The system requires this energy and the rule is preventing it
In the shadow of a coming El Niño, Colombia's Energy Ministry has issued an urgent call to its power regulator, warning that the nation's electricity system is drifting toward a deficit it may not be able to absorb. The gap between what the grid can reliably produce and what the country will need has been measured and named — nearly 4 terawatt-hours annually by late 2026 — and the ministry argues that outdated rules are preventing existing plants from offering the capacity they already possess. It is a familiar human predicament: the tools to address a foreseeable crisis exist, but the frameworks governing their use have not kept pace with the urgency of the moment.
- Colombia faces a projected electricity shortfall equivalent to a 450-megawatt plant running without pause — and the gap is expected to nearly double within two years.
- A 2007 regulation is actively preventing Hidroituango, one of the country's largest hydroelectric plants, from bidding its full available capacity into supply auctions, leaving over 0.26 TWh on the table.
- Climate forecasters give a 95% probability to El Niño arriving in June 2026, threatening the rainfall that Colombia's hydroelectric-heavy grid depends on to keep the lights on.
- Scarcity prices surged 25% in a single month — from 803 to 1,006 pesos per kilowatt-hour — signaling that energy markets are already bracing for tightness.
- The Energy Ministry has formally demanded that regulator CREG urgently revise auction rules, expand the pool of eligible participants, and recalibrate the scarcity price mechanism before the climate window closes.
Colombia's Energy Ministry sent a formal alarm to the country's power regulator in mid-May, warning that the national electricity system is heading toward a supply deficit and that existing regulations are making the problem worse. The letter, signed by Minister Edwin Palma Egea and addressed to the Commission for Energy and Gas Regulation (CREG), called for immediate changes to the rules governing how energy supply contracts are auctioned.
The numbers behind the warning are stark. Government projections estimate a shortfall of roughly 2 terawatt-hours per year for the period ending November 2026 — a figure that nearly doubles to 3.9 terawatt-hours in the following twelve months. The ministry described the larger deficit as equivalent to losing the continuous output of a 450-megawatt power plant.
A specific regulatory bottleneck sits at the center of the complaint. A CREG resolution dating to 2007 limits how much additional reliable energy existing plants can offer when they expand or modernize. The ministry pointed to Hidroituango as a telling example: planned reservoir maintenance could increase the plant's reliable output by over 1 terawatt-hour annually, yet current rules cap its auction bid well below that threshold, leaving significant capacity unused precisely when the system needs it most.
The climate dimension sharpens the urgency. U.S. forecasters place a 95 percent probability on El Niño conditions emerging in June 2026 — a pattern that historically reduces rainfall across Colombia and strains the hydroelectric dams that supply a large share of national power. Meanwhile, the market is already sending distress signals: the scarcity price, a key indicator of grid stress, jumped 25 percent in a single month between March and April 2026.
The ministry asked CREG to act within the current auction cycle — incorporating the energy the system needs, creating drought-resilience incentives, broadening the pool of eligible participants, and revisiting the scarcity price formula. Colombia's reliability charge mechanism has long been its primary safeguard against supply crises, but officials are now signaling that the framework was not designed for the climate and demand pressures now bearing down on it. Whether the regulator moves quickly enough may determine whether the country weathers the coming dry season intact.
Colombia's Energy Ministry sent an urgent message to the country's power regulator in mid-May, warning that the nation faces a looming electricity shortage and demanding immediate changes to how the government auctions off energy supply contracts. The alert, signed by Energy Minister Edwin Palma Egea on May 14th and addressed to the Commission for Energy and Gas Regulation (CREG), centers on a troubling gap between projected electricity demand and the reliable power generation capacity available to meet it.
The ministry's projections, drawn from data compiled by the National Dispatch Center, paint a worsening picture. For the period between December 2025 and November 2026, the government estimates a shortfall of 1.97 terawatt-hours per year. That number nearly doubles for the following twelve months—reaching 3.9 terawatt-hours annually between December 2026 and November 2027. To put that in perspective, the ministry noted that the larger figure equals the annual output of a single power plant with roughly 450 megawatts of continuous capacity. The government framed this as a situation demanding immediate regulatory intervention to expand which companies and projects can participate in the country's energy supply auctions.
