jurisdiction
CURRENT STATUS OF HYDROGEN PROJECTS
Colombia has a strong commitment to reducing emissions and meeting its decarbonisation goals. In the last 10 years, Colombia has bolstered its legal framework 1 to promote the development of unconventional sources and renewable energies. 2 In 2021, Law 2099 included green hydrogen as a renewable source and blue hydrogen as an unconventional source, promoting hydrogen value chain activities such as production, storage, transport, distribution, and use, as well as innovation, research and investments. Since the publication of Colombia’s national low-carbon hydrogen roadmap in 2021, Colombia has endorsed a legal framework focused on low-carbon hydrogen.
This legal framework has driven local and international investors’ interest in the development of pilot or demonstration projects. Over the next six years, Colombia is looking to have installed 1-3 GW of electrolyser capacity and to produce 50 kt of hydrogen from fossil fuel sources equipped with carbon capture systems. .
Private and public sectors have taken action for the development of hydrogen projects, most of which are in the early stages. For example, the World Bank approved a loan of USD 1 billion to support the policy framework for the energy transition, including the development of green hydrogen in Colombia. According to available information, there are 31 hydrogen production pilot projects in Colombia, representing more than 8 MW of installed capacity. Four of them are already in operation, three have taken a final investment decision, and the rest are in a feasibility or conceptual stage. The four operational projects are:
- The state-owned Colombian oil company Ecopetrol has put into operation a 50 kW PEM electrolyser and 270 solar panels located in the Cartagena Refinery. This is the first pilot project to produce green hydrogen in Colombia, which aims to be used in the refining process.
- Promigas, the second natural gas transporter in Colombia, has put into operation a 137 kW PEM electrolyser which processes water from Cartagena’s aqueduct and 342 solar panels. It is located in Mamonal, Cartagena, and aims to blend hydrogen through natural gas pipelines to reduce CO2 emissions.
- Bogotá’s transport system has put into operation the first Colombian hydrogen bus, which will carry more than 98,000 passengers per year and can store 30 kg of hydrogen, with a range of more than 450 km with one refuelling per day, and can reach a maximum speed of 90 km/h.
- Opex has put into operation a Hyundai Nexo which has a 113 kW electric motor powered mostly by a fuel cell and the first hydrogen station in Colombia, “Andes Station”.
The remaining projects aim to produce hydrogen to be used in refining activities, blending in natural gas pipelines, as well as producing ammonia, ethanol, explosives, among other hydrogen derivatives, and to be used in transport.
RECENT POLICY CHANGES
Law 2294 of 2023 established the National Development Plan 2022 - 2026, which included the definition of white hydrogen (which is naturally occurring in certain geological settings). Recent subsurface studies undertaken in 2023 show positive indicators of the presence of significant concentrations of white hydrogen in Colombia.
The definition of green hydrogen was extended. In addition to production from Unconventional Renewable Energy Sources (sources that are not commonly used to produce electricity in Colombia such as solar, wind, biomass, geothermal, among others), hydrogen produced through self-generation systems from Unconventional Renewable Energy Sources connected to the electricity grid will also be considered green hydrogen, where there is an equivalent balance between the energy delivered to and taken from the grid. This balance must be certified according to the procedure established by the Ministry of Mines and Energy which is yet to be defined.
Carbon capture, utilisation and storage technology (CCUS) is required for the production of blue hydrogen. Law 2994 of 2023 also extended the concept of CCUS. The effect is that in Colombia the use of CCUS is now supported both as a method for reducing carbon emissions by capturing CO2, but also as a way of producing CO2 to be used as a raw material in production processes . The Ministry of Mines and Energy is to develop the general guidelines, alongside the competent entities, to determine the requirements and technical conditions for, and to regulate the storage of, CO2. This regulatory framework has not been issued yet.
RECENT DEVELOPMENTS
Development 1
Law 2099 of 2021 or the “Energy Transition Law” made several modifications to Law 1715 of 2014 or “Law of Unconventional Energy Sources,” which regulated the integration of unconventional renewable energies into the National Energy System. Law 2099 was issued, in part, to modernise the existing renewable energies legal framework and to define general guidelines for the energy transition. Among other amendments, the Energy Transition Law included blue hydrogen within the definition and classification of unconventional energy sources and included green hydrogen within the definition of unconventional renewable energy sources.
The inclusion of green and blue hydrogen within the definition of unconventional energy sources has, among others, the following consequences:
- All tax benefits and exemptions introduced under Law 1715 of 2014 in favour of Unconventional Renewable Energy Sources are extended to green hydrogen. The tax incentives applicable are: (a) 50% income tax deductions for 15 years, (b) exclusion of value-added tax, VAT, (c) excemption from payment of importation duties, and (d) the application of an accelerated depreciation regime.
