The Colombian electricity system faces the potential El Niño phenomenon of 2026-2027 with more limited capacity to maneuver than in previous episodes, according to ERCO Energía. Sustained consumption growth, declining hydroelectric reserves, a delay in new projects, and reliance on thermal backup power create a combination that could drive up prices and increase the risk of supply restrictions.
During the webinar “Understanding to act”, organized by ERCO Energía , representatives from generation, marketing and regulation agreed that the main challenge is not the climate event itself, but the structural tightness between the available supply and a demand that continues to advance .
“The problem isn’t El Niño,” states Mario Rubio , technical secretary of the Marketing Advisory Committee. The specialist maintains that these cycles occur periodically and that their appearance allows for an assessment of the system’s preparedness to respond to adverse hydrological conditions.
According to figures presented during the meeting, demand has increased by more than 100% since the beginning of the century, while net active generation capacity has expanded by around 70% . This difference has progressively reduced the gap between production and consumption.
The phenomenon is also observed in the near future. Since 2015, daily energy demand has risen from around 200 GWh to peaks of nearly 260 GWh, representing an increase of approximately 35%.
Adriana Asensio, manager of ERCO Generación , points out that supply has grown more slowly than consumption, and that this gap is forcing the sector to seek new solutions. “This lack of flexibility is what’s putting us in a bind today,” she stated.
Reservoirs are losing capacity in the face of rising demand
One of the most sensitive indicators is the number of days reservoirs could supply national consumption. According to data shared in the webinar, that reserve has decreased from approximately 120 days six or seven years ago to a current range of between 60 and 70 days with reservoirs full .
Jorge Valencia, former commissioner and former executive director of the Energy and Gas Regulatory Commission, explains that the loss is due both to increased consumption and to factors that reduce the usable volume of the reservoirs.
“We are losing roughly 5 to 6 percent of our storage capacity per year,” warned Valencia, who identified sedimentation as one of the main causes.
The problem isn't limited to less water flowing in during a drought. Even when reservoirs reach high levels, the stored volume represents fewer and fewer days of consumption because demand continues to rise.
This situation is compounded by the lack of new large-scale hydroelectric plants. Participants emphasize that, after Ituango, there is no clarity on which will be the next major facility using this technology to be integrated into the system .
Valencia adds that consumption grows by around 3.5% annually under average conditions, but can accelerate during periods of high temperatures. On particularly hot days, the observed demand reached 262 GWh , above the expected average values.
“We already know that, according to the calculations, we can't expect to have even a moderately strong summer,” the former regulator warned. Under that scenario, the only immediate tool would be to moderate consumption, given that generation and transmission projects require several years to be planned, authorized, and built.
Vulnerability increases during periods of low water supply. In previous intense summers, water entering the system ranged between 60 and 65 GWh equivalent per day . With a demand of approximately 260 GWh, other technologies would need to cover roughly 200 GWh.
However, according to the estimates mentioned in the webinar, non-conventional renewable sources would contribute between 20 and 25 GWh per day , so the rest should come mainly from thermal generation and hydroelectric reserves.
When rainfall decreases, gas, coal, or liquid fuel facilities must increase their production to preserve stored water .
The financial situation adds another constraint. The meeting mentioned a debt of approximately 3.4 trillion pesos in the wholesale market , a significant portion of which would affect generators, and especially thermal power companies.
At the same time, marketers could face an exposure to the stock market of close to 40% or 44% during the last quarter of the year and the first quarter of 2027 , depending on the evolution of contracts and available energy.
This level of exposure poses a risk to tariffs. The stock market is a very short-term market and reflects the cost of the last unit needed to meet demand. During a drought, the value of stored water increases because using it today could force the generator to buy more expensive electricity in the future.
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Could price intervention discourage new investment?
Faced with an increase in wholesale prices, one of the alternatives discussed publicly is to intervene in the market.
“For me, intervention is the worst solution,” Valencia emphasized. The specialist believes that limiting the price offered by thermal power plants could cause a unit to cease operations if the permitted revenue does not cover fuel and its variable costs.
The warning also points to the long term. Generation projects recoup their investment over periods of 20 or 30 years , so they argued that unexpected regulatory changes could disrupt projected cash flows, hinder financing, and slow the addition of capacity.
Rubio compares the market's design to a Swiss watch made up of different gears. "The moment someone wants to change a gear for some short-term reason, you touch it and it affects the entire mechanism," he said.
The technical secretary distinguishes three areas: the short-term stock market, medium-term contracts, and the long-term reliability charge. From his perspective, the central problem is not only the stock market price, but also the insufficient contractual coverage on the part of the demand side .
The product shortage is already being reflected in negotiations. Juan Felipe Puerta, head of ERCO's energy trading business, says that buying electricity has become a complex task because numerous generators have already committed their production.
“Today, if you knock on a generator's door, they'll tell you to wait until 2032,” Puerta said. For that reason, the company recommends that large consumers consider longer-term contracts and renew them in advance.
An industrial customer who agrees to a supply contract for only two years may find themselves facing price increases of 30% or 40% at the end of that period, as illustrated by the examples. Long-term contracts reduce exposure to volatility, although they require evaluating prices and risks over longer periods.
Demand appears as the main immediate tool
The speakers agree that Colombia will not be able to build new hydroelectric plants, thermal power plants, or transmission networks before the next dry season. Therefore, meeting demand emerges as the primary action available in the short term.
“We have to lower the demand, because there isn’t time for more,” Valencia summarized.
The measures include simple adjustments in homes, businesses, and industries. The industrial potential is greater. Unregulated users account for approximately 30% of consumption , while the regulated market represents the remaining 70%. Due to their scale, factories and large companies can offer significant reductions through formal demand response programs.
ERCO works with clients seeking to participate in these programs to temporarily reduce their consumption and access the corresponding incentives. The energy supplier maintains that its digital tools have allowed its clients to accumulate savings exceeding 50 billion pesos through consumption management and relatively minor operational actions.
Self-generation and storage to relieve the grid
In addition to efficiency, ERCO identifies self-generation as a faster-to-implement alternative to large-scale projects. While a utility-scale power plant faces environmental permits, connections, and transmission infrastructure, a behind-the-meter installation could be completed in about six months , according to the company.
Puerta proposes that large customers develop solar energy storage systems capable of supplying a portion of their consumption. In the example given, an industry could cover around 30% of its energy needs , reducing the amount of energy drawn from the grid during peak hours.
On the supply side, ERCO Generación reported that it operates 65 MW in plants not centrally dispatched and plans to incorporate another 120 MW, subject to regulation and connection procedures allowing for faster entry.
However, participants caution that solar and wind power, while necessary, will not solve the energy shortage on their own. Their firm energy contribution still represents a small fraction compared to hydroelectric and thermal power plants. The discussion includes hydroelectric plants with design criteria adapted to climate change, energy storage, thermal generation, solar and wind projects, the National Transmission System grid, and new gas infrastructure.
The risk, according to specialists, is that Colombia will overcome the next El Niño phenomenon through temporary measures, but will face the same threat again a year later , when reserves will be equivalent to fewer days of consumption and demand will be even greater.
“We can’t get used to it,” Rubio warned, referring to the possibility of periodic rationing. The specialist maintains that the Colombian sector has overcome previous crises, but needs to turn this situation into a starting point for structural decisions.
The experts conclude that the immediate response must combine energy conservation, active consumption management, self-generation, storage, and greater contractual coverage . At the same time, the country will need to regain confidence in investing and enable projects capable of supporting the growth in demand.