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UNCLAS BOGOTA 003236 
 
SIPDIS 
PASS TO BARBARA BRERETON, OPIC 
 
E.O. 12958: N/A 
TAGS: ECON EINV OPIC CO ENRG
SUBJECT: COLOMBIA: POTENTIAL DESTINATION FOR OPIC-SUPPORTED RENEWABLE 
ENERGY INVESTMENT FUND 
 
REF: 09 STATE 95170 
 
¶1.  Summary:  Colombia is a rich environment for renewable energy 
investment and would benefit from additional financing from the 
USRG Emerging Market Fund, LP.  Colombia is a regional leader in 
the production of biofuels, specifically ethanol and biodiesel. 
Wind, geothermal, and hydroelectric projects are moving forward, 
but are at different stages.  The GOC looks favorably on 
investments in these or new areas such as cellulosic technology. 
In September 2008, the United States and Colombia signed a 
memorandum of understanding to advance bilateral cooperation on 
renewable and clean energy, which provides a framework for 
increased cooperation.  Colombia supports the Energy and Climate 
Partnership of the Americas and is pursuing a leadership role in 
promoting renewable energy throughout the region.  Per reftel 
request, Embassy contacts were not aware of the USRG Emerging 
Market Fund that is managed by the US Renewables Group.  End 
Summary. 
 
 
 
--------------------- 
 
Biofuels Growth 
 
--------------------- 
 
 
 
¶2.   Colombia's goal is to provide a 20 percent mix of ethanol 
(E20) from sugarcane, primarily, and yucca in gasoline pumps and a 
20 percent mix of biodiesel (B20) from palm oil in diesel pumps by 
¶2015.  Colombia already provides B5 in most of the country and B7 
on the Atlantic coast.  In 2010, Colombia plans to provide B10 
throughout the country.  With regards to ethanol, Colombia 
currently provides E10 in all major cities, except for the Atlantic 
coast, which is expected to receive E10 in 2010 once an additional 
ethanol refinery comes on line. 
 
 
 
¶3.  Jorge Bendeck, Executive President of the National Federation 
of Biofuels, told Econoffs that the short to medium term objectives 
are to expand sugarcane production from 250,000 to 350,000 hectares 
and palm production from 350,000 to over 500,000 hectares. 
According to Minister of Energy and Mines Hernan Martinez, 
Colombia's long term goal is to convert three million hectares of 
fallow cattle land into sugarcane and palm fields for the 
production of ethanol and biodiesel.  (Note:  second generation 
biofuels, such as switchgrass, could eventually be incorporated or 
substitute sugarcane production.  End Note.) 
 
 
 
¶4.  Colombia's aggressive goals are backed by government mandates 
as well as a law that requires the phase-in of flex-fuel technology 
(E85) in all new gasoline-fueled vehicles starting in 2012.  The 
requirement begins with 60 percent of small cars (2000 cubic 
centimeters engine displacement or less) in 2012 and extends to 
larger passenger vehicles the following year.  By 2016 all new 
passenger vehicles manufactured or imported into Colombia must 
incorporate flex-fuel technology. 
 
 
 
¶5.  Biofuels are a priority for the Colombian government. 
According to Environment Minister Carlos Costa and other senior 
government officials, Colombia's biofuels policy supports three 
major objectives: 1) create jobs in rural and post-conflict zones; 
2) remain self-sufficient as an energy producer; and 3) protect the 
environment while reducing Colombia's carbon footprint.  Given the 
high unemployment rate (11.7 percent in September) and its desire 
to support an ambitious agreement at the Copenhagen Climate Change 
Summit, Colombia is likely to continue its biofuels policy. 
 
 
¶6.  Aerocivil (Colombian FAA), with U.S. Trade and Development 
Agency (TDA) funds, is currently developing a study on the 
potential application of renewable energy sources to navigational 
aids at locations in different parts of the country, replacing 
diesel-fired generators. 
 
 
 
------------------------- 
 
Wind Opportunities 
 
------------------------- 
 
 
 
¶7.  Colombia has an estimated wind power potential of 21 gigawatts 
(GW) in the northeast state of La Guajira, which is home to class 7 
winds (i.e. over 10 meters per second), according to local 
analysts.  Colombia's installed wind capacity totals 19.5 MW. 
Fifteen windmills make up the Jepirachi Wind Project, which the 
Medellin Public Utility (EPM) company developed under a World Bank 
carbon finance mechanism (Prototype Carbon Fund).  ISAGEN, 
Colombia's third largest power generation company, is planning to 
develop a 32 MW wind farm five kilometers from the EPM project. 
(Note:  ISAGEN is state-owned, but plans to sell its 57 percent of 
the company by early 2010 to raise capital for country-wide 
infrastructure projects.  End Note.) 
 
 
 
¶8.  The ISAGEN wind farm will be split into 12.5 and 19.5 MW parks 
to avoid a Colombian regulation that requires any electricity 
provider of 20 MW or more to be centrally dispatched.  This 
regulation is a disincentive for the development of large wind 
farms, which cannot produce a constant level of electricity 24 
hours/365 days per year.  The government is considering a revision 
to this regulation, but is facing opposition from representatives 
from thermal, coal and hydroelectric power plants. 
 
