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A Colombian power firm’s daring wager on sustainability

When Juan Ricardo Ortega was appointed president of Grupo Energía Bogotá (GEB), Colombia’s largest pure gasoline transporter and second-largest power transmitter, in July 2020, he introduced a singular set of abilities and experiences to the function. Ortega was educated in economics, finance, and arithmetic on the College of the Andes after which at Yale (the place, at age 54, he’ll quickly full a Ph.D. in financial improvement). He started his profession as chief economist at multinational banking firm BBVA in Bogotá within the Nineteen Eighties however later transitioned to the general public sector, when he was appointed financial advisor to then Colombian President Andrés Pastrana.

Ortega went on to carry different high-level public positions, reminiscent of vice minister of finance and commerce and secretary of finance for the Metropolis of Bogotá, in addition to professorships at Colombian universities. From 2014 to 2020, he labored as an advisor to the Inter-American Improvement Financial institution in Washington, DC, however returned to Colombia when he was appointed president of GEB. He joined at a important second, because the 125-year-old firm expands its portfolio to incorporate nonconventional renewable power and will increase its presence in Latin America. For instance, in June 2021, GEB introduced an settlement with the Italy-based power multinational Enel to create Enel Colombia, a subsidiary that can embrace extra fairness worth of US$1.4 billion in renewable power belongings positioned in Colombia, Panama, Costa Rica, and Guatemala.

GEB is effectively positioned to make these strikes. It stands out amongst different Colombian public utilities due to its shareholder construction—though the Metropolis of Bogotá owns the vast majority of its shares (65.7%), near 35% are privately held—which helps it keep above the political fray. GEB’s web earnings rose by 36% in 2020, and it’ll distribute $437 million in dividends this yr. In a current video interview with technique+enterprise, Ortega shared his ideas on the way forward for the power sector in Colombia, because the nation strikes past hydropower to embrace different renewables.

S+B: Waiting for the subsequent few a long time, how do you see your online business remodeling to fulfill power wants in Colombia and, extra broadly, in Latin America?

ORTEGA:
The local weather change and power transition agenda is central for Colombia, a rustic the place 70% of electrical energy already comes from renewables [the majority from hydropower]. Colombia’s authorities has set a purpose of decreasing web carbon emissions by 51% by 2030. That could be a very aggressive purpose.

On the identical time, I believe it could be unreasonable for a rustic like Colombia to decide to zero web emissions for the subsequent ten to twenty years. Colombia contributes round 92.5 million tons of carbon a yr. The world’s complete determine is round 39 billion tons, which implies Colombia’s carbon emissions are .25% of the worldwide share. Due to this fact, if we decide to a zero web emissions technique, it could hinder Colombia’s capability to compete with different international locations and to spice up its financial system, particularly as a result of the nation has a whole lot of potential in gasoline.

I believe there are very strong arguments to defend gasoline as a transition power supply in Colombia. It may possibly assist progress and employment and assist Colombia grow to be an more and more aggressive financial system. If the heavy cargo business, particularly, makes the transition [from oil] to gasoline, it could assist to scale back particulate matter.

I additionally imagine probably the most smart choice is to modify industrial autos to run on electrical energy. That’s why our wager is on electrical energy. We imagine it is going to be one of many huge winners within the subsequent 20 years. There’s additionally an enormous alternative within the area because the transmission infrastructure from Mexico to Chile is built-in to allow a extra environment friendly supply of electrical energy from crops to clients. Colombia can drastically profit from this course of. We’ve the businesses, the contractors, the worth chains, and the experience to assist generate extra resilient transmission networks all through the area.

There are vital progress alternatives on this matter, and that’s the reason we’re investing in Peru, Brazil, Guatemala, and Colombia—international locations the place we have now a big transmission community, with hundreds of kilometers of traces in operation. For instance, in Peru we’re leaders with ISA REP and ISA Transmantaro [energy transmission companies], and in Guatemala, we’re engaged on an vital power transmission mission. We wish to place the corporate in order that sooner or later we are able to take advantage of out of this built-in infrastructure and maximize progress.

S+B: What renewable sources will play a job in Colombia’s power transition?

ORTEGA:
Colombia has monumental wind and solar energy potential in La Guajira. [Located at the northern tip of the country along the Caribbean Sea, the region gets abundant sunlight, and its average wind speed is more than double the world’s average.] Vichada, on the japanese plains, has nice photo voltaic depth, and southern Galerazamba, towards the north of the nation, additionally has robust winds. There’s additionally a chance for biomass power. Colombia is already making an attempt to make sugarcane right into a supply power, and I believe it may well produce power from methane emissions from landfills.

I’ve little doubt that hydrogen shall be a viable supply of energy inside the subsequent ten to fifteen years. We try to be taught from Chile about hydrogen’s potential. Chile already has an extra of unconventional renewables in Atacama. In addition they have a mining business that calls for ammonia and warmth, and, in that sense, hydrogen comes nearly naturally to them.

