechanism is technology-neutral, meaning that

any technology that ensures ‘i rm’ (i.e. stable) energy

supplies can receive monetary payments. As Figure

1 shows, between 1997 and 2007, the incentives

initially favoured thermal technologies for increasing

generation capacity, but ever since 2000 these have

favoured hydro technologies. Note that the only wind

farm in place did not receive capacity payments and

was built using dif erent incentives.

To summarise, hydroelectricity forms the basis of power

generation in Colombia, and because water inl ows are

variable, CCGTs provide security of supply. However,

as Figure 1 shows, incentives for i rm capacity have

favoured hydro-based power, a seasonally-dependent

technology. h e dominance of hydro power has a

direct impact on the proi tability of thermal plants,

whose high operating costs make thermal generation

economically infeasible during periods with high

availability of water. With this structure, the electricity

Experiences from around the world indicate that wind

power can be successfully added to the primary energy

mix, provided that there is an enabling framework

that lowers entry barriers, especially the high capital

costs (IEA, 2009). In 2002 Colombia created a

general framework for promoting Renewable Energy

Technologies (RETs). his framework includes

incentives for research on RETs and tax exemptions for

suppliers that use RETs and obtain carbon certiicates.

Between 2004 and 2010, the Colombian enabling

framework promoted only one wind farm with a

capacity of 19.5 MW (0.015% of total 13440 MW

capacity). his is a poor result compared to other

countries in Latin America.

he Colombian framework fails to promote wind

power mainly because the incentives it provides (tax

cuts) are not targeted at lowering entry barriers for

renewables. he high capital costs of wind power, a

market structure based on hydro technologies and

high industry concentration (four utilities account

for 82.39% of hydro capacity; UPME, 2009) create

a negative environment for investing in wind farms.

As discussed earlier, regulatory incentives (capacity and

reliability charges) have favoured expansion based on

medium to large-scale hydro plants at the expense of

other technologies, particularly renewables (Larsen et

al. 2004). Reliability charges can be allocated regardless

of technology and could in principle remunerate the

capital costs of wind energy. In their current form,

however, reliability charges do not provide a method

of forecasting the power generated by intermittent

sources other than that available for hydro sources.

he contribution of hydroelectricity to power supply

can be forecast from long historic time series which

are not available for wind, solar or other renewable

energy technologies. hus, it is not possible to make

a reliable estimate of the contribution of wind power

technologies to total energy supply during years of

extreme weather conditions. A lack of wind generation

data is common to many wind farms, but average

assessments of capacity can be used for remunerating

immature wind farms, as the New York Independent

System Operator (NYISO), the Pennsylvania-Jersey-

Maryland market (PJM) and Spain do. (Botero

et al., 2010).

he existing framework for promoting renewable

and wind power generation consists of the following

initiatives:

•

Law 697 of 2001 and Decree 3683 of 2003,

which:

1. Incorporate renewables and energy

eiciency as part of the goals to be met

by energy policy and create institutions to

support their development,

2. Propose

research

funding

for energy

eiciency, and

Include

renewable options

for non-

interconnected regions.

•

Law 788 of 2002, which establishes:

A ifteen-year tax-exemption period for power

generated from wind or biomass energy. To

beneit from this tax-exemption scheme,

generators must obtain carbon emission

certiicates, which are an additional source

of income, and 50% of this income must be

invested locally in social beneit programs.

As there are limited incentives for technological

innovation, utilities are reluctant to diversify their

technology portfolios. Barriers to renewable energy

technologies are likely to persist in the short to medium

term. Wind power costs, however, are expected to

decrease, which will provide an opportunity to develop

Colombia’s wind resources. From the 1980s to the

2000s worldwide, wind power capacity grew at annual

rates above 20% (IEA, 2004); turbine sizes increased

and capacity costs generally decreased (Wiser and

Bolinger, 2009). Capital and equipment shortages in

the 2000s put pressure on wind capacity costs, but in

the long term it is expected that the industry will move

his policy for RETs has been insuicient to trigger a

large-scale development of wind power in Colombia.

By 2010, the only wind farm in place was Jepírachi.

Despite the signiicant potential for developing

renewable energy sources, only 1.2% (105 MW)

of proposed new generation projects are non-hydro

renewable. Although other wind projects are under

consideration, the indicative plan for power generation

and transmission expansion registers only the 20MW

Jouktai wind farm, which is to be located in La Guajira

(ESMAP, 2009; UPME, 2009).

along a learning curve, thus reducing its capital costs

(Wiser and Bolinger, 2009).

