Hydrogen law, regulations & strategy in Colombia

The hydrogen industry is emerging in Colombia, as it is expected to be one of the most relevant low-carbon alternative energy solutions in the following decades. In general terms, the Colombian energy sector expects hydrogen to play a substantial role as part of the energy transition programme, 1 More information is available in https://www.minenergia.gov.co/libro-transicion-energetica  contributing to the goal set by the Colombian Nationally Determined Contributions (“NDC”) of reducing 51% of its greenhouse gas (“GHG”) emissions by 2030 compared to 2015. 2 For  more information (i) https://www.minambiente.gov.co/index.php/noticias/4877-colombia-reducira-en-un-51-sus-emisiones-de-gases-efecto-invernadero-para-el-ano-2030 and (ii) https://www.minambiente.gov.co/images/cambioclimatico/pdf/NDC_Colombia/informe_NDC_de_Colombia_2020_Versi%C3%B3n_Final.pdf.

Currently, no hydrogen projects are being developed in Colombia, even though different stakeholders are considering the jurisdiction for investing and forming the hydrogen industry. The state-owned company Empresa Colombiana de Petróleos (“ECOPETROL”) uses grey hydrogen for some processes inside its refineries and oversees a green hydrogen pilot project for reducing emissions in its refineries. 3 https://investincolombia.com.co/es/articulos-y-herramientas/articulos/hidrogeno-verde-una-alternativa-para-el-futuro-de-la-energia-en-colombia?__cf_chl_tk=Gf_4UOAJA4RBKqNULjaqnYOdUoI4ApVCxq6uNcbwWYI-1637776543-0-gaNycGzNCeU

According to Colombia’s National Energy Plan 2020–2050 (“PEN”), the Ministry of Mines and Energy and the Unit of Energy Mining Planning (“UPME”) have committed to a clean energy transition. Colombia is one of the Latin-American leaders in energy transition, having set a target of 2,400 MW of renewable energy capacity by 2022, diversifying the energy matrix with clean energy sources. According to the PEN, renewable energy is expected to be the principal energy source in Colombia by 2050.  This is also counting on the hydrogen industry developments. 4 http://www.upme.gov.co/docs/pen/pen_idearioenergetico2050.pdf By 2050, Colombia is expecting to have a significant green hydrogen production from renewables. 5 https://www.minenergia.gov.co/documents/10192/24302627/Hoja+de+Ruta+H2+Colombia_Borrador.pdf

Earlier in the year, the Colombian government, in partnership with multilateral organisations and research institutes, started to develop a route to establish principally:

1. initiatives and activities to be developed in the short (2 years), medium (5 years) and long term (10 years);
2. potential hydrogen exportations;
3. a legal framework;
4. incentives for the different stages of the hydrogen chain; and
5. private investment, (the “Hydrogen Route”).

The hydrogen market in Colombia is at an early stage but has significant prospects for growth. As part of the Hydrogen Route, it is anticipated that in the near future, opportunities will come mainly in the form of pilot projects by state-owned companies such as ECOPETROL and Grupo de Energía de Bogota (“GEB”), as Colombia oversees hydrogen as a low-carbon alternative energy solution which is capable of being one of the Colombian principal energy sources by 2050, increasing the fulfilment of the rural energy needs. 6 https://www.ocensa.com.co/Paginas/Los-planes-de-GEB-y-Ecopetrol-con-el-hidr%C3%B3geno.aspx

Currently, Colombia does not have large-scale facilities for mass hydrogen production, nor the tough, high-pressure, insulated fuel tanks required for large-scale hydrogen storage.  Instead, the Colombian government is evaluating the possibility of using the local gas infrastructure and facilities to overcome large-scale facility issues, as Colombia expects to export green and blue hydrogen. 7 https://www.larepublica.co/analisis/jose-david-name-507206/atencion-a-la-emergente-industria-del-hidrogeno-verde-3113532

As the hydrogen industry in Colombia is nascent, there are currently no records of M&A or project financing activity.  In addition, stakeholders continue to monitor the hydrogen industry as the state-owned companies’ pilot projects evolve.

Like many other jurisdictions, Colombia does not yet have a well-defined legislative framework regulating hydrogen. Even though, last year, Bill No. 371 of 2020 (Senate), which promotes the production and use of green hydrogen in different industries, was presented to the National Congress.