In Colombia, hydrogen’s potential just isn’t so apparent. To make it possible, we first want power accessible at a really low value. For that, we have to develop our photo voltaic and wind farms within the subsequent few years. We then have to do issues like improve our gasoline pipelines to ensure they’re much less susceptible to corrosion. [Hydrogen, through a deterioration process called hydrogen embrittlement, can lead to corrosion and cracking in metals.] I don’t see this transformation taking place but. The price of storing hydrogen and of transporting it has made that troublesome. Nonetheless, you already see international locations like Germany with hydrogen stations and autos. And that’s the reason I believe it is a supply of power we have to pay shut consideration to. We have to research the best way to get there.

Lastly, our current settlement with Enel will permit us to have a share within the nonconventional renewable power market. A brand new, worldwide firm is being shaped from the merger of Emgesa, Codensa, and Enel Inexperienced Energy. The brand new firm can have a presence in Colombia, Panama, Costa Rica, and Guatemala, and can have an put in capability of 5,470 megawatts by 2025, with a main give attention to renewable power.

S+B: Moreover investing in renewables, what’s GEB doing to scale back its environmental affect?

ORTEGA:
Sixty p.c of Colombia’s emissions are the product of deforestation, which, in flip, comes from agriculture, livestock, and related sorts of land use. Somewhat than give attention to a zero web emissions technique, a extra environment friendly solution to cut back our environmental affect could be to deal with deforestation and unsustainable cattle ranching. I believe that’s the place the true downside is.

With this in thoughts, our firm’s technique is predicated on restoring native forests. Now, this isn’t about planting timber. What biologists have beneficial is for us to give attention to the restoration of ecosystems. We’re utilizing our electrical and gasoline infrastructure to create corridors that interconnect pure parks and ecosystems. This manner we are able to broaden areas that assist to protect biodiversity and native species. We’ve profitable examples of this, particularly in southern Colombia with the preservation of two species of native fauna—the mountain tapir and the spectacled bear.

In one other instance from southern Colombia, in Putumayo, our native department has performed an incredible job restoring all the infrastructure that was destroyed within the landslides that hit Mocoa, Putumayo’s capital, in 2017. We’ve realized to construct with little or no affect on nature. We now make towers which might be very lean and tall. They stand in small areas and due to this fact don’t require us to chop down a lot of surrounding timber. We not use bulldozers to put in cables. As an alternative we use drones and really small paths.

S+B: What do you imagine are the best challenges in pursuing a sustainability technique?

ORTEGA:
Many Colombians don’t but absolutely perceive the magnitude of environmental threats. We hold pondering that local weather change is a topic for others to debate. However we’re already seeing local weather change phenomena in Colombia, like El Niño, La Niña, and extended droughts. Climate projections say that for as much as 30% of the yr, La Guajira might have temperatures of fifty to 60 levels Celsius. That may make this area uninhabitable.

The best problem we have now is communication. False tales have unfold on social media that we have to combat in opposition to, for instance, that cows produce inexperienced milk as a consequence of being close to our towers, or that the towers have brought about leukemia in youngsters. It makes folks imagine {that electrical} infrastructure is a menace to the setting and communities, when in reality, it helps them. For instance, cooking with charcoal and firewood has led to horrible lung illnesses.

The empirical info, sadly, should not being communicated. And it’s so laborious for us to refute these concepts, to persuade people who this infrastructure just isn’t a menace. We face a really nice problem in Colombia in incomes credibility and the belief of the folks. However it’s our responsibility to attempt to earn that belief. And that’s, partially, why we have now a method to regenerate ecosystems. We imagine it may well assist us construct relationships with communities. By means of optimistic outcomes, we are able to present them that preserving nature is appropriate with our infrastructure.

S+B: What do you imagine authorities can do to assist?

ORTEGA:
 The federal government wants to assist deal with the misinformation downside. It ought to give attention to training, to ensure everybody has a fundamental degree of information about local weather change threats.

It’s our responsibility to attempt to earn [people’s] belief. By means of optimistic outcomes, we are able to present them that preserving nature is appropriate with our infrastructure.”

There’s additionally the necessity for higher laws to allow the power transition. Carbon taxes are, in my view, important. And we should talk about, as a society, the prices of externalities. The worldwide common tax for a ton of carbon is round [US]$60 to $70. In Colombia, it’s simply $5. That sends a weak message. We will’t change this in a single day, however we do have to take steps so that individuals begin migrating from diesel, gasoline, and coal.

