On September 30th, 2021, Diego Mesa Puyo, Minister of Energy and Mining, launched Colombia’s Hydrogen Roadmap during an event in Barranquilla’s ‘Caja de Cristal’. As was emphasized in a promotional video during the opening of the event, “hydrogen will further accelerate the expansion of solar and wind projects” in Colombia, because its extraction can be achieved by the use of renewables. In addition, Mesa Puyo emphasized that hydrogen will allow the country to diversify and strengthen its energy mix, its efforts towards sustainable mobility and its aim to promote a ‘sustainable recovery’ at regional and national levels.
Celebrating Colombia’s Hydrogen Roadmap
The launch of Colombia’s Hydrogen Roadmap was celebrated by Colombia’s president Iván Duque Márquez as well as other representatives of the Colombian government with expertise in the fields of energy and mining, transport and sustainable development. Furthermore, it was supported by stakeholders from the private sector. At a diplomatic level, the event was attended by the Ambassadors of the United Kingdom, Denmark, South Korea and Australia as well as representatives from the French, German and Spanish embassies in Colombia. As Mesa Puyo emphasized in resonance with the arguments of the audience, “hydrogen is the future of the energy transition” and, in the short- and in the long-term, the Colombian government aspires three main goals with its new hydrogen strategy: 1) to make the energy sector more efficient and competitive; 2) to foster energy access and security (i.e. in regions where this continues to be a profound issue), and 3) to become a leader in combating climate change through the promotion of a more environmentally-friendly energy sector.
Providing a short presentation to showcase the country’s natural resources, Mesa Puyo emphasized that Colombia is not only home to more than 740,000 water basins (46% of the global water supply), but also has made significant progress with regard to wind and solar power. At the current moment, its wind power facilities in La Guajira region have a capacity of 25GW as they operate at a very rapid speed (9m/s). Meanwhile, in the field of solar power, the daily average radiation amounts to 4,5kWh/m2. Reuters correspondent Oliver Griffin might hence have not exaggerated when he said that since Colombia was “in an ideal position to produce green hydrogen”. Moreover, as Mesa Puyo illustrated, Colombia’s geographic location makes it particularly suitable for becoming a hydrogen exporter. Next to this, the country has an abundance of carbon and natural gas.
Colombia’s Ambitions with the Hydrogen Roadmap
When formally ending the presentation of the Hydrogen Roadmap, Colombia’s president Iván Duque Márquez emphasized that one reason to explore the potential of hydrogen was its potential to promote decarbonization, which could protect the biodiversity of the country. Earlier, Mesa Puyo laid open that Colombia’s motivation behind implementing the Hydrogen Roadmap relates to the following five aims:
- The deployment of hydrogen for decarbonization;
- The reduction of CO2 emissions;
- The establishment of value chains, which will foster an export economy;
- The deployment of hydrogen to promote a just and well-managed energy transition;
- The deployment of hydrogen to promote local development including with regard to environmental protection.
By 2030, the country aims to produce green hydrogen at the cost of 1,7USD/kg. Moreover, it expects to achieve a demand for approximately 1,500-2000 light vehicles and 1000-1,500 heavy vehicles, all of which will be fuelled by green hydrogen. Aside from investing in green hydrogen, Colombia also intends to invest in the development of blue hydrogen. By 2030, it expects to be able to offer 50 kt H2 for 2,4USD/kg. In order to make future hydrogen projects a success, the Colombian government will additionally analyze thirteen pilot projects in the fields of hydrogen, ammonia and e-fuels in the following sectors: industrial uses, transport, power generation, mixed uses (i.e. transport and industrial use) and blending with natural gas.
As Mesa Puyo emphasized, Colombia’s transport sector (40%) and its industrial sector (22%) make up for 62% of the country’s energy consumption. Among others, the steel, cement and paper industries as well as agriculture heavily rely on an effective energy supply. Therefore, innovation in these sectors is of particular importance. With regard to promoting eco-friendly and low-carbon solutions in the transport sector, Colombia also presented its Electric Mobility Law, which will complement the country’s national strategy on electric mobility from 2019. More information on Colombia’s strategies with regard to e-mobility can be obtained through resources provided by the same actors, who are tasked with bringing forward innovation in the future: the Ministry of Science, Technology and Innovation (Minciencias), the Ministry of Mines and Energy (MinEnergía) and Ecopetrol, Colombia’s national oil company.