- Other tax benefits are granted in favour of investments, goods, equipment and machinery used for CO2 capture processes and CCUS technologies such as: (a) 25 % income tax discount, (b) exclusion of value-added tax, VAT and (c) the application of an accelerated depreciation regime.
- The financing benefits of the Unconventional Energy and Efficient Energy Management Fund ("FENOGE") are extended in favour of projects for the production, storage, conditioning, re-electrification and use of blue hydrogen and green hydrogen. FENOGE is a fund created with the goal of promoting, executing and financing plans, programmes and projects for unconventional energy sources, mostly renewables.
Development 2
The International Renewable Energy Agency (IRENA) recently published a report on the costs and potential for the supply of green hydrogen, estimating the potential of Colombia’s developing hydrogen economy. Regarding the levelised cost of hydrogen (LCOH), IRENA stated that, by 2050, Colombia will have the fourth cheapest LCOH, following China, Chile and Morocco.
This is due to the availability and quality of the renewable resources, which are required for the production of green hydrogen, as well as natural gas and carbon reserves which are required for the production of blue hydrogen. For example, La Guajira has winds with measured wind speeds of 9 m/s at 80m of height, which is twice the world’s average; and Colombia has regions with constant daily radiation throughout the year of 6 kW/m2, which corresponds to 60% above the world average. Colombia also has important potential for natural gas production (a total of 54 TpC from offshore and onshore wells) and has the largest coal reserves in Latin America, (approximately 50% of the continent's reserves), each of which can be used (with CCUS technology) to produce blue hydrogen.
However, the achievement of Colombian decarbonisation goals through renewable energy sources, including hydrogen (blue and green), requires overcoming the challenges that the Colombian electricity market faces.
For instance, one of the most important new energy transmission lines in the country, Colectora, a 114 kilometre line which aims to connect 2 GW of electricity from 16 renewable energy projects (mostly wind and solar) in La Guajira, only obtained the required environmental licence in June 2024 after more than 8 years. This project required more than 235 prior consultation agreements. 3
To overcome this, in July 2024 the Ministry of Environment and Sustainable Development issued Decree 852 modifying the competence of the environmental authorities in charge of evaluating the environmental licence application. The Decree seeks to centralise the environmental licensing of projects with a capacity greater than 50 MW in the National Environmental Licensing Agency (ANLA). Previously, regional environmental authorities were in charge of evaluating projects up to 100 MW. This measure seeks to simplify and accelerate the procedures for the issuance of environmental permits.
Finally, while there is not a specific environmental licence regime for hydrogen projects yet, projects involving the production of hydrogen from certain technologies must obtain environmental permits in respect of the environmental demands of the project – i.e., the needs in terms of water, discharges and emissions.
Development 3
In Colombia, freedom of the market is established in the national context as a constitutional principle, which includes the hydrogen industry. However, being a new industry closely related to some heavily regulated sectors, such as the gas and electricity sectors, there are concerns regarding the risk of over-regulating the emerging hydrogen market.
Thus, policy discussions are underway to conclude whether Colombia needs to expand the hydrogen legal framework to promote more investments. These discussions relate to:
- Authorisation for self-generation plants with unconventional renewable energy sources to transport electricity through the grid to hydrogen production plants. The intention is to reduce hydrogen production costs by providing for exemptions from payments in respect of grid costs.
- The adoption of an obligatory origin certification scheme and/or issuing public policy to guide market participants and better align local markets with the international market.
- The establishment of a methodology for calculating greenhouse gas (GHG) emissions during the life cycle of hydrogen production and defining an emissions accounting limit.
- Creating a voluntary and public hydrogen project registration platform to access reliable information related to hydrogen investments in Colombia and project status.
Finally, in July a bill for the second time was filed with the purpose of promoting and encouraging the development of hydrogen in Colombia as well as to guarantee its production, capture, storage, transportation, use and export. 4 Among others, the following are the key points: Introduces a definition of hydrogen, ammonia, synthetic fuels and “low emissions” derivatives, changing the hydrogen rainbow classification; bolsters and confirms the principle of economic freedom for the activities of production, storage, distribution, marketing and use of hydrogen; grants specific deadlines for ministerial entities and other competent authorities to regulate the aspects necessary to materialise the development of hydrogen value chain activities in Colombia; promotes intersectoral coordination through the creation of a table that is responsible for monitoring and controlling policies around hydrogen; promotes conditions for the injection of green and blue hydrogen into the natural gas pipeline network infrastructure; encourages programmes to promote hydrogen in the technology, mobility, agricultural, and energy sectors; promotes demand increase through minimum consumption quota schemes; and creates plans for the protection and care of the water resources necessary for the production of hydrogen.