At the heart of the ministry's complaint lies a specific regulatory rule that, in its view, is making the shortage worse. A 2007 CREG resolution limits how much additional reliable energy certain existing plants can offer when they undergo expansion or modernization work. The ministry cited Hidroituango, one of Colombia's largest hydroelectric facilities, as a concrete example. Planned maintenance work on the reservoir could theoretically increase the plant's reliable energy output by 1.066 terawatt-hours annually. Yet current regulations cap what Hidroituango can actually bid into the auction at just 0.8 terawatt-hours—leaving roughly 0.266 terawatt-hours of available capacity sitting unused precisely when the system needs it most.
The timing of this warning is sharpened by climate forecasts. The U.S. National Oceanic and Atmospheric Administration projects a 95 percent probability that El Niño conditions will emerge in June 2026. In Colombia, where hydroelectric dams supply a substantial portion of national electricity, such a weather pattern typically means reduced rainfall, lower reservoir levels, and constrained generation capacity during the dry months. The ministry emphasized that this convergence—a projected energy deficit, regulatory barriers to expanding supply, and a looming climate event—creates what it called an imminent risk to the country's continuous power supply.
Another warning sign already visible in the market is the price of scarcity, a financial indicator that triggers emergency generation obligations when the grid faces stress. That price jumped sharply from 803.7 pesos per kilowatt-hour in March 2026 to 1,006.9 pesos per kilowatt-hour in April, a 25 percent increase in just one month. The ministry interpreted this spike as evidence that market participants are already pricing in supply tightness.
In response, the ministry formally requested that CREG undertake urgent regulatory reviews within the ongoing auction process for reliable energy contracts. The government wants the regulator to immediately incorporate the energy the system requires, create incentives that ensure generation capacity remains available during future droughts, and recalculate the scarcity price mechanism itself. The ministry also asked for a review of which plants and projects can participate in the auctions, arguing that broadening the participant base would strengthen the nation's ability to weather both climate stress and operational strain.
The Cargo por Confiabilidad—the reliability charge mechanism at the center of this dispute—has long been Colombia's primary tool for guaranteeing electricity supply during periods of water scarcity or extreme weather. Under the system, power plants receive contractual obligations to supply energy and must deliver when system conditions demand it. The ministry's intervention signals that officials believe the current regulatory framework is not fit for the climate and demand challenges ahead. What happens next depends on whether CREG agrees to loosen the rules before El Niño arrives.
Citas Notables
This situation demands the immediate adoption of measures that expand the base of agents capable of participating in auction mechanisms and incentivize their early entry— Energy Minister Edwin Palma Egea, in circular to CREG
The combination of the projected deficit, scarcity price behavior, and the probability of a critical hydrological event creates an imminent risk to continuous electricity service— Colombia's Energy Ministry, in formal warning to regulator
La Conversación del Hearth Otra perspectiva de la historia
Why is the ministry so alarmed right now? Colombia has managed power shortages before.
The convergence is what matters. You have a projected deficit, regulatory rules that are actively preventing plants from offering available capacity, and a 95 percent probability of El Niño hitting in a few months. It's not one problem—it's three at once.
The Hidroituango example—that's a real plant that could add power but can't because of a rule from 2007?
Exactly. The plant could theoretically increase its reliable output by 1.066 terawatt-hours, but regulations cap what it can bid at 0.8. That's a quarter of the available capacity locked out of the market by a rule written before anyone was thinking about this kind of stress.
And the scarcity price jumping 25 percent in one month—what does that tell you?
It tells you the market is already nervous. When traders see supply tightening, they bid up the price of scarcity. It's a signal that people with money are betting on shortages. The ministry is reading that signal and saying: we need to act before this becomes a crisis.
If CREG loosens these rules, does that solve the problem?
It helps. Expanding who can participate and how much they can offer would bring more capacity into the auction. But it's not a silver bullet. You still have the climate risk. If El Niño dries up the reservoirs, even more generation capacity won't matter if there's no water.
So what's the real ask here?
The ministry wants CREG to move fast—to change the rules before June, before El Niño arrives, before the deficit becomes acute. They're asking for regulatory flexibility in a moment when the system feels fragile.