In terms of international cooperation, Colombia has an ambition to work together with South Korean companies, particularly in the field of transport. Furthermore, Mesa Puyo emphasized that the country has an active interest in cooperating with other countries whose representatives attended the event. Similar to Mesa Puyo, Ángela María Orozco Gómez, Colombia’s Minister of Transport, stressed that hydrogen opens new doors for innovation in the field of electric mobility, particularly with regard to cargo and long-distance travel. Jaime Pumarejo, the Mayor of Barranquilla, argued that in order to make use of Colombia’s potential, mayors had to inform citizens appropriately and calm their fears, while the government had to make sure that the energy transition would not only be paid only out of the pocket of taxpayers.
Colombia’s Regulatory and Tax Framework for the Energy Transition
As part of his presentation, Mesa Puyo presented Colombia’s regulatory and tax framework, which was established to accelerate the energy transition and its impacts. Consisting of a National Development Plan as well as a financing and an energy transition law, the framework foresees some of the following steps and actions. First, the National Development Plan seeks to offer VAT benefits for those who contribute to building the infrastructure needed to drive forward solar power projects. Meanwhile, marketers from the energy sector will be obligated to obtain an 8%-10% share of non-conventional renewable energy sources (FNCER) and 50% of the income tax will be reduced over the next 15 years to enable investments into the infrastructure needed for FNCER.
Second, the energy transition law foresees additional financial incentives for blue and green hydrogen, geothermal energy, smart metering and large-scale storage systems as well as the development of carbon capture, utilization and storage (CCUS) technologies. Furthermore, accelerated depreciation of investments into energy efficiency and sustainable energy and an optimization of processes will serve to create a strong foundation for the expansion of the renewables sector in Colombia. Third, the financing law aims to implement VAT benefits over the acquisition of real productive fixed assets (AFRP). In addition, 50% of the industry and commerce tax (ICA) as well as the financial transactions tax (GMF) will be reduced for the period between 2019-2021. From 2022, the tax will fully be refunded.
Next to Colombia’s regulatory and tax framework, the country also intends to work on three other pillars: 1) instruments for market development, 2) deployment support for infrastructure, and 3) impulses for technological and industrial development. Among others, mechanisms to finance hydrogen projects with low emissions will be installed and efforts to support research, development and innovation will support pilot projects in the hydrogen field. With regard to infrastructure support, Colombia will investigate whether hydrogen and natural gas can be used as complementary tools to promote the energy transition. Carlos Eduardo Correa Escaf, Colombia’s Minister of Environment and Sustainable Development, added to the discussion that Colombia’s effort to promote hydrogen is also embodied in the country’s recent passing of the Law on Climate Action, which foresees the involvement of various ministries.
Fostering Public-Private Sector Partnerships
One significant aspect of the operationalization of Colombia’s hydrogen ambitions are partnerships between the public and private sector. During the launch of the Hydrogen Roadmap, various actors from the private sector added their thoughts to the country’s new ambitions in the scale-up for 2030. Ignacio Corlazzoli, a representative of the Inter-American Development Bank (BID) in Colombia, emphasized that the BID has identified three kinds of countries on which it focuses, namely such which: 1) already have an energy matrix for renewables (i.e. Costa Rica, Paraguay, Uruguay), 2) import hydrogen (i.e. Trinidad and Tobago, Mexico, Argentina, Brazil) and, 3) work towards decarbonization (i.e. Colombia, Chile). Corlazzoli’s illustration showed that regional cooperation in Latin America could be key to attracting investments.
At least, projects such as EUROCLIMA+ Urban Mobility, which is funded by the German Society for International Cooperation (GIZ) and Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), focus on such an approach. Guilherme de Mendonça, the Managing Director of Siemens Energy, also emphasized that the support through cooperational projects with Germany might indeed be helpful to steer development in the Colombian hydrogen sector based on Germany’s activities in research and development as well as funding programmes. More generally, Felipe Bayón, the CEO of Ecopetrol, emphasized that in order to foster development in the Colombian green and blue hydrogen industry, it is necessary to: 1) ensure additional production capacity for hydrogen and 2) positively affect the capacity of hydrogen. How the latter could be promoted through international cooperation is surely one of the questions of the future.
Feel free to contact the Energy Transition Centre today for questions.
· Julius Moerder, Head of Energy Transition Centre julius.moerder@centurionlg.com
· Oneyka Ojogbo, Head of Energy Transition Centre, Nigeria & West Africa oneyka.ojogbo@centurionlg.com
· Leon van Der Merwe, Head of Energy Transition Centre, South Africa leon.vdmerwe@centurionlg.com
