Wind Power in Colombia-In Guajira there’s a potential of 20,000 megawatts

Renewable energy in Colombia refers to infrastructure for renewable energy in Colombia. The country has 28.1 Megawatt installed capacity of renewable energy (excluding large hydropower), consisting mainly of wind power.

The wind regime in Colombia is among the best in South America. Offshore regions of the northern part of Colombia, such as in the Guajira Department, have been classified with class 7 winds (over 10 meters per second (m/s). The only other region in Latin America with such high wind power classification is the Patagonia region of Chile and Argentina.

Colombia has an estimated theoretical wind power potential of 21 GW just in the Guajira Department, enough to generate sufficient power to meet the national demand almost twice over. However, the country only has an installed capacity of 19.5 MW of wind energy, tapping only 0.4% of its theoretical wind potential. This capacity is concentrated in a single project, the Jepírachi Wind Project, developed by Empresas Públicas de Medellín (EPM) under a Carbon Finance mechanism arranged by the World Bank. There are several projects under consideration, including a 200 MW project in Ipapure.

Colombia: 20 MW wind farm at Wayuu

The PESP Study dealt with a proposed project in the Department of La Guajira in the north of Colombia. The project consists of a 20 MW wind farm which generates revenues for a not-for-profit Rural Utility whose objective it is to provide basic services such as energy and water to the large Wayuu Indian Community situated in the La Guajira Indian Territory, where the majority of the rural households have no access to these services.

In order to deal with this quite complex and large project the wind farm and the rural utility were dealt with as 2 separate sub-projects, linked by the common special purpose company, established to implement the project(s) – WAYUUE.S.P. The Study was executed in the period August 2003 to June 2004.

Joutkai Wind Farm

The feasibility study was undertaken by NuPlanet BV and KEMADuurzaam of the Netherlands under a Netherlands Ministry of Economic Affairs PESP-mechanism. The study exhaustively looked at the technical, economic, financial, institutional, cultural and environmental issues that are part of the project proposal.

The conclusion of the study was that the project is feasible conditional to a number of key issues being solved and/or obtained. These in essence are:

* A long term fixed contract is negotiated with a bulk buyer or the price for power is guaranteed by a contract on the financial markets.
* Concessional finance is obtained, preferably in the form of a capital investment grant. An ORET grant from the Netherlands Government seems within the possibilities of the project, if the “new” guidelines for ORET become a fact.
* A deal is made with the owners of the Jepirachi sub-station, which is close to the site, to use the sub-station for an agreed cost.
* All the licenses, permissions and authorizations materialize. It is likely that these will be given.
* Senior debt and equity is in place.

The project was initiated by AcquaireLtda a Colombian developer and consulting company in renewables. As part of the development of this project a special purpose company called WAYUUE.S.P. was established. WAYUUE.S.P. is a Public Private Partnership Company with various local authorities as major shareholders. The purpose of WAYUUE.S.P. is to function as a Rural Utility in the Middle and High La Guajira region in the north of Colombia.

This area is the domain of the Wayuu Indian Community. AcquaireLtda, acting on behalf of WAYUUE.S.P. signed a pre-development contract with DELTA Caribbean NV, a Netherlands Antilles developer and operator of wind farms to develop the Joutkai wind farm. DELTA Caribbean approached NEG-Micon Nederland to act as supplier in the project. In July 2003 the feasibility study for the project was started.

The proposed site is located in the vicinity of Puerto Bolivar on private land. The area is a semi-desert with very high average temperatures. The wind resource at the site belongs to the best wind resource in the world with average wind speeds of 11,3 m/s at hub height of 67-m.

The Vestas V80 – 2.0 turbine was chosen for the site. This turbine has a effective rotor diameter of 80-m, a nominal capacity of 2 MW and a 67-m tower was chosen. The project size was determined by the fact that projects under a 20MW size are dispatched with priority by the Colombian dispatcher. Therefore 10 turbines will be installed in an initial phase of the project. It is quite possible that the project will be further extended.

Based on the wind resource and taking into account the losses and uncertainties the project will produce approximately 87 GWh per annum. In doing so the project avoids approximately 70.000 tons of CO2, 400 tons of NOx and 1.200 tons of SO2 per annum.

The project is situated close to the Jepirachi wind farm owned by the MedellinElectricty Utility EEPPM. This is a 19,5 MW wind farm which was commissioned in the first quarter of 2004. At Jepirachi there is a sub-station which connects onto a 110 kV high power line feeding into the national grid of Colombia. The Joutkai wind farm will also feed into the grid via the Jepirachi sub-station, if negotiations with EEPPM to use their sub-station are successful.

The Colombian Electricity Market is fully liberalized and production is typically sold on the spot-market. Here the prices are very low (approximately 0,025 US dollar per kWh). These low prices are predominantly caused by the high percentage of hydro-power in Colombia (approximately 70 percent of the total capacity). However there are various reasons to assume that prices in Colombia are set to rise dramatically in the future.

For this project however the low prices are a fact and selling the power from the wind plant on the spot-market will make the project difficult, if not impossible, to finance. An realistic alternative is to negotiate a fixed price long term contract with bulk buyers or negotiate fixed price contracts via the financial markets in Bogotá. Discussions with potential partners for these alternatives show that this is feasible.

The project represents a fixed capacity of approximately 10 MW and the Colombian Government will pay a Capacity Credit for this fixed capacity. Furthermore the project meets the requirements to offer it’s Carbon Emission Reductions for sale.