 
 
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Geothermal Prospects 
 
--------------------------- 
 
 
 
¶9.  The Colombian Mining Service and Geological Survey has 
identified three areas in Colombia with strong geothermal power 
potential:  1) near the Azufral volcano, Narino state; 2) near the 
Chiles volcano, Narino state; and 3) Paipa, Boyaca state.  The U.S. 
Trade and Development Agency (TDA) has funded a feasibility study 
to support the development of a 50 MW geothermal power generation 
project with ISAGEN.  After completion of the study, ISAGEN has 
moved forward with additional funding from the Inter-American 
Development Bank to conduct further geological studies.  ISAGEN 
plans to begin drilling in 2011.  Post learned recently that the 
Medellin Utilities Company (EPM) is also interested in developing 
geothermal resources and may request TDA assistance. 
 
 
 
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Hydroelectric Projects 
 
---------------------------- 
 
 
 
¶10.  According to GOC figures, hydroelectric power currently 
accounts for 78 percent of Colombia's electricity generation 
 
 
(13,600 MW).  More than 3,000 MW of additional capacity is under 
construction at six new plants scheduled for completion by 2018. 
Colombia sells excess capacity to regional neighbors, including 
Venezuela and Ecuador, and plans to sell additional capacity (up to 
300 MW) to Panama.  A longer term project envisions providing 
electricity to the Caribbean, notably Dominican Republic and Puerto 
Rico, via submarine cables. 
 
 
 
---------------------- 
 
Waste-to-Energy 
 
---------------------- 
 
 
 
¶11.  In March 2009 during the Inter-American Development Bank 
annual conference, the Embassy's Commercial Section coordinated a 
meeting between TDA representatives and the manager of Medellin's 
solid waste management company (EVM) and the President of 
Medellin's public utilities company (Empresas Publicas de Medellin) 
to discuss a potential waste-to-energy project.  The Colombians are 
developing prefeasibility studies and a solid waste 
characterization assessment prior to making a request for TDA 
feasibility study funds. 
 
 
 
---------------------------------------- 
 
Memorandum of Understanding 
 
---------------------------------------- 
 
 
 
¶12.  The United States and Colombia signed a memorandum of 
understanding in September 2008 to advance cooperation on renewable 
energy by promoting research exchanges, alternative development 
activities, investment in clean energy, and the alignment of 
biofuels standards and codes.  To date, State Department and U.S. 
Department of Agriculture funds have supported exchanges of experts 
on sustainable biofuels development.  Additional areas of interest 
are being reviewed to support renewable energy initiatives and 
climate change-related programs. 
 
 
 
--------------------------------------------- -------------- 
 
Energy and Climate Partnership of the Americas 
 
--------------------------------------------- -------------- 
 
 
 
¶13.  Colombia supports President Obama's Energy and Climate 
Partnership of the Americas and has shown an interest in taking a 
leadership role in one or more areas:  Biodiesel, Public Sector 
Reform in the Energy Sector, Second Generation Biofuels, and Long 
Distance Electricity Transmission. 
 
 
 
--------------------------------------------- ---------------------- 
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Investment Opportunities for USRG Emerging Market Fund 
 
--------------------------------------------- ---------------------- 
------- 
 
 
 
¶14.  Colombia provides incentives for the development of renewable 
power generation, clean fuels, and renewable energy value chains. 
Many of the ongoing and proposed projects will be asset-focused, 
particularly since many of the technologies are produced outside of 
Colombia.  Wind projects are largely asset-focused and have low 
windmill technology risk (energy distribution is more complicated). 
Development of geothermal projects are largely dependent upon the 
appropriate feasibility, geological, and drilling studies. 
Biofuels projects in the ethanol and biodiesel areas are capital 
intensive, concentrated on refineries and infrastructure.  Second 
generation biofuels have a great potential for investment 
opportunities, but the technology and scope are still undeveloped 
in Colombia.  Regarding cash flows, the majority of projects listed 
above are financed by established private sector companies.  That 
said, additional funding from investment funds is always welcome 
depending on the structured agreement. 
 
 
 
¶15.  The transfer of clean energy expertise to Colombian 
enterprises is a key bargaining chip in offering investments in the 
renewable energy sector.  Securing management positions in project 
companies and control of strategic decision-making is probably more 
difficult to achieve in large companies and trade associations, 
which are the primary backers of the larger-scale renewable 
energies.  There are small to medium size companies in renewable 
energies, but their focus is primarily in wind and less developed 
biofuels, such as jatropha, algae, and yucca ethanol. 
 
 
 
¶16.  There is a need for capital investments in the renewable 
energy sector, according to the National Biofuels Federation and 
government officials.  Colombia continues to grow its renewable 
energy sector and has already reaped benefits from carbon credits. 
The World Bank, IDB, and the Andean Development Corporation (CAF) 
have helped finance several projects in Colombia's renewable energy 
sector.  U.S. investors also have shown interest in funding local 
projects. 
 
 
 
¶17.  Per reftel request, Embassy contacts were not fully aware of 
the USRG Emerging Market Fund, nor did they have an opinion about 
the fund manager, US Renewables Group.  Colombia's economic 
development plans appear consistent with the objectives of OPIC's 
investment fund program. 
NICHOLS