Colombia’s government has introduced a new pricing mechanism for electricity sold on the country’s energy exchange, aiming to prevent the prices of cheap renewables and coal from soaring, the ministry of mining and energy said on Sunday.
The measure, outlined in Resolution CREG 101 066 of 2024, differentiates between power plants based on their operating costs and sets rates accordingly. Plants powered by coal and renewables like hydro, solar, and wind, having low operating costs, will be subject to a significantly lower price cap. These types of plants supply demand most of the time.
High-cost plants, using more expensive fuels like natural gas, diesel and imported fuels, will maintain their traditional scarcity price, the ministry said.
This differentiation is expected to lower overall electricity prices, as the market will no longer be driven primarily by the costs of the most expensive plants. Previously, the energy exchange used a single price cap for all plants, leading to higher prices for consumers and resulting in hydro and solar power being paid at prices up to ten times higher than their actual production cost.
Around 20% of Colombia’s electricity is purchased on the energy market exchange, according to the ministry.
“This measure will have an immediate impact on electricity bills for Colombians,” said energy minister Andres Camacho. “Today, the energy market is fairer to consumers, who have been demanding such action for years.”
