Biomass generated energy
Biomass generated energy
Business Model Description
Produce energy from lignocellulosic residues, biomass obtained from plant residues such as rice husks, coffee souks, palm oil, and sugar cane by implementing value-chains that include biorefineries that transform certified bio-products, resulting in an array of alternative fuels such as biodiesel and ethanol.
Expected Impact
This initiative intends to reduce the environmental impact of traditional energy sources through the use of biomass energy.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
Sector Classification
Renewable Resources and Alternative Energy
Development need
>44% of green gases emissions in Colombia come from energy related activates that comprise the burning of fossil fuels in manufacturing, transportation, oil&gas industries.
>Less than 1% of the country's energy sources come from non-conventional renewable sources (1) (2).
Policy priority
>According to the National Energy Plan 2020-2025 sets the target of diversification of Colombia's energy matrix to be 12-20% non-conventional renewable sourced by 2050 (2).
Gender inequalities and marginalization issues
>86.3% of households led by rural women have access to electricity whereas 96.3% is the national level (3).
Investment opportunities
> Auto generation through non-conventional generation sources, generation for non-interconnected areas and renewable energy auctions (4).
Key bottlenecks
> Colombia has a heavily concentrated energy matrix and new technologies are costly for private investors due to the low development of the non conventional renewable market.
Alternative Energy
Development need
>44% of green gases emissions in Colombia come from energy related activates that comprise the burning of fossil fuels in manufacturing, transportation, oil&gas industries.
>Less than 1% of the country's energy sources come from non-conventional renewable sources (1) (2).
Policy priority
>According to the National Energy Plan 2020-2025 sets the target of diversification of Colombia's energy matrix to be 12-20% non-conventional renewable sourced by 2050 (2).
Gender inequalities and marginalization issues
>86.3% of households led by rural women have access to electricity whereas 96.3% is the national level (3).
Investment opportunities
> Auto generation through non-conventional generation sources, generation for non-interconnected areas and renewable energy auctions (4).
Key bottlenecks
> Colombia has a heavily concentrated energy matrix and new technologies are costly for private investors due to the low development of the non conventional renewable market.
Biofuels
Pipeline Opportunity
Biomass generated energy
Produce energy from lignocellulosic residues, biomass obtained from plant residues such as rice husks, coffee souks, palm oil, and sugar cane by implementing value-chains that include biorefineries that transform certified bio-products, resulting in an array of alternative fuels such as biodiesel and ethanol.
Business Case
Market Size and Environment
> USD 1 billion
20% - 25%
> According to Fedepalma, Colombian consumption of palm oil biodiesel will be 550 million kilograms and 440 million litters of fuel ethanol (5). Based on FedeBiocombustibles prices ($0.8USD/litters of ethanol and $1.2USD/kg of biodiesel (6), there is a USD $1bn local opportunity.
> According to a study performed in EAFIT, Biomass participation in the energy matrix has grown 20% from 2007 to 2017.
Indicative Return
> 25%
Accoring to local investors interviewed, they expect IRRs over 25% for biomass energy generation.
Investment Timeframe
Medium Term (5–10 years)
Accoring to local investors interviewed, expected holding periods for biomass energy generation are around 5 to 8 years.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
> 18k deaths in Colombia (8%) in 2016 were attributed to environmental risk factors (7).
> The annual cost to health of contamination produced is 1.5 trillion pesos (USD $ 790 million), equivalent to 0.8% of the Gross Domestic Product.(8)
> 44% of green gases emissions in Colombia come from energy related activates that comprise the burning of fossil fuels in manufacturing, transportation, oil&gas industries.(1)
Gender & Marginalisation
> 86.3% of households led by rural women have access to electricity whereas 96.3% of households have access at a national level (3).
Expected Development Outcome
> Diversify energy matrix to 12-20% non-conventional renewable sources by 2050.
> Improve the quality of the environment by reducing polluting emissions.
> Reduce airborne related diseases and premature deaths and generate additional employment in agriculture and bio economy related activities.
Gender & Marginalisation
> Reduce gender gaps in access to public services including electricity, preventing poverty traps.
Primary SDGs addressed
7.2.1 Renewable energy share in the total final energy consumption
7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
7.1.1 Proportion of population with access to electricity
Current non conventional renewable share (2019): 1% (2).
Per capita installed capacity of non conventional renewables is 3.9 (2)
Electricity coverage in Colombia is around 96% (17).
Target level (2050): 7-12% non conventional renewables target in 2050 (2).
7.7 watts per capita installed capacity of non conventional renewables expected by 2030, based on National Energy Plan forecasts and DANE population forecasts (2).
The target coverage by 2030 in Colombia is 100% (17).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Outcome Risks
> There are external environmental costs that could arise from biomass energy production such as soil depletion due to the removal of nutrients.
> Increased sugar cane production could lead to deforestation creating a negative impact for the environment.
Impact Risks
External risk: > Better coordination is lacking between agricultural policies adapted for biofuel production and food security policy in the country. > Drastic changes in the environment that are not accounted for such as earthquakes, tsunamis, and other natural disasters affecting ability to source energy.
Execution risks: > transport and collection difficulty could reduce the capacity to benefit a wide population.
