Colombia to improve sustainable energy system with IDB support

Colombia will enhance its energy sector’s sustainability and efficiency with a $300 million loan approved by the Inter-American Development Bank (IDB). The project will support the implementation of a series of policy reforms aimed at ensuring an efficient electricity supply by the Interconnected National System and by increasing access to electricity in Colombia’s Non-Connected Areas, reducing the vulnerability of the power sector to climate change effects.

“Contributing to provide greater security and efficiency to the electricity supply does not just mean cleaner energy sources—it will also result in lower power rates and thus have a positive impact on consumers and also produce fiscal savings by way of lower subsidies to low-income users,” said José Ramón Gómez, IDB Project Team Leader. “In turn, lower energy prices will raise competitiveness due to a lower country cost, benefiting trade and industry and the entire population at large.”

Colombia’s energy sector has two critical weaknesses—first, the risk of being unable to guarantee a safe supply of efficient energy in a system stress situation such as that produced by climate change events like El Niño; and second, low coverage of remote communities with no connection to the national grid.

More than 470,000 rural Colombian families are estimated to lack access to reliable electricity. These families typically live in rural communities that are too distant from the Interconnected National System, making it financially unfeasible to expand the network service area.

The program is expected to ensure a reliable electricity supply by diversifying the energy matrix with nonconventional renewable sources and by establishing more power-sharing arrangements with other nations. It will also foster the implementation of reforms and policies aimed at strengthening the electricity market, including moves that can help guarantee the supply of natural gas for electricity generation, promote an efficient management of electricity demand, and improve the operation of the Ministry of Mines and Energy.

The $300 million IDB loan is for an 8-year term, with an 8-year grace period and an interest rate based on LIBOR. The program’s executing agency will be Colombia’s Ministry of Finance and Public Credit, in technical coordination with the National Planning Department and the Ministry of Mines and Energy.

Original source: IDB
Published on 30 November 2017