Facilitating the energy transition in Colombia and Latin America

February 4, 2025

Ramiro López-Ghio, group representative for the Inter-American Development Bank (IDB) in Colombia, talks to The Energy Year about the importance of financing the energy sector for the socioeconomic development of Colombia. The IDB is a provider of development financing in Latin America and the Caribbean, with 48 member countries.

How important is the area of energy for the IDB in fostering socioeconomic development in Latin America and the Caribbean, and what are the bank’s recent milestones?
Latin America and the Caribbean have seen an evolution in electricity access, with household coverage increasing from 89% in 2001 to 98% in 2021. The improvement in access is most pronounced in rural areas, which went from 74% to 96% in that period. However, even in 2021, 16 million people, or four million households, still lack access to electricity in the region.
The region also faces the challenge of growing electricity demand due to population growth, economic growth and the increased electrification of sectors such as transport and industry. It is estimated that demand will increase by an annual average of 2.3% between 2022 and 2050.
To meet this challenge, it is essential to increase power generation capacity while aligning with decarbonisation targets, such as Colombia’s target of a 51% reduction in emissions by 2030. In this context, the IDB is committed to supporting countries in the region for a just, inclusive, low-carbon and resilient energy transition.
Between 2016 and 2023, the IDB financed government programmes that increased access or improved the quality of service delivery to 5.3 million households in the region. Nearly USD 1.1 billion was invested in the construction of 425 MW of generation capacity and the modernisation of 5,209 MW of hydropower plants.
In addition, it has supported the modernisation of regulatory frameworks to facilitate private investment in renewable energy and promoted the development of emerging technologies such as green hydrogen.
The IDB is also committed to fostering regional energy integration. In 2017, the bank estimated that, if the regional grid is integrated with 80% renewable energy, it would save USD 23 billion and 700 million tonnes of CO2e by 2030.
For this reason, technical and financial support has been provided to initiatives such as the Andean Electrical Interconnection System, the Southern Cone Energy Integration System, the Northern Arc and the Electrical Interconnection System of Central American Countries. These systems are designed to build electricity infrastructure that shares surplus clean energy, mitigates potential supply failures and strengthens regional energy security.

In what ways does the IDB seek to address energy poverty in Colombia?
In Colombia, there are marked regional disparities with respect to energy poverty. According to the 2023 Multidimensional Energy Poverty Index, energy poverty in rural areas is 11 times higher than in urban centres and varies significantly between departments.
For example, Bogotá, Quindío and San Andrés have energy poverty rates below 4%, while La Guajira, Guainía, Vaupés and Vichada exceed 70%. In addition, households headed by Afro-descendants are 1.13 times more likely to face severe energy poverty compared to other households, and the odds are four times higher for indigenous households, according to a 2023 IDB study.
To address these challenges, several initiatives have been developed that focus on non-interconnected zones (ZNI) and rural areas. One of the main initiatives is the Todos Somos PAZcífico Plan, which finances electrification projects with renewable energy in the departments of the Pacific coast: Cauca, Chocó, Nariño and Valle del Cauca. These projects have brought energy to 50 municipalities, benefiting close to 20,000 households, 500 schools and health centres.
The IDB also supports the government of Colombia with technical assistance projects to directly address energy poverty. The IDB has collaborated with the Mining and Energy Planning Unit in the development of methodologies to improve territorial planning and the calculation of the energy poverty index. It has also worked with the Institute for Planning and Promotion of Energy Solutions for Non-Interconnected Zones to create decarbonisation roadmaps to improve electricity supply in Pacific territories.
The bank has also contributed to the socioeconomic characterisation of more than 1,900 users without access to electricity in the ZNI of La Guajira and at least 2,000 users on the Pacific coast. This effort included identifying the most appropriate energy solution among non-conventional renewable sources, such as solar, wind, biomass and small-scale hydro.

 

