The department of La Guajira is on the verge of experiencing a capital flight from the renewable energy sector. Despite possessing natural resources that are the envy of the rest of the world for the construction of solar farms and wind farms, the unique characteristics of the region and its communities are making the development of infrastructure involving the use of non-conventional energy sources unfeasible.

With Celsia’s recent announcement of its intention to sell its wind energy projects located in La Guajira and produce that energy outside the country, it is essential that we, as ordinary citizens, understand the reasons that have led companies to suspend their activities and reconsider their investments in wind farms in the department. Even more importantly, we need to know if this situation will increase energy rates nationwide. But before addressing these questions, some context is necessary.

In 2019, the Ministry of Mines and Energy introduced a mechanism to promote investment in non-conventional renewable energy sources (NCRES) in the country. In this initiative, called the “Renewable Energy Auction,” the participants were Sellers (Energy Generators) on one side and Buyers (Energy Marketers, or, as they are colloquially known, Service Providers) on the other. The Sellers offered the construction of a generation plant, the quantities of energy to be delivered, the sale price, and the supply start dates. Meanwhile, the Buyers indicated the price they were willing to pay for the energy offered by the Sellers. The winning bidders entered into long-term power purchase agreements (PPAs) with a 15-year term and a fixed price with annual indexation.

It is worth mentioning that this mechanism was considered highly beneficial for the sector. The reason lies in the fact that, in 2019, non-conventional renewable energy sources (NCRES) represented only 0.7% of the country’s electricity mix. With the auction awards, the Ministry of Mines and Energy aimed to increase capacity fortyfold, anticipating a 5.5% share by 2022. The success of the first auction led to another in 2021. On that occasion, 11 contracts were awarded, with the goal that, by the end of 2023, non-conventional renewable energy sources (NCRES) would constitute 15% of the energy mix. However, by the end of that year, less than 2% corresponded to alternative sources. But what happened?

Let’s return to 2019. The first auction closed with the hope of building eight projects: three solar and five wind, the latter located in La Guajira. None of these have materialized to date. Currently, one project is indefinitely suspended, two are seeking a viable exit strategy from the country, and two others have issued official statements declaring their potential unfeasibility. Furthermore, all five companies face the same difficulties: significant delays in the environmental licensing process and obstacles in the prior consultation with Indigenous communities.

Five years after being awarded the concessions, it is no longer profitable for these companies to continue injecting capital into projects that have been physically blocked for months. This was the case with Enel, which announced in mid-2023 the indefinite suspension of construction on the Windpeshi wind farm, and Celsia and EDPR find themselves in similar situations. One of the solutions the government has proposed for this situation is the implementation of a 6% tax on energy sales from the wind farms, with the aim of allocating the revenue directly to the communities. However, the lack of progress in agreements between companies and Indigenous communities demonstrates that, two years later, this measure has not achieved its objective.

Regarding environmental licensing, the Ministry of the Environment recently published a draft decree to transfer responsibility for the studies to the ANLA (National Environmental Licensing Authority), relieving the Regional Autonomous Corporations (CARs), which are known for their slow bureaucratic processes, of certain burdens. Thus, the ANLA (National Environmental Licensing Authority) would be responsible for the environmental licensing review of parks with a capacity exceeding 50 MW, while the CARs (Regional Autonomous Corporations) would only handle those between 10 MW and 50 MW.

Finally, it is a fact that if these companies abandon the projects, the price of energy will increase nationwide. Experts maintain that an increase of between 8% and 13% could be experienced. This is due to the obvious implications for supply and demand, but also because the purpose of the long-term contracts awarded in the auctions was to guarantee Service Providers a stable price without fluctuations for 15 years. However, if the parks do not become operational, the Service Providers will be forced to resort to the Energy Exchange, where prices can skyrocket during droughts or other contingencies, leaving Retailers at the mercy of these variations.