Leading for Hydrogen: Colombia Focuses

Holland & Knight LLP

Holland & Knight LLP

Since 2014, Colombia has been steadily moving ahead in alternative unconventional renewable energy. This effort began with Law 1715 of 2014 and has just recently received a further boost with the issuance of Law 2099, or "Energy Transition Law," on July 10, 2021.

Key in Colombian energy advances are its strong ties with Chile, the Inter-American Development Bank and the pursuit to produce, use and export green and blue hydrogen. Meetings are held periodically at the Ministry of Mines and Energy, which alongside the Unidad de Planeación Minero Energética (UPME) and the Comisión de Regulación de Energía y Gas (CREG) are defining the roadmap into 2030 when Colombia expects to be an active producer and exporter of hydrogen in the regional market.

Colombia's bet on hydrogen has strong science attached to it. With a developing renewable energy base in wind and solar, as well as geothermal alternatives and abundant water resources, may allow Colombia to find a niche with hydrogen and become a regional leader. In the case of blue hydrogen, particular attention is being placed on the important coal reserves Colombia continues to produce and the options for this mining activity to enter into an additional energy market alternative.

Colombia will of course need to swiftly advance its technological understanding of the business, offer stable regulatory and tax conditions, and allow for prompt permitting of hydrogen projects it if is to lead alongside Chile. Opportunities for investors abound in this front, and given where Colombia is situated, this too may be a relevant competitive advantage. Law 2099 highlights tax cuts and benefits for those seeking to invest.

A key to supporting the hydrogen efforts will be not to overregulate an industry that is nascent and has yet many hurdles to overcome. If Colombia's government gets the regulatory and tax framework right, Colombia's natural resources, its strong desire to find additional opportunities for prompt sustainable economic development and the science should provide the tailwinds necessary for hydrogen to find a road much similar to that which Colombian coffee has been driving on for many years.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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