Energy prices to increase?

Company News, Energy    Oct 31, 2021 12:43 PM

The Colombian Association of Large Industrial and Commercial Energy Consumers (Asoenergía), warned about unwelcome effects of the recent renewable energy auction.

The entity said that the conditions of the closing price of the renewable energy auction could generate cost increases for non-regulated users and for demand in general, La Republica reported.

Asoenergia explained that obliging marketers to contract 10% of demand would cause a price increase in the contract market.

“This obligation, to contract in an exclusive way, was not viable and on the contrary it causes an ostensible loss of competitiveness in the contract market,” Asoenergia said.

The entity estimates that only 50% of the shortfall of this goal was achieved and high prices were induced without fully achieving it.

“The announced average price of CoP$155kwh plus the nearly CoP$75Kwh of market charges, leads to 15-year prices of approximately CoP$230kwh, which, for contracts of similar length and comparable commitment, represent an increase of between 5% and 10% from current conditions,” Asoenergia explained.

The entity said that the closing of the auction is 20% higher than the previous auction, despite the fact that in the previous auction close to 80% was wind energy.

Despite the observations, the association highlighted the inclusion of new agents to the market, although “this plurality is achieved at a high cost, fortunately only for a portion of less than 2% of the demand to be covered under this obligation.”

Bottom-Line: Energy prices could increase even more in case Hidroituango does not start operating next year. Ah, and several other projects are delayed due to prior consultations…

Maybe investors have learned about the regulatory, social and political risk of participating in the Colombian energy market and are pricing that risk accordingly.

Authorities have tried to send messages of reassurance, but there is still no certainty about where we are between capacity commitments and demand projections.

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