This may be performed step by step. For instance, I imagine the homeowners of all these luxurious four-wheel-drive vehicles might pay a carbon tax that compensates for the affect of their autos. After they start to see what it prices to personal these vehicles, they are going to begin to migrate to electrical autos. And in Colombia, we additionally have to have a dialog concerning the type of hybrid autos we have now. A lot of what’s referred to as a hybrid in Colombia isn’t actually hybrid. They’re vehicles which have miniature batteries—folks purchase them to get round circulation restrictions, reminiscent of pico y placa, which restricts visitors throughout rush hours in a number of Colombian cities.

Furthermore, international locations which might be implementing these measures—taking satisfactory steps, imposing taxes, and assuming all the prices of defending the setting—ought to be capable to defend themselves in opposition to international locations that aren’t, and are thus unfair rivals. For instance, america is already interested by this, by ensuring calls for on international firms that wish to entry its market.

The federal government and the power sector even have to consider what will occur with sure industries that can disappear, just like the coal business. They make use of lots of people. So how are we going to make use of all of those that could possibly be jobless sooner or later? And the way are we going to take care of the infrastructure that can grow to be out of date? These are very uncomfortable and troublesome debates, however they’re imminent.

S+B: For Colombia, particularly, what authorities investments do you suppose would have the best affect?

ORTEGA:
We imagine La Guajira deserves a nationwide dialogue. We have to perceive how the native financial system of the Wayuu ethnic group, which lives in La Guajira and may be very poor and weak, can grow to be viable.

One factor we are able to do is to create good-paying jobs for 20, 30, and even 40 years. And we are able to generate analysis and improvement in a area that has an immense potential if solely the proper infrastructure is constructed there. For that, nevertheless, we have to acknowledge that for hundreds of years this area has suffered from advanced crime issues and a scarcity of state presence.

I imagine firms like ours can assist by pushing for an vital a part of our taxes to be mixed with social duty packages. That means we can assist rework La Guajira. However we are able to’t try this alone. We’d like a state that may present the providers and advantages that solely governments can present. Particularly, the state must strengthen its justice system and its capability to conduct felony investigations.

S+B: What’s the function of digital transformation in GEB’s evolution?

ORTEGA:
Our funding in a digital agenda has helped us, significantly with our managerial efforts—our potential to grasp what we’d like and to hint what’s taking place. For instance, we found in the course of the pandemic that we had large investments in gear and applied sciences that had been underutilized. We’ve additionally began to embrace automation.

In fact, some folks really feel threatened by automation. They fear that they are going to grow to be irrelevant or that they are going to lose their job. However automation truly facilitates progress. It permits us to relocate folks to roles the place they’re actually wanted or the place they could possibly be extra productive. And computer systems don’t robotically resolve administration issues. Ideally, automated programs make life simpler for folks and permit for accountability. However all that requires nice assist from a strong and mature group. In any other case, these programs received’t flourish.

S+B: How is digitization enabling your organization’s sustainability objectives?

ORTEGA:
Colombia is at the moment debating introducing AMI [advanced metering infrastructure], or good meters, for power consumption. This know-how just isn’t but extensively accessible in growing international locations like Colombia as a result of it’s too costly. However as the worth drops, good meters will grow to be accessible and can permit us to cost for power at a mean value relative to a time-frame. For instance, if you wish to bake a cake late at night time when fewer individuals are consuming power, you’ll pay lower than for those who baked it at dinnertime. Our capability to transition into electrical vehicles additionally depends upon the convenience of charging autos [at hours] when power is cheaper. With this technique, folks might use power 24 hours a day and in a way more environment friendly means.

This type of innovation can even assist folks perceive which home equipment find yourself being costlier as a result of they use extra power. For instance, folks would notice how a lot it prices to have an previous fridge. And, going additional, we might even supply incentives, like credit score, so that individuals can exchange these inefficient fridges. Ultimately, that funding pays for itself as a result of folks will get monetary savings on power.

Clearly, we have to deal with this type of information with care, and we have to have guidelines that shield customers’ identities. As soon as we try this, providing these new sorts of merchandise will make folks’s lives a lot simpler and generate monumental worth for them.

S+B: By way of defending information, what measures are you taking in opposition to cyber threats?

ORTEGA:
Final yr, we had a cyberattack, regardless that we had purchased all of the safety software program wanted to mitigate the chance of our staff working from house. It occurred whereas we had been making an attempt to implement our new protection system, and our workers was not absolutely educated but. They recognized the assault a bit late. Luckily, we managed to defend ourselves by shutting down the servers earlier than the attackers accessed delicate databases. Ultimately, we had an operational downside of just a few hours. However this was a wake-up name for us, as we realized it was an try to extort us.

After that assault, we have now targeted on coaching our workers in opposition to cyber threats. We realized that we’ll not be protected till each worker is educated, till everybody is part of our firm’s safety. Digital innovation has additionally made the electrical energy sector extra weak, as we noticed in Ukraine in 2015, when Russian hackers left tens of millions with out energy for greater than 24 hours. You must be on prime of cybersecurity each day, and remember that it’s best to go the additional mile to guard your organization.

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