AND NOW, the weather

Nature has ways of telling us that it is high time to rethink current practices.

Translating into “little boy,” the El Niño meteorological phenomenon sounds benign. Yet, its consequences for Colombia’s energy security can be as devastating as the forest fires that have blighted regions such as Vichada, Santander, Cauca, Boyacá, and Cundinamarca. In short, the phenomenon involves a warming of the ocean surface, with above-average sea surface temperatures, and is felt in the central and eastern tropical Pacific Ocean. On average, the effects of El Niño can be felt for around a year. History tells Colombians, however, that such events have lasted up to four long years, as in the 1991 to 1995 period.

Basically put, warmer weather and severely lower rainfall conspire to lower water levels in reservoirs in a country 80% dependent on hydroelectricity generation. The consequences for agriculture can be grim. El Niño not only leads to a loss of livestock but impacts crop quality, if not the ability to raise key cash crops such as coffee during the critical flowering stage of the season. Meanwhile, lower vegetative growth renders crops more susceptible to pests and disease. Hotter weather precipitates a spike in electricity consumption for cooling during depleted water availability. Official numbers indicate reservoir water levels in January 2024 were already down 10%. Drought has already been reported across the regions. This has prompted Colombia’s march toward alternative electricity generation, such as thermoelectric plants, as explored elsewhere in the book.

Lower energy supply is the road to higher energy prices for industry and retail consumers alike. But there is a greater fear that the government has sought to address. The Association of Electric Power Generators (ACOLGEN), representing roughly 85% of Colombia’s energy generators, has warned against energy complacency. It identifies 2027 as the “year of the break,” meaning the return of what Colombians fear most: an electricity blackout. In 2007, such a blackout and its unpredictability paralyzed the nation, disrupting daily life, communication, and, by extension, commerce and capital market operations. ACOLGEN claimed the country has sufficient energy capacity for now but urged the government to action suspended energy schemes, labeling the risk of a blackout as “latent.” It drew attention to the fact that, at the same time, reservoirs are at 60% of their capacity. In fact, sector data as of January 2024 revealed that reservoirs had a useful capacity of just 60.61%. Water levels are exacerbated by lower river flows—at 45% of historic volumes—to the reservoir network for the month of January. And while the National Interconnected System (SIN) heavily relies on its thermal park, recent data reveals that just one of the 23 reservoirs feeding hydroelectric plants, El Peñol de Guatapé, has a regulation capacity of over a year. At the same time, the figure for the remainder languishes at four months.

Colombians worry that fluctuations in electricity prices inevitably reflect in their bills. ACOLGEN responds that this is not always the case, as 85% of regional electricity distributors purchase energy through advance deals. In December 2023, power and gas regulator CREG issued a draft resolution proposing to curb electricity price increases during the El Niño season. Transitional measures are to be valid until April 30 and potentially beyond. The draft established an adjusted wholesale electricity price cap of USD0.13 per kilowatt hour during that period. Two months earlier, with El Niño predicted to impact Colombia until June 2024, President Gustavo Petro had revealed changes to the wholesale electricity price formula for 2023-24 to counter speculative behavior by market players to mitigate the El Niño effect.

With sparse rain in store for the early part of the year, it is an all-hands-to-the-pump scenario involving the state and private sector. As the latest El Niño season was being felt, TBY spoke with Luis Miguel Fernández, the President of TPL Holdings, regarding initiatives to lessen the phenomenon’s hold on the country. The holding’s electricity business is Colombia’s single largest gas consumer and has “also participated in the development of the LNG importation facility in Colombia.” Fernández drew attention to the recent expansion of its Termocandelaria plant in Cartagena, with an investment of USD258 million, having commenced commercial operations of the plant’s combined cycle project. The plant is a valuable contributor to the SIN matrix. “We expanded the capacity from 314MW to 566MW with an important enhancement in energy efficiency from 35% to 55%.” The result? “With the same gas we used to produce 340MW, we now produce 566MW.”

Encouragingly, Fernández adds, “our combined operations today of the thermal power plant in Soledad (TEBSA) plus Termocandelaria delivers close to 14% of the total energy consumption for Colombia.” Moreover, the firm will continue “diversifying our installed capacity through renewable projects currently in the pipeline.” The El Niño effect, then, is not something to be prevented but planned for to sustain Colombia’s energy security. After all, as the economy pursues growth, so too does the demand for sustainable power.