Given the emerging status of hydrogen as a low-carbon energy alternative, it is crucial that new regulations cover all hydrogen types as a hydrogen chain to regulate the use of hydrogen in Colombia. However, many gaps in the energy sector will need to be addressed before the hydrogen framework is determined. 8 E.g., gas reservoirs.

As many different countries' economies consider the hydrogen industry as part of the strategy to reduce GHG emissions, one of the key challenges for its development involves the production, refurbishment, and transportation of hydrogen, with high costs and the difficulty in achieving economies of scale. 9 https://www.asuntoslegales.com.co/analisis/jose-luis-palacios-verswyvel-3000911/el-hidrogeno-en-el-sector-electrico-colombiano-3155970

Colombia's principal source in the electric generation matrix is hydric, providing clean and efficient energy generation in terms of costs. This clean generation may imply a lower environmental pressure to develop green hydrogen projects in Colombia than in other jurisdictions, especially regarding energy costs.

As mentioned above, Colombia does not have a specific or well-defined legislative framework that regulates hydrogen-based projects. Instead, and until a specific regulation is issued, hydrogen projects may be governed (on applicable grounds) by the existing legislative framework for natural gas and renewable energy projects. The most relevant laws are:

1. Decree 1609 of 2002, regarding the land transportation of hazardous materials and waste;
2. Law 1715 of 2014, with promotes renewables integration to the National Energy System;
3. Decree 570 of 2018, which establishes public policy guidelines for long-term power generation projects;
4. CONPES 3934, relating to public policy for green development (energy matrix diversification); and
5. Law 2099 of 2021, regarding energy transition framework.

The Colombian gas market is regulated by the Energy and Gas Regulatory Commission (Comisión de Regulación de Energía y Gas (“CREG”)), a government body for the national regulation of the mining-energy sector.
The Colombian Ministry of Mines and Energy, CREG, and UPME, are crucial for the further development of hydrogen projects. They lead, regulate, and coordinate efforts in the field of natural gas and renewable energies. Earlier this year, the Ministry of Mines and Energy started to promote the implementation of the Hydrogen Route. 

Colombia does not have one regulatory body which exclusively regulates hydrogen projects. Instead, as hydrogen falls under the existing regulation of the gas and electricity markets, the responsible bodies that may be involved are:

Regarding Colombia’s commitment to reduce GHG emissions and be one of the energy transition leaders in Latin-America, the National Congress may enact the green hydrogen law. The government may start regulating and promoting hydrogen projects in the following years.

The Hydrogen Route expects:

1. a 1GW of electrolysis capacity by 2030; and
2. an adoption of hydrogen vehicles.

As mentioned before, there are currently no low-carbon hydrogen projects in Colombia. Even though green hydrogen pilot projects are expected to start by 2022. 

1. ECOPETROL would develop a hydrogen pilot project of 50 KW by electrolysis. This pilot would take place in Cartagena’s Refinery and would be operating by the first quarter of 2022. 10 More information available https://www.portafolio.co/economia/infraestructura/empresas-que-haran-piloto-de-hidrogeno-en-colombia-557104  It is also evaluating 17 further hydrogen projects, including pilots for its Barrancabermeja refinery. These would require about USD $200mn-$300mn in investment, 11 More information available https://www.argusmedia.com/en/news/2259875-colombias-ecopetrol-eyes-18-hydrogen-projects  as part of Colombia's goal of developing hydrogen energy options.
2. Promigas is developing two hydrogen pilots in the northern part of the country, with one operating by 2022. It is also studying four different market segments:
   1. distributed generation;
   2. decentralized production;
   3. mix gas pipelines;
   4. and mobility 12 UK-657896881.256.3.2Promigas is developing two hydrogen pilots in the northern part of the country, with one operating by 2022. It is also studying four different market segments: (a)distributed generation;(b)decentralized production;(c)mix gas pipelines; and(d)mobility.126.3.3Transportadora de Gas Internacional (“TGI”) is expecting to present its pilot in the next weeks regarding GEB’s clean energy policies.1312 For more information https://www.bloomberglinea.com.co/2021/10/06/colombia-alista-pilotos-de-hidrogeno-verde-en-sectores-de-gas-e-hidrocarburos
3. Transportadora de Gas Internacional (“TGI”) is expecting to soon present its pilot in the next weeks regarding GEB’s clean energy policies. 13 More information available https://www.tgi.com.co/