Colombia's new electricity auction incorporates energy storage as a central component of the system, but industry analysis points to a deeper problem: a lack of clear regulations and low project implementation rates. The change in design is significant, although it comes in a context where previous mechanisms failed to deliver the allocated capacity.
For Natalia García , CEO of Enermant, challenges regarding financial certainty still exist. The executive emphasized that BESS formally enters the competition within the scheme, expanding the range of available solutions. “Vendors will now not only have the opportunity to offer photovoltaic and wind farms, but we will also have a key technological component: Energy Storage Systems (ESS) ,” she noted.
The auction's focus has shifted: now it also aims to guarantee supply during critical hours. In this framework, hybrid products necessitate meeting demand during periods when variable energy sources fall short, making battery storage essential. García explained that these blocks—especially at night—require battery systems to ensure service continuity if projects with intermittent energy sources are implemented.
“Product 3 (Hybrid) and Product 4 were introduced, where the use of storage is mandatory to guarantee the delivery of energy in the critical night block from 6:00 p.m. to 10:00 p.m.,” he explained.
However, the main gap lies in the remuneration of these assets. Although the regulations allow for storage and recognize its role in complementary services, they still do not define how these services will be paid for. García warned that this point is central to the viability of the projects. “ We are still waiting for the final tariff regulations that the CREG must issue within a maximum legal period of 12 months ,” he added.
In market terms, this introduces a critical variable: the price no longer depends solely on energy but now includes potential additional revenue streams that are not yet regulated. The executive explained: “While the battery waits its turn to deliver energy (arbitrage) , it could be providing simultaneous services to improve its price competitiveness, but we still don't know how these schemes will be financially compensated .”
Adding to this scenario is the rising cost of BESS systems, driven by international factors affecting hardware and logistics. According to García, this combination of variables makes it impossible to project prices with certainty and complicates the structuring of competitive bids.
But beyond price or regulation, the biggest problem remains structural: project execution. Colombia maintains a significant lag between what has been awarded and what has been built, which directly affects energy security.
García emphasized that even projects with advanced conditions failed to materialize within the projected timeframes. “We face the historic challenge of the 2019 and 2021 auctions, where to date only about 21% of the total awarded capacity has entered commercial operation, according to the Ministry of Mines and Energy’s own figures,” he stated.
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In that context, the connection point continues to be a determining factor for the viability of any initiative.
“My concern is that by relaxing the barriers to entry to participate only with the environmental permit, we may get more projects to compete in the auction, but how do we guarantee that delays in execution will not continue to occur? In Colombia, the cornerstone of any project for its real viability remains the firm connection point,” he remarked.
This opens the door to projects that are not sufficiently mature, a problem that has already impacted previous auctions. From their perspective, the success of the mechanism lies not in the amount awarded, but in the actual execution capacity.
According to the executive, a "masterstroke" for the country would be to thoroughly review which of the projects assigned to date are truly feasible. "We can't just stop at the planning stage; we must closely monitor the projects to adjust our actions in a timely manner. Only in this way will we guarantee that we have sufficient supply to meet demand and achieve lower energy prices in a technically sound, efficient, and sustainable way," she stated.
The need for certainty for the investor
Given this complex regulatory and implementation landscape, due diligence has become the critical success factor. Even for international capital, the dynamics of the Colombian market are not always clear. “Foreign investors still believe that because a project was prioritized, they will automatically be given a connection point,” he explained.
To mitigate this risk, García highlighted the role of firms specializing in uncertainty mitigation. “At Enermant, we conduct comprehensive valuations—technical, legal, and financial—of projects so that investors know exactly what they are getting into. In fact, we have a market study that identifies the true state of projects based on publicly available information, which allows us to support the development of a secure and refined pipeline so that our clients can make informed decisions, protected against market risks.”
Finally, the pricing component introduces new controls by the Ministry, such as the Maximum Purchase Price and the Minimum Sale Price. However, for García, this raises a significant concern about the financial viability of the bids.
“The big question is how market expectations will be managed with these price caps. Since the revenue from ancillary services—whose rules are still pending—cannot yet be included in the financial models, there is a latent risk that the maximum prices allowed in the auction will not be enough to cover the high cost of the batteries and, therefore, will not allow for the repayment of investments,” García warned.
The new scheme represents a necessary technological leap by including storage, but the structural challenge is clear: it is not enough to simply allocate capacity; it is essential to ensure that price caps reflect the reality of investments and that projects have sufficient certainty to be built. Without addressing these issues, the risk lies not in the design, but in repeating a model that allocates capacity that never becomes operational.