Legal stability and clear rules of the game is the request that is repeated over and over again among the electric power companies that have a presence in Colombia and that are making large investments to expand their operations and contribute to the energy transition.
But no matter how repetitive this message is, little has been taken into account and in the last five months, with the tax reform and the National Development Plan (PND), most of the benefits that the solar projects and wind.
(Also read: ‘The energy transition is in intensive care,’ companies tell Petro)
“We are receiving contradictory signals because while other countries in the world are putting together a whole tax scheme with more benefits for investment in these technologies, in the tax reform they took away almost 75 percent of the benefits and in the PND the electrical transfers were increased”, assures the president of the Colombian Association of Electric Power Generators (Acolgen), Natalia Gutierrez.
In the tax reform they took away almost 75 percent of the benefits
Likewise, it states that power generators are very concerned about these changes, many of the projects that are intended to be developed in La Guajira and that they acquired commitments in the 2019 auctions had completely different rules of the game.
And it is that while in the tax reform the minimum tax rate for non-conventional renewable energy companies will be increased to 15 percent –when before it was close to 0 percent– in the PND of the Gustavo Petro government, Article 233 was found, which increases the electrical transfers that solar and wind farms must pay.
They will go from the current 1 percent to 6 percent for new projects, but this increase will be gradual. In two years, the transfers that companies must pay for gross energy sales will rise to 3 percent and then, each year that passes, it will stand out by one percentage point until reaching 6 percent in 2028.
Mauricio Duenas Castañeda. EFE
Alexandra Hernández, executive director of Ser Colombia.
This can only be used for projects that are located in areas with the highest average annual solar radiation and highest average wind speed, that is, mainly in the Northern departments of the country such as La Guajira and El Cesar.
This will also be used for projects already operating in the country, but the final fee will be 4 percent. A gradual increase will also be used and starting in 2025 and each year, there will be an increase of one percentage point until reaching the full rate in 2027.
for him former Minister of Mines and Energy, Amylkar AcostaModulating the initial proposal and creating this gradualness and differential rates will not allow the construction of solar and wind farms in Colombia to become unfeasible.
However, the executive director of Ser Colombia, Alexandra Hernández, assured that this increase “attacks the competitiveness of renewable energy”since currently the thermal plants – which use coal or natural gas to generate energy – pay a rate of 4 percent, while for hydroelectric plants it is 6 percent.
besides, any additional burden could make projects unfeasible that they already have commitments to sell energy and cannot transfer this new load.
(Read also: Alert in energy transition megaprojects due to delays)
This is the same perception held by Manuel Cotes, a lawyer at Holland & Knight, who considers that this increase in the percentage of transfers could discourage the development of this type of initiativebecause it would probably impact the sale price of energy to end users, making the projects financially unviable in the medium term.
Not only is stability in the rules needed, but also a determined accompaniment from the Government
Calculations by Ser Colombia indicate that the increase in the cost of energy may be in the order of 30 percent of the rate reduction achieved by the work between Ministry of Mines and Energy and the companies under the so-called Pact for Tariff Justice.
Both the union leaders and the expert agree in affirming that it is contradictory to impose greater financial barriers to this type of energy when the purpose of the National Government is to accelerate the energy transition and have 6,000 megawatts of renewable energy by 2026, almost three times the total capacity of Hidroituango (2,400 megawatts).
The negative effects of this increase in taxes are added to the eShortage of debt and raw materials, an expensive dollarglobal economic uncertainty and social conflict in the territories that will also end up raising the viability and financing of solar and wind projects.
Additionally, the president of Isagén, Camilo Marulanda, points out that the new policy for the electric power service that is being proposed to lower rates “is clouding the fundamental discussion that is the need to have more investment and that the projects that really be done. Determined accompaniment of the National Government for the projects to be done”.
(Also read: Enel Colombia sells its thermal plant in Cartagena to focus on solar and wind energy)
“I am a bit skeptical, I am not so positive because I see that the territory challenges are going to be very big and that investors, to the extent that projects take longer and cost more, may become discouraged and the world-class resource we have will fall by the wayside,” he says.
Obviously investor confidence will be affected by observing the lack of investment motivation
Along the same lines, the lawyer Manuel Cotes affirms that legal certainty is vital, particularly in renewable energy projects because they imply a higher initial capital expense and require time for the recovery of the investment.
Therefore, if Colombia does not maintain a favorable perception in terms of legal and macroeconomic stability, “obviously investor confidence will be affected by the lack of investment motivation. There must be clear rules of legal and fiscal stability that allow not only to promote but also to maintain agreed agreements in the development of renewable energy projects”, he adds.
According to the president of Ser Colombia, these types of projects have low profitability, even below less risky investment options such as the current yields of Colombian TES.
And it is that the investments in this sector are made to 20 years or more, reason why a regulatory stability becomes vital to be able to guarantee the financing that is required to develop this type of projects and that The investments made can be recovered in the future.
Natalia Gutiérrez, president of Acolgén.
Despite this rule change, the president of colgen ensures that the companies will honor all the commitments made in the past under other conditions and will build the wind and solar farms, even if this means additional costs because the energy they have not been able to deliver due to the difficulties they have had to build the projects They have to get it elsewhere.
However, the companies They ask the Government for consistency in the signals because at the same time that an energy transition is wanted, they are putting more taxes on them. “The important thing is to give signals, but that they be in the long term. They cannot be four or five years, but 15, 20 or 30 years, so that investments in a sector that is in search of climate change mature,” expresses Natalia Gutiérrez.
Faced with this difficult panorama surrounding the energy transition, Senator José David Name hopes that Article 233 of the PND will be sued before the Constitutional Court because he considers that it is unconstitutional and how the debate in the Congress of the Republic should be carefully reviewed. “I hope that in the future it will fall off”given.
However, it also ensures that a solution must be sought so that neighboring communities allow the construction of non-conventional renewable energy projects and “Do not feel that the wind and the sun are going to take you away because they see gas pass by and they never had gas and they see coal pass by and the benefits are very few”.