3. A pilot plant to transfer and innovate wind

energy technology

he case of the Jepírachi wind farm, which this

article discusses in detail, illustrates the challenges of

Colombia’s renewables, and also shows the potential for

the deployment of wind power technologies on a larger

scale. Having examined the Colombian framework for

promoting RETs, we then look at policies in Latin

American countries, focusing on those whose power

sector structure is similar to that of Colombia’s.

Based on this analysis, we examine the potential for

the Ministry of Mines to set wind generation goals of

3% for 2015 and 6% by 2019. Finally, this proposal

is contrasted with the current proposal by Vergara et

al. (2010) to make reliability payments to intermittent

sources by calculating their contribution to the ability

of the interconnected system to meet demand during

extremely dry seasons (irmness).

EPM started this R&D program after examining

medium to long-term trends for power generation

in Colombia. he Guajira is a semi-tropical desert,

and the operating challenges of the pilot plant have

shown the need to adapt wind power technology

the Caribbean

conditions

(Pinilla

and

Trujillo, 2009).

GTZ, the World Bank and the Universidad Nacional

de Colombia advised EPM during the formulation of

the project, whose capital investment was $21 million

dollars (EPM, 2004). he plant is located in the Uribia

municipality, in the territory of the indigenous Wayúu

community. his is an arid area, with long summers,

frequent droughts and no surface water. Water comes

from wells and desalination plants. As a part of its social

and environmental plant, EPM built a desalination

plant that provides the Wayúu community with

clean water. Carbon credits are 10% of the Jepírachi’s

revenues, the rest coming from energy sales.

Assessment and development of wind

resources in Colombia

As of 2010, the only wind farm operating in

Colombia is located in La Guajira province, a region

in the north-east of the country. his onshore wind

farm has ifteen units of 1.3 MW each for a total

nominal power of 19.5 MW. his farm, the irst

one built in Colombia, was commissioned in 2004

and it is connected to the national grid by a 110

kV transmission line. Minimum wind speed for the

windmills is 4 m/s and the average wind speed is

9.25 m/s (EPM, 2008; Pinilla and Trujillo, 2009).

his wind regime is rated among the best in South

America, comparable only to the Patagonia region

(ESMAP, 2010). he farm was built by Empresas

Públicas de Medellín (EPM), a public utility, the

second largest power generator of the country and

the only vertically integrated utility. Jepírachi is part

of EPM’s R&D program on wind energy, whose

purpose is to learn about the operation of wind farms

in Colombia, and which includes:

1. Evaluation of wind regimes

2. Study of tax incentives and the enabling

framework for RETs, and

he output and performance data for the Jepírachi

plant conirm that year-round winds in the Guajira

region conirm the high potential for energy generation

(see Figure 2). However, as winds speeds do vary, the

performance of wind power is evaluated in terms of

its capacity factor and availability. Capacity, or plant

factors, are a measure of the productivity of a power

plant, calculated as the amount of energy that the

plant produces over a given time period divided by the

amount of energy that would have been produced if

the plant had been running at full capacity during the

same time period (DOE, 2008). Availability is deined

as the number of hours of energy production divided

by the number of hours that wind speed is between

the operating limits of the turbine (Pinilla and Trujillo

2009). Pinilla and Trujillo (2009) report that capacity

factors for turbines in Jepírachi are similar to those for

other turbines, averaging 38% with 96% availability,

whereas production is higher than typical values in the

literature (1750kWh/m2-year per turbine).

Figure 2. Complementarities between water regimes in the northwest of Colombia and wind

regimes in La Guajira, Colombia.

Water flow (m3/s )

Wind speed (m/s)

Source: COLCIENCIAS-EPM-Universidad Nacional de Colombia, 2003.

As Figure 2 shows, wind peaks in La Guajira coincide

with low water lows in the northwest of Colombia.

To a large extent, wind resources complement water

resources and the complementarities between water

low and wind speed are higher during the irst months

of the year, when water is scarce. Figure 2 shows how

energy produced in Jepírachi is higher during the

irst six months of the year, and it is lower during the

second semester.

In addition to the complementarities between water

and wind regimes, daily variability of wind can also

improve the performance of the interconnected

system because wind power could displace some water

resources in the low-demand hours (Vergara et al.,

2010).

Being the irst operational wind farm in Colombia,

Jepírachi has provided valuable data and knowledge

Figure 3. Average power generation at Jepírachi. Adapted from Vergara et al., 2010

7000

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Average power generation at Jepírachi

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