Drop off risks: . > companies owning sugar mills might not explore this opportunity given that it is not a part of its core business
Impact Classification
What
Positive and significant outcome due to improved basic services coverage and sustainability.
Risk
Failing to diversify the energy matrix could lead to energy shortages, lack of access and environmental health problems-
Impact Thesis
This initiative intends to reduce the environmental impact of traditional energy sources through the use of biomass energy.
Enabling Environment
Policy Environment
(National Energy Plan 2020-2025): sets the target of diversification of Colombia's energy matrix to be 12-20% non-conventional renewable sourced by 2050 (designed by UPME) (2).
(National Development Plan): Achieve diversified energy matrix increasing the shares of bioenergetics (biofuels, biogas, among others), and cleaner fuels (Gasoline at 50 ppm Diesel at 10 ppm) with alternatives that guarantee energy security and supply to all homes.(10)
(Estrategia Colombiana de Desarrollo Bajo en Carbono): Decouple the growth of GHG emissions from economic growth by promoting the alternative sector development.(11)
(Colciencias): Develop a technology transfer system for the biofuels sector, taking into account concepts of best available technologies and best environmental practices (12).
Financial Environment
Other incentives: The Government has been supporting African palm and sugarcane producers with the expansion of irrigation districts and with investments in infrastructure, which makes possible a greater competitiveness of these products (16),
Fiscal incentives: Income tax exemption for late-yield crops; VAT and Global Fuel Tax Rate exemption for mixed biofuels and fossil fuels. Mandatory mix of biofuels expanded to 20%.(2)
Financial incentives: FAER (a fund created by the Ministry of Energy) allows Territorial Entities, to manage investment plans, programs and projects prioritized for the construction and installation of electrical infrastructure and coverage expansion (4)
Regulatory Environment
(Conpes 3510): Are guidelines to promote the sustainable production of biofuels and implement strategies aimed at generating conditions for the improvement of the productive efficiency (13).
(Law 1715 of 2014): regulates the integration of URES into the national electricity system encouraging investment, R&D in the sector, by: (1) Authorizing auto-generators to sell their surpluses to the distribution network and the development of projects based on URES is promoted.(14)
(Law 629 of 2000): this law approved joining the international Kyoto Protocol with the purpose of committing to greenhouse gases emission reduction (15).
(Law 788 of 2002): established income tax exemptions from sales of energy generated from biomass and wind (15).
Marketplace Participants
Private Sector
Sugar mills: Incauca, Manuelita, Mayaguez and Providencia are huge sugar mills able to process and produce enough bio-inputs to generate bio-fuels. Fedepalma: Consolidates a competitive and sustainable palm agribusiness, bringing together, guiding, representing palm growers to contribute to the well-being of their communities.
Non-Profit
Paisaje Palmero Biodiverso: provided a route to incorporate environmental variables in crop planning and implement practices that protect biodiversity and increase productivity.
Government
The government is an important actor promoting the diversification of the energy matrix.
Target Locations
References
- (1)IDEAM (2012) – Inventario de efecto invernadero. Accessed May 22nd 2020
- (2) UPME (2019) -Plan Energético Nacional
- (3) DANE (2018) Mujeres Rurales en Colombia
- (4) Colombia Investment Summit (2020) - Energy. Accessed February 8th 2021. (https://colombiainvestmentsummit.co/es/oportunidades-de-inversion/energia)
- (5)Fedebiocombustibles (2017) – El consumo de etanol en 2017 será de más de 440 millones de litros. Accessed May 4th
- (6)Fedebiocombustibles (2017) – Precios alcohol carburante (etanol) y biodiesel. Accessed May 4th
- (7) National Institute of Health (2019) – Deaths associated with poor quality of water, air, and exposure to heavy fuels. Accessed May 29th 2020 "8) Fedebiocombustibles (2010) – La contaminación atmosférica problemática ambiental. Accessed May 13th 2020 "
- (9) Fedepalma (2018) – Desempeño del sector palmero Colombiano. Accessed June 2nd 2020
- (10) DNP (2017) – Plan Nacional de Desarrollo
- (11) MinAmbiente (2011) – Estrategia Colombiana de Desarrrollo Bajo en Carbono. Accessed June 3rd 2020
- (12) Colciencias (2008) – Programa de investigación, desarrollo e innovación en biocombustibles. Accessed June 3rd 2020 "13) Fedebiocombustibles (2008) – CONPES 3510. Accessed May 22nd 2020 "
- (14) ICEX (2019) – Energías Renovables en Colombia (link)
- (15) Cámara de comercio de Cali (2016)- Normatividad para las Energías Renovables en Colombia. Accessed February 8th 2021. (https://www.ccc.org.co/file/2016/04/Ritmo-Bioenergia-Bioenergia.pdf)
- (16) UPME (2014) - Costo Fiscal de Subsidios y Exenciones Tributarias al Consumo de Gasolina y ACPM. Accessed May 2nd 2020
- (17) Minenergia (2014) Energía eléctrica
- (18) EAFIT (2019) Adopción de Biomasa como Energía Renovable No Convencional en el Mercado Eléctrico Colombiano. Accessed February 8th 2021.