The new auction for long-term electricity contracts in Colombia received expressions of interest from 43 companies. However, behind that number lies a scenario that worries the market: while demand accounts for a large portion of the participants, the pool of developers with the capacity to supply energy remains small, and new regulatory requirements could further limit competition among sellers.
The list published by the Colombian Mercantile Exchange includes marketers, distributors, generators, and developers interested in competing in one of the four energy supply products and in the exclusive scheme for battery energy storage systems (BESS). However, the distribution of participants makes it clear that the competition will not be uniform.
While the list includes 43 interested parties, specialists consulted by Energía Estratégica agree that the largest number of participants are on the buyer side. This is partly due to the fact that the Ministry of Mines and Energy has been requiring energy retailers to demonstrate compliance with long-term energy procurement obligations, equivalent to between 8% and 10% of their regulated demand .
According to Juanita Hernández Vidal, Managing Partner of Estudio Legal Hernández , several agents chose to register for the auction to leave evidence of their participation and avoid potential investigations by the Superintendency of Public Services, even if they ultimately do not win the bid.
The big players are looking to secure the contracts
The interested parties include some of the main players in the Colombian electricity market, such as Terpel Energía, Enel Colombia, Empresas Públicas de Medellín (EPM), Celsia, GECELCA, Air-e, AES Colombia and Urrá , along with developers specializing in renewable energy and storage, including Solar El Edén, ERCO Generación, Bosques Solares de los Llanos 8, Nuevas Energías II, Proyecto Solar Cimitarra, Proyecto Solar Corozo, Proyecto Solar Matimba II, OTACC Generación, Caribean Energy Green 1, SPK La Unión, SPK La Mata, Parque Solar Fotovoltaico Wimke and Sociedad de Gestión Grupo TW Solar Colombia .
The diversity of participants reflects the sector's interest in long-term contracts. However, experts warn that a large portion of these agents are buyers, while the number of companies that will actually compete as energy suppliers will be considerably smaller.
Stricter guarantees and more mature projects
"The guarantees aspect was significantly strengthened," Hernández Vidal stated in an interview with Energía Estratégica. He explained that developers will need to provide bank guarantees of good standing from the early stages of the process, in addition to covering the cost of bidding documents and meeting financial requirements that increase the cost of entering the auction.
The specialist believes that these conditions could reduce the number of effective participants on the selling side, even if the initial interest is high.
Added to this is a requirement that substantially modifies the profile of eligible projects, since in this auction the connection point ceases to be a subsequent or purely declarative matter and becomes a condition for the qualification of the participant, explained Adriana García, a lawyer with more than 25 years of experience in the energy and natural gas sector and an external consultant for companies in Colombia.
As he explained, only one of the products allows submission without having an awarded connection , specifically the one corresponding to the supply from 2035 onwards. In the rest of the cases, the projects must arrive with a considerably higher degree of development than required in previous calls.
Not all the changes introduced in this call for proposals were met with concern. Hernández Vidal also highlighted a modification that, in his opinion, strengthens the bankability of the projects.
The expert points out that the government corrected the indexation mechanism for long-term contracts, an aspect that had affected the bankability of projects awarded in previous calls for bids. Given that these contracts will begin supplying energy from 2030 onwards, having an indexation mechanism that reflects cost evolution is crucial for facilitating access to financing for new investments.
What products are included in the new auction and where is the interest concentrated?
It's worth noting that the auction includes four energy supply products, in addition to a specific scheme for battery energy storage systems (BESS). Product 1 corresponds to a 24-hour flat supply; Product 2 is intended for solar projects with daytime delivery; Product 3 combines renewable generation with battery storage; and Product 4 is geared towards supplying energy during peak demand hours (6:00 PM to 10:00 PM) through projects incorporating battery energy storage systems.
Another new feature of the auction design is that it will allow the participation of projects already in commercial operation. This measure aims to primarily incentivize Product 4, which focuses on supplying energy during peak demand hours, by encouraging existing solar plants to incorporate battery storage systems to shift some of their generation to nighttime hours.
According to the information shared by the interviewees, only two vendors expressed interest in participating in Product 1 , while only one agent registered for the product whose supply start is planned for 2035 .
In contrast, 17 companies aspire to compete in Product 3 , another six in Product 4 , and eight developers seek to participate in the product intended exclusively for batteries for nighttime supply , one of the segments that generates the greatest expectation due to the boost that the Government intends to give to energy storage.
The experts also point out that the regulations on energy storage were released almost simultaneously with the auction process. "The resolution came out last week, after the expression of interest had already closed," explained García, referring to CREG Resolution 113, which establishes the conditions for integrating battery storage systems (BSS) into renewable energy plants.
"Many developers had to express interest without knowing how the regulations for hybridizing projects would ultimately turn out, nor the terms of the contract," Hernández added, noting that this situation introduced an additional degree of uncertainty for those seeking to compete in storage-related products.
Lessons from past auctions define the new rules of the game
The tightening of requirements is partly a response to the results obtained in previous long-term energy supply auctions. According to experts consulted by Energía Estratégica , the government's objective is to ensure that awarded projects have a greater probability of being built and becoming operational within the agreed timeframes.
In that regard, they point out that only 23% of the projects awarded in the long-term auctions held so far have become operational , while the rest continue to face delays associated with environmental permits, land management, social conflict or difficulties in obtaining the connection point to the National Interconnected System.
However, experts warn that simultaneously tightening technical and financial requirements could also reduce the pool of competitors .
"I feel that it was not the right time to strengthen entry conditions," said Juanita Hernández Vidal, considering that the market still faces challenges in developing new renewable projects and that raising entry barriers could result in less competition on the supply side.
Added to this is the timeline of the process, another aspect that generates concern among developers.
"This is a very fast auction... the schedule has been extremely tight," said Adriana García, who believes that the established timeframes force participants to structure guarantees, documentation and bids in a short period.
According to the schedule defined by the Colombian Mercantile Exchange and the Ministry of Mines and Energy, the stages of enabling and training the technological platform, publishing the final lists, presenting economic offers and awarding the contracts will take place during the month of July, with the objective that the process will be resolved by July 23 and 24, before the change of Government scheduled for August 7, the day that Abelardo de la Espriella will take command of the country.