What types of energy projects in Colombia are currently attracting the largest share of IDB financing?
In terms of energy efficiency, the IDB recently supported a pilot programme in the archipelago of San Andres, Providencia and Santa Catalina, which benefited 17,516 low-income households by replacing inefficient light bulbs with efficient ones. In 2024, the Caribbean Energy Efficiency and Sustainable Energy Programme was launched, which seeks to replace inefficient light bulbs in 150,000 homes and finance the replacement of inefficient refrigerators for 70,000 users, among other initiatives.
Furthermore, through IDB Invest, for the 2020-2025 period, progress has been made in financing five solar generation parks: Llanos 1, 2 and 3; Puerto Gaitán (Meta); La Mata; La Unión; and, recently, Shangri-La. These projects have an aggregate installed capacity of approximately 534 MWp, and in two decades, they are expected to displace greenhouse gas emissions in the order of 6.54 million tonnes of CO2e and produce more than 16,570 GWh of clean energy.
Also, in 2025 the project to support the Just Energy Transition in Colombia is expected to start. This initiative, financed with resources from the IDB and the Climate Investment Funds, will seek to finance projects for the integration of renewable energy through the Financiera de Desarrollo Nacional, Colombia’s national development bank.
These projects are related to energy communities, rural electrification, transmission and distribution equipment, smart metering, electromobility and potentially innovative technologies such as green hydrogen and offshore wind.
These initiatives, together with the Todos Somos PAZcífico Plan, demonstrate the IDB’s efforts to reduce Colombia’s dependence on hydropower generation and fossil energy sources. They seek to strengthen the resilience of the electricity system, improve coverage and ensure stability in the face of climate variability, while advancing decarbonisation through the integration of renewable energy and clean technologies.

What flagship energy projects are you currently funding, and how will they positively impact communities in Colombia and Latin America and the Caribbean?
The IDB has made significant progress in projects that address energy needs and promote sustainable economies. In Colombia, energy efficiency and electrification projects in the insular, Caribbean and Pacific regions, as well as a new project to integrate renewable energies, stand out. These efforts contribute to decarbonisation, expanding access to energy and reducing costs for users.
At the regional level, “LAC E-Coop,” which promotes access to clean energy sources for productive activities in the countryside, stands out. Led by IDB Lab, this initiative will directly impact 2,300 low-income producers by installing clean technologies for machinery in food processing, crop irrigation, product refrigeration and water pumping, among other activities. It will focus on solidarity-economy organisations and seek to increase women’s labour participation.
In addition, in 2023 the IDB launched the IDB Climate programme, a results-based incentive mechanism that rewards borrowing countries for achieving biodiversity and climate-change targets. This programme incentivises energy transition and institutional capacity building to access international green debt markets. Colombia and Uruguay are among the first countries to implement this innovative financial mechanism.

In what ways is the IDB accelerating or contributing to decarbonisation?
Despite the clean-up of the region’s generation matrix, the IDB recognises the need to move towards greater decarbonisation. Indeed, the IDB estimates that strategic efforts to achieve carbon neutrality by 2050 could generate USD 2.7 trillion in net benefits compared to high-emissions development.
To support this transition, the IDB serves as the technical secretariat of the Renewables in Latin America and the Caribbean initiative, which brings together 16 countries committed to accelerating the transition to carbon-neutral electricity systems, with the goal of deriving at least 80% of electricity generation from renewable sources by 2030.
Regional research projects include studies such as “Incorporating energy storage in electricity systems” and “From lithium to electric vehicles in Latin America and the Caribbean.”
In Colombia, technical assistance exercises have been carried out to support the national government, including, for example, the “Cost-benefit analysis to achieve zero net emissions,” the financing of the “Roadmap for Hydrogen in Colombia” and support in the structuring of long-term auctions for non-conventional renewable energy sources.
Currently, technical assistance is also being provided to support Colombia’s energy transition with projects related to the promotion of storage technologies, energy efficiency, offshore wind energy development and energy communities, as well as the recent approval of technical cooperation to support the development of the green hydrogen industry.

What are the IDB’s short- and medium-term objectives for energy, social and economic development in Colombia?
The IDB is committed to addressing the vulnerabilities of countries in the region and unlocking their potential to foster transformative social and economic progress while actively combating climate change.
In Colombia, the goal is to promote sustainable and inclusive growth through initiatives that address the country’s development challenges with a territorial and social-inclusion approach. According to the IDB’s new study, “Territorial Inequalities in Colombia: Realities and Prospects,” some departments of the country have socioeconomic indicators comparable to those of OECD countries, while others are at levels similar to less developed countries.
For example, in the departments with the most factors that threaten the wellbeing and quality of life of citizens, referred to in the study as “Vulnerable Colombia,” the percentage of people with “unsatisfied basic needs,” such as a lack of access to public services such as electricity, is 2.4 times higher than the national average. This underlines the importance of addressing the needs of different territories and population groups, especially those in vulnerable situations.
To reduce these inequalities, in the coming years the IDB plans to contribute to the promotion of public and private investment for the development of green solutions and universal access to affordable clean energy. In the country, progress is also being made on projects related to energy transition which contribute to the reduction of CO2 emissions and economic reactivation.
Given that Colombia is one of the most attractive countries in Latin America with regard to investing in renewable energy, due to the availability of optimal natural resources for clean energy generation and a favourable regulatory environment, the IDB seeks to support the country in attracting foreign direct investment in the energy sector.

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