Energy plays a crucial role in a country’s social and economic development. As a country gains wealth, its economy requires more energy. Energy is needed for the industrial sector, fuel for vehicles, temperature regulation of buildings and homes and the increasing demand for power for electronic equipment and appliances.
Colombia is no exception. Its energy needs have increased over time. Between 1975 and 2012 energy consumption doubled while the GDP quadrupled. Efficiency has improved so that less energy is needed to produce one unit of GDP. This can be explained in part because the country moved from inefficient energy sources like wood and coal to more efficient sources hydropower to meet its energy needs. Furthermore, vehicle motors, including cargo vehicles, have become more and more efficient.
Changing energy sources
Currently around 60% of energy comes from natural gas, diesel and electrical energy. This represents a drastic change considering that only 20% came of the country’s energy came from these sources at the end of the 1970s. It is also reflection of the success of vehicles and their demand for diesel, as well as the country’s efforts to build hydroelectric plants and increase the availability of natural gas for industry, residences and transportation.
The use of these energy sources is on the rise – so much so that most of the economy now relies on their availability. In order for the economy to continue to grow, the availability of these energy sources must be guaranteed for the near future.
Fuel imports will increase
In terms of diesel, the opening of Reficar, together with the country’s oil surplus will result in lower diesel and gasoline imports, increasing the energy security of these resources. However, in the medium-term, Colombia is not expected to be self-sufficient in this fuel and will be forced to import more from abroad to meet its growing demand. This will not be a difficult transition as a great deal of the country’s infrastructure being used for oil exports and internal fuel transportation could be used to distribute these imports.
Regarding the demand for electrical energy, short and medium term needs are covered through several projects that will start generating energy over the next few years. In addition to the Colombia’s installed capacity of 15,000 megawatts (MW), the recently opened El Quimbo will add another 400 MW, Termotasajero II will add 150 MW , Gecelca 160 MW and Cucuana 68 MV. The biggest project is the hydroelectric plant Ituango, which will provide 2,400 MW (half of which will come in 2018 when the first stage of operations begin). This construction will increase existing capacity by 30% and part of the electricity can even be exported.
The country should be content with its electricity generating capacity. Recent events were an unfortunate coincidence of three unlikely events (which occurred simultaneously!): An extremely intense El Niño, and two accidents at the Guatapé dam and Termoflores thermal power plant.
Natural gas: Colombia’s main challenge
Colombia’s main energy challenge is natural gas. Production has been declining since 2012 and the country is expected to lose self-sufficiency in 2017. Given the time needed to find and develop new resources, the government should speed up infrastructure construction in ports that allow liquefied gas imports, as well as the transportation routes to take this resource from the ports to gasification plants, and from the plants to distribution points throughout the country.
The government is ahead of the game for the first two tasks, granting a license to Promigas to carry out these functions. However, regulation is still needed to allow this natural gas to be distributed beyond the thermal plants in the Colombian Caribbean as planned to other places or sectors that need this fuel. The government could also improve the reliability of the transportation of this resource in such a way that the country has an integrated system that allows regions with a surplus (the foothills) to supply areas with a deficit (Colombian Caribbean)
Fabián García is a Senior Economist at BBVA Research Colombia