Focus: Diversification

Toward a Renewable Future

Nov. 19, 2021

A diversified economy is seen as one of the main ways to protect a country from global economic shocks. Colombia's mining and energy sector is looking to take the lead.

As Colombia works to throw off its COVID-induced economic doldrums, numerous areas of minerals and mining industry are poised to make significant contributions. Two key areas of focus have been unlocking the country's untapped gold and copper resources and expanding renewable energy production.

One of the government's core initiatives has been to diversify the nation's mining matrix. Historically, Colombia has relied heavily on thermal coal as a main mining export. However, as Colombia and the rest of the world work to transition to more sustainable forms of energy, Colombia is taking steps to unlock other mineral resources that can help facilitate this transition. Particularly rich in gold and copper, two minerals absolutely necessary in a renewable energy economy, Colombia has recently awarded numerous copper mining concessions via a competitive bidding process and has developed an incentive scheme for attracting investment that includes a streamlined licensing process. In 4Q2020 alone, Colombia's gold production increased by 40% to around 13.9 tons, representing the highest production levels in the last four years.

Local Colombian companies also have a major role to play, and firms such as Advanced Technologies Company Colombia (CTAC) can help ensure that development and innovation is spearheaded by domestic firms. CTAC, which focuses on developing and implementing exploration technologies that are ecologically friendly, can play a major role in ensuring that Colombia's mining matrix diversification efforts are sustainable by providing exploration technologies that have zero environmental impact.

Colombia has quickly become a sustainability leader in Latin America and around world by implementing visionary policies designed to incentivize renewable development and create a sustainable renewable economy. Colombia has seen particular success in the renewable energy transportation market, inaugurating cutting-edge public policy aimed at growing the electric vehicle market. Law 1964/2019 capped the taxation of electric vehicles at 1% of its commercial value and allows for other policy mechanisms aimed to promote electric vehicle use. The Ministry of Mines and Energy is in the midst of developing a framework to encourage electric vehicle adoption, and the ministry has announce its desire to develop a 600,000-strong EV fleet by 2030.
According to the World Energy Council, approximately 80% of CO2 emissions come from mobile sources, indicating that transportation sea change from internal combustion to electric could lead to a dramatic reduction in the emissions of a key pollutant. In an exclusive interview with TBY, Diego Mesa, Minister of Energy and Mines, laid the success Colombia has already achieved in the EV space and his ambitions for the future. “In 2019, as a result of the national electric vehicle law," noted Mesa, “Colombia became the number-one country in Latin America in sales of EVs, with almost 1,000 units [sold] in that year." Fast forward two short years, and “Colombia has taken off as the leader of EVs and hybrids in Latin America, and we expect to reach about 10,000 in 2021 alone," said Mesa.

Colombia's current energy matrix has significant room for greater renewable energy reliance, with 68.3% coming from hydroelectric sources, 30.7% coming from thermal sources, and only 0.98% coming from nonrenewable sources. The country currently has 14 solar and wind projects that are expected to expand renewable's portion of the energy matrix to 12%. In 2019, the country held its first renewable energy auction, awarding around 2.2GW. A second auction was announced in March 2021 to allocate approximately 5GW of capacity, and a third auction will be held in October. According to the International Renewable Energy Agency (IRENA), the auctions in Colombia designed augment the nation's preexisting electricity market mechanisms and provide opportunities to diversify the power supply, support energy resilience, and attract more investment and foster investor confidence. Such far-sighted policy making has made Colombia a sustainable transportation leader.

Colombia's efforts have not gone unnoticed by the global community. The World Economic Forum's Energy Transition Index 2020 recognized Colombia for making the greatest progress in the renewable energy area in Latin America and Caribbean, and the UN selected Colombia as one of a handful of countries to guide the discussions on energy transition at the High-Level Dialogue on Energy to be held in September 2021. Further, Colombia was chosen as a principal member of the Council of the General Assembly of the International Renewable Energy Agency.

Policymakers are also keen to reduce the energy gap between the nation's most and least prosperous, and it has inaugurated a program aimed at bringing electricity to 100,00 families that currently lack access in the next four years. Improving solar capacity has been a key thrust of this initiative, and thousands of rural homes lacking access to the country's power grid have been equipped with solar panels in recent years. The government expects to reach 70,000 new homes by the end of 2021, and policymakers are focused on reducing energy inequities across the country.

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