How a solar project comes together in Colombia
The legal structures, the parties involved and the risks nobody controls
Behind every solar farm there are seven parties, two possible legal structures and a list of things that get settled before the first panel goes in.
Here you'll see each one, so you can read any solar project (ours or someone else's) and know what to ask.
- 2
- legal structures
- 7
- parties involved
- 11
- rules governing connection and incentives
The words, plainly
Eight terms you'll see in any solar project. We use them throughout the rest of the guide.
Special purpose vehicle (SPV)
A company created only to own the project and its contracts, kept separate from the rest of the business.
PPA
Power purchase agreement. The buyer pays for each kWh (the unit energy is measured in) at an agreed price, for years, without buying the plant.
Comunidad Energética (Energy Community)
A group of users who join together to produce energy. It was created by Ley 2294 de 2023 (Law 2294 of 2023) and regulated by Decreto 2236 (Decree 2236).
EPC
The company that designs the plant, buys the equipment and builds it. The acronym stands for engineering, procurement and construction.
Surplus energy
The energy the plant produces that nobody is using at that moment. It's delivered to the grid and settled on the bill.
Network operator
The company that runs the power lines in the area. It authorizes and oversees a plant's connection.
Electricity retailer
The company that sells the energy and issues the bill. That's where the surplus energy shows up.
CREG and UPME
CREG sets the rules for connecting and for paying for energy. UPME certifies projects so they can access the tax benefits.
The two legal structures
Almost every utility-scale solar project in Colombia uses one of these two. What changes is the order: who comes first, the buyer or the plant.
The buyer signs before anything is built.
A special purpose vehicle (SPV) groups several power purchase agreements, instead of depending on a single asset.
- Step 1
First, the buyer
Each contract comes in with its buyer already signed and its term defined.
- Step 2
Then, construction
The plant is built with the purchase agreement already in hand.
- Step 3
And contracts add up
The company grows and diversifies its revenue as new customers arrive.
- Revenue
- The buyer pays per kWh under a 10- to 20-year contract
- Plant owner
- The SPV, for the whole term
- At the end
- The system becomes the buyer's property
- Rules
- Ley 1715 de 2014 (Law 1715 of 2014), Resolución CREG 174 de 2021 (CREG Resolution 174 of 2021)
In the documents you'll see it called “SPV multicontrato de PPA” (a multi-contract PPA SPV).
Who does what
No single party does everything. Knowing who answers for what is the difference between reading a project and taking a brochure at its word.
Tap a party to see what it answers for
Before construction
To connect and get paid
Tap a party to see what it answers for
Energy buyer
Commits to buying.
A company or community that uses the energy and signs the purchase commitment. In the Subway La Pintada project the contract was signed before construction began.
What to ask a project
What should be settled before construction. It works for any solar project you're shown, not just ours: tick what you already know.
0 of 8 answered
What nobody can solve for you
Not us, not any other developer. We'd rather you read it here than find out later.
The sector is behind its target
What the sector delivers lags behind what the regulation aims for. This is how this year's Energy Communities look:
The rules can change
Colombia's rules for Energy Communities have been adjusted several times since 2023 and may keep changing.
The price of surplus energy varies
The price surplus energy is settled at depends on the regime that applies to each community's size and spread.
A community takes time to fill
How quickly a community fills up determines how much energy is sold as surplus, and at what price.
Grid connection runs on its own clock
Connection timelines depend on the network operator, not the developer.
Sunshine is estimated, not promised
A site's solar resource is an estimate, not a promise: a cloudy year produces less than the historical average.
Taking part in any project carries that project’s own risks, and results are subject to its performance.
Questions coming up as you read?
At Circular Urban we structure and operate solar projects in Colombia. If something here doesn't add up for you, ask us.
- You talk with the people who structure the projects
- We answer technical and regulatory questions
- No sales pitch in between
The solar projects we are structuring
To bring all of this down to earth: here's how the two projects we're structuring in La Pintada, Antioquia, are set up. One for each legal structure.
Project in Structuring
Project in StructuringLearn more about the business model and how you can take part
We'll answer your questions on a call.
This conversation is informational, about how the project is structured. It is not financial, legal or tax advice, nor a public offering of securities. Every participation carries risk.
Market figures 2023–2026: UPME (self-generation and distributed generation registry), XM (firm-energy projections), Mordor Intelligence, SER Colombia, Stockholm Environment Institute and local business press. The regulations cited were checked against the official text of each one.
This content is informational, about how the projects and the Colombian energy market are structured. It is not financial, legal or tax advice, nor a public offering of securities. The savings shown are reference estimates, and each project's results are subject to its performance.