The costs of accelerating energy transition in the country

The costs of accelerating energy transition in the country

Within the framework of the Naturgas Congress, President Gustavo Petro stressed the need to accelerate the energy transition. For this, the president pointed out that the necessary resources must be allocated. In fact, citing Luz Stella Murgas, president of Naturgas, the president said that although Between 2035 and 2050, twice the world’s GDP would have to be used to make a transitionthe question was “what happens if it is not done?”

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Although there is still no clear roadmap regarding what the public policy plans will be to execute this proposal, the Minister of Mines and Energy explained to Portafolio that it would be ready in six months.

In this context, a study by Fedesarrollo, carried out by researcher Juan Benavides, points out that there are a series of economic risks that are related to a policy that “accelerates” the transition. “It is important to examine the economic impacts of forcing technologies that do not meet the conditions of profitability and risk, and of dismantling assets that have not been depreciated and that serve critical functions in conditions of stress to the energy system,” says the analysis.

There are four effects that would be generated: first, reduced tax revenue; the cost overruns of excluding gas from the energy matrix; costs of adopting new technologies on the demand side, with a lower performance/cost ratio, and lastly, the replacement cost from the supply side.

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In the study, Benavides highlights that, for example, there could be a reduction in GDP. Between 2023 and 2030, it could mean between 0.23% and 0.27% annually for “forcing a fraction of the new investment in machinery and equipment to be carried out under conditions of low profitability.” He assures that around US$ 10,750 million could be lost due to this policy in that period.

Added to this is that dismantling thermal generation would cost US$2.34 billion and replacing thermal generation with wind power would cost US$38.9 billion ($163 billion). Benavides points out that despite this, the replacement of this source of generation would be a relatively small contribution to carbon neutrality and also represents high fiscal costs.

However, this is not the only consequence of a measure of this type. It should also be noted that it is these plants that provide reliability to the power generation system, so an accelerated transition could affect it. On this subject, the Deputy Minister of Energy, Belizza Ruiz, pointed out that the plants that are already operating will continue to do so, although new ones of this type will not be promoted in the future.

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The study analyzes that these heavy investments require someone to pay for them. At the moment, non-conventional renewable energies continue to be more expensive compared to others, such as hydro, so that a very abrupt replacement may imply increases in the costs of electricity bills.

Benavides explains that all technologies have a natural maturation speed, in which their generation costs are lowered while other sources depreciate their most polluting assets that are gradually replaced. This process can take at least 30 years and does not necessarily imply a complete change of fossil technologies.

According to the research, this is evidenced in a lower number of emissions (not null) due to the energy consumed, since by 2050, 20,000 tons of CO2 would be emitted for each giga joule of energy; that is, less than half of what is generated in 2021 (as evidenced in the graph). This taking into account that the energy consumption would have multiplied by more than two times. Namely, over time, a much less polluting natural replacement will be achieved.

Daniela Morales Soler

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