The Energy Regulation and Markets Review - Stikeman Elliott

Colombia
commercialisation companies through bilateral contracts to supply the demand of
unregulated customers, however, is freely negotiated between the parties to the contract.
Energy spot market
The last modality is the transaction within the energy spot market. Under this system, the
transmission network is considered neutral, which implies that the electricity generator
sets its daily price offer and its hourly availability declaration without considering the
physical and technical restrictions of the transmission network. Electricity resources to
be dispatched at a particular time are selected based on the lowest price offers. This
mechanism is known as the optimal dispatch, and differs from the real dispatch because
in the latter the CND takes into account the restrictions that may affect the transmission
network. This price ranking system is intended to ensure that national demand is satisfied
by the lowest possible cost combination of available generating units.
The price offered by generation companies that participate in the MEM reflects
the variable costs of generation as well as opportunity costs. The price of the last resource
used to meet the total demand in each hour is the one that sets the price to be used to
pay all the infra-marginal resources in the same hour, and it is known as the spot price.
Electricity demand from commercialisation companies that is not covered by bilateral
contracts is settled at the spot price.
V
RENEWABLE ENERGY AND CONSERVATION
According to a study by the World Bank’s Energy Sector Management Assistance
Program (Annual Report 2011), Colombia has significant wind potential, which alone
could cover more than the country’s current total energy needs.
Notwithstanding the foregoing, the legal framework in this regard is still very
precarious and so the development of renewable energy is yet to start but may yet be a
great source of electricity generation. The main law related to renewable energy is Law
697 of 2001 by means of which the rational and efficient use of energy is promoted as
well as the use of alternative energy. Additionally, Decree 2755 of 2003 establishes tax
exemptions for wind generation plants. It was only in 2011, however, that the CREG
issued Resolution 092, which set out the methodology to determine the firm energy
from wind generation plants. It is important to bear in mind that this resolution is not
yet a definitive resolution and may still be subject to some modifications.
In conclusion, the renewable energy generation is still untapped in Colombia, but
with great potential due to the richness of natural resources within the country.
VI
THE YEAR IN REVIEW
In 2011, an auction took place where several projects were assigned. The goal of these
new projects is give more reliability to the system until 2016. Three of these projects are
for hydropower generation, while the remaining two are for thermal energy. Among the
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