The Electrical Power Systems market grew significantly during the last three years and represents an excellent opportunity for U.S. exports. This market was minimally affected by the global economic crisis in 2009 and grew a surprising 12.6 percent, much higher than the GDP rate. It is expected to grow 13 percent in 2010 to USD 1,025 billion due to new projects under development. The crisis affected imported equipment, which grew two percent reaching USD $1 billion in 2009. U.S. equipment imports surged by 22 percent and by 2009 represented 40 percent of the import market. The economic crisis affected competitors across the board with all of them holding steady or registering a slight decrease in their market share. Other competitors include: China (10.0 percent), Brazil (8.2 percent), Mexico (7.2 percent), Japan, and Germany. During the last two years, Colombia imported mostly high-voltage transmission systems and equipment (the 230kV and 500 kV lines), as well as electric power generation and switching equipment.
It is important to highlight the significant growth of Chinese imports during the last five years. Chinese companies’ main competitive advantage is lower cost compared to similar equipment from established vendors. However, the lower quality and reliability of Chinese equipment are considerable disadvantages. U.S. equipment suppliers benefit from long-standing compliance with industry standards, reliability, lower shipment costs, innovation, and a favorable exchange rate. In 2009, Colombia officially adopted UL standards.
At the end of 2008, Colombia’s installed electric power generation capacity reached 13,457 MW, of which 63.6 percent were hydro power plants and thermal and co-generation facilities produced the remaining 36.4 percent (gas-fired power plants - 2,757 MW, coal-fired power plants - 967 MW, wind - 18.4 MW, other thermal - 619 MW, and cogeneration facilities - 570.3 MW).
During 2008, electricity generation in Colombia reached 54,395 GWh. Hydro power plants generated approximately 80 percent of the electricity supply, due to lower generation costs thanks to the large water reserves created by the La Niña phenomenon that produced heavy rainfall, especially in the Andean and Pacific Ocean regions. The situation changed dramatically in 2009, when the lack of rainfall caused plants to switch over to thermal sources. In two cases, the Colombian Government was not able to meet its gas supply commitments.
Total electricity demand grew 1.6 percent during 2008, led by increased mining and oil and gas production. Demand by the manufacturing sector dropped in 2009 as well due to the global economic crisis which reduced output. These low demand projections may be the norm for the next two years given Colombia’s expected slower than normal economic growth due to the 2010 Presidential elections and continued scarcity of financial resources. If the planned major infrastructure, refinery upgrades and mining projects kick off, this may offset the declining demand. Other critical factors include:
• The lack of firm fuel supply commitments (mainly from restrictions to natural gas pipeline transport limitations), as existing alternative fuels (diesel and coal) are more expensive and have greater (negative) environmental impact;
• The identification of new gas reserves from traditional fields and from coal bed methane, with its associated infrastructure development, and
• Future development of new wind power and geothermal resources.
The Energy and Gas Regulatory Commission (CREG) enacted a “Reliability Charge” that recognizes the availability of generation assets to insure “firm generation capacity - OEF” under critical conditions. This offers a major incentive to develop new power projects in Colombia. The May and June 2008 power auctions under this new market-oriented mechanism generated new power plant commitments, mostly hydro-based plants, increasing the share of hydro-based generation to 72 percent with the incorporation of Porce III and IV, El Quimbo, HidroSogamoso and Pescadero-Ituango, totaling more than 4,000 MW.
Several large Colombian power companies, including Interconexión Eléctrica (ISA), Empresas Públicas de Medellín (EPM), ISAGEN S.A., and Empresa de Energía de Bogotá (EEB) are evaluating expansion projects to other Andean (Bolivia, Ecuador, and Perú) and Central American countries. The proposed power interconnection with Panama could lead to new power projects in Central America. Colombia ceased providing power to Venezuela in 2009 when Venezuela cut commercial ties with Colombia.
The Uribe Administration is also promoting the use of renewable energy sources, especially for off-grid and isolated areas. Also under development is a regulatory framework to expand the use of energy efficient systems and create awareness for the rational use of energy, including building more cogeneration facilities. Efforts are underway to promote private ventures in the areas of solar, wind, geothermal, and small-hydro systems. If successful, these projects allow for the use of energy in sustainable community projects. EPM owns the country’s only wind power plant (Jepírachi), a 19.5 MW facility, with financial support from the World Bank’s Prototype Carbon Fund’s greenhouse gas reduction credits. Other electric utilities are interested in pursuing renewable energy projects (mainly wind). Another non-traditional project is the Amoyá run-of-river hydro project that is expected to produce some 80 MW of electricity and additional environmental benefits aimed at protecting the peak areas in the surrounding mountains.
If the CPTA is approved, U.S. equipment exporters will be more competitive as 65 percent of products will receive immediate duty-free treatment with the remaining tariffs phased out over ten years. In addition, the ban on remanufactured products will be lifted.
Electrical power equipment opportunities include
• Power, distribution, and specialty transformers
• Industrial controls
• Steam, gas, and hydraulic turbines
• Turbine generator sets.
Some utilities are evaluating the development of wind (ISAGEN’s 32 MW project in Guajira), geothermal and the proposed Medellín waste-to-energy power projects that if proven feasible will generate additional opportunities for U.S. equipment manufacturers.
The outlook for the Colombian electricity sector is promising since the government is planning to develop several new power generation projects, mostly hydro, to accommodate the expanded demand through 2018. Additionally, the government is exploring prospects to become a major exporter of electricity (including goods and services) to the Andean region and Central America.
Some solid business prospects exist as a result of the market trend to continue using hydroelectric plants with gas-fueled thermal energy generators, including cogeneration systems. Also, electricity trading and distribution companies are focusing on reducing losses by acquiring leading-edge management and control systems technologies.
Another promising business opportunity is the Rural Energy Program aimed at providing electrical power to off-grid areas using renewable energy systems such as solar, wind, and small and medium scale hydro plants. This program calls for new generation systems and improving existing systems. The government has taken steps to secure funding for the program. This sector will continue to consolidate.
To assist with these government efforts, the U.S. Trade and Development Agency has awarded feasibility study grants for a 50 MW geothermal power plant (ISAGEN), a renewable energy implementation assessment for selected aeronautical navigation aids locations for the Colombian Civil Aviation authority Aerocivil, and selected a consultant to evaluate the feasibility of a waste-to-energy facility in Medellín.