Based on a long term contract with a risk-premium about 30 percent above the spot-market price and an investment grant of 5 million US dollar the project is economically and financially viable giving an Internal rate of Return of 18 percent and a Net Present value of approximately 4 million US dollar. Per annum the project will generate approximately 800,000 US dollar revenues for the not-for-profit WAYUUE.S.P. Rural Utility which will utilize these revenues to finance part of its operations.

In order for the project to be economically feasible a form of concessional funding is required besides the regular debt and equity finance. This concessional funding is required to equal the playing field in the competition the project has with conventional coal and gas fired plants. In this regards the Netherlands ORET export mechanism is regarded as a viable option.

The project proposal was eagerly received by various financial development institutions and banks. Financing of the project will be possible in Colombia. Findeter, the Colombian Development bank for the Territories has shown keen interest and would be interested to finance the project, conditional to normal bankability. It is considered feasible that financing can be arranged in Colombia.

The project has a net positive effect on the environment and has a high component of developmental relevance. The latter is essentially due to the fact that the revenues generated by the project will be utilized to finance rural energy and water services for the non-grid connected Wayuu Indian Communities in the region.

From a macro-economic point of view the project has a net positive effect with an economic internal rate of return of 18 percent. The project is viable and it was recommended to proceed to the next phase which is the detailed development process, the financing process and the licensing process.

WAYUU ESP is a rural services utility set up with the express purpose of providing basic services (electricity and potable water) to the mostly rural Wayuu population of the La Guajira region. Due to a number of circumstances including low population density, dispersed small rural settlement (rancheria) patterns, remoteness and low income, the access to these basic services is below 5 percent in the project area. This compares with the national averages of over 90 percent.

WAYUU ESP intends to overcome the barriers to the delivery of services through the use of stand alone and decentralised energy systems, mostly small wind turbines and through a Public Private Partnership (PPP) structure which combines public (including international grants) funding with private sector funding in order to achieve commercially sustainable operations

The target market for WAYUU ESP is the 90,000 people in La Guajira currently without access to basic services. The target group is split into 9,680 households, 290 Rancherias (communities), 194 large Rancherias and 27 small towns.

The La Guajira climate and vegetation is typical of a dry semi desert area. There is no surface water. Water for human and animal consumption all comes from wells and is characterised by high levels of salinity. Average household incomes are estimated at EUR 1,000/annum, although a significant part of this income is ‘in kind’ as typical in subsistence farming communities and not in cash.

Household energy consumption patterns are characterised by dependence on wood fuel or charcoal for cooking, kerosene for lighting and dry cell batteries for small radios. Water pumping from wells is done by hand or with mechanical wind pumps. WAYUU ESP will utilise state of the art decentralised renewable energy power generation systems comprising wind and solar photovoltaic (PV) hybrid systems to provide electrical power for household and communal use. The system sizes vary from 400W for a small household system to 3kW or 6 kW for a communal system and up to 180 kW (combined with diesel generators) for systems in a small town. The household systems will provide sufficient electrical power for lighting, basic telecommunications (radio and TV) and in some cases refrigeration.

Communal systems in the rancherias and small towns will provide electricity for water pumping and desalination, the lighting of communal areas such as schools, clinics and meeting areas as well as for telecommunications (radio, telephones) and entertainment (TV). The larger urban systems will utilise wind /diesel hybrid systems.

FORTIS Wind Energy, a Dutch supplier of small wind turbines and a partner to the PESP study, provided technical specifications for small wind turbines that can reliably and cost effectively provide power specified for the different systems. This is an important component of the project as it presents the opportunity for WAYUU ESP to qualify for an ORET/MILIEV capital grant from the Netherlands government.

The overall conclusion from the project team is that the WAYUU ESP business plan and concept is feasible. The business plan requires a limited amount of further development to get to the level of a ‘bankable’ document.

The overall recommendations are:

* WAYUU ESP rural utility as described in the business plan and financial model is conditionally feasible.
* Minor components of the business plan need to be further developed to remove the conditionality clause from the feasibility assessment.
* The concept should be tested and refined in a large scale pilot project, which would serve as the first stage of full scale implementation.
* Based on the high Dutch content in the power generation component (small wind turbines and solar PV panels) a 4 million US dollar ORET/MILLIEV subsidy from the Netherlands Government as well as funding from the various Colombian sources, should be applied for after completion of the business plan.

It is recommended that the following steps be taken to finalise the business plan and bring the whole document up to the level of a bankable document.

* Comprehensive customer survey.
* The option of a smaller +/-50WP residential system must be assessed.
* Development of a customer management and billing system.
* Development of specifications for the hybrid system configuration and controllers.
* Project team composition to include commercial and customer service skills.

On finalisation of the business plan (incorporation of the above comments and recommendations) it is proposed that a phased implementation strategy be developed starting with a ‘pilot project’ first phase. There will also be the need to customise and refine many of the technological aspects as well as operational procedures of WAYUU ESP. It is recommended that the start-up phase focus on the installation of power and water supply systems in communal rancherias and not include domestic stand alone systems or the larger systems in towns. The start-up phase should include at least 20 installations over an 18 month period. The implementation of the start-up phase should follow on the procedures and guidelines as described in the business plan and financial model.

It is recommended that an 4 million US dollar ORET/MILIEV grant be applied for from the government for the Netherlands, based on the high Dutch content of the wind turbines to be used for power generation.