A Colombian vitality 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 vitality transmitter, in July 2020, he introduced a novel set of abilities and experiences to the function. Ortega was skilled 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 growth). He started his profession as chief economist at multinational banking firm BBVA in Bogotá within the 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, resembling 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 vitality and will increase its presence in Latin America. For instance, in June 2021, GEB introduced an settlement with the Italy-based vitality multinational Enel to create Enel Colombia, a subsidiary that may embrace further fairness worth of US$1.4 billion in renewable vitality property positioned in Colombia, Panama, Costa Rica, and Guatemala.

GEB is properly positioned to make these strikes. It stands out amongst different Colombian public utilities due to its shareholder construction—though the Metropolis of Bogotá owns nearly all of its shares (65.7{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942}), near 35{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} are privately held—which helps it keep above the political fray. GEB’s web income rose by 36{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} in 2020, and it’ll distribute $437 million in dividends this yr. In a latest video interview with technique+enterprise, Ortega shared his ideas on the way forward for the vitality sector in Colombia, because the nation strikes past hydropower to embrace different renewables.

S+B: Looking forward to the following few a long time, how do you see your small business reworking to satisfy vitality wants in Colombia and, extra broadly, in Latin America?

The local weather change and vitality transition agenda is central for Colombia, a rustic the place 70{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} 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{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} by 2030. That could be a very aggressive purpose.

On the identical time, I feel it will be unreasonable for a rustic like Colombia to decide to zero web emissions for the following ten to twenty years. Colombia contributes round 92.5 million tons of carbon a yr. The world’s whole determine is round 39 billion tons, which implies Colombia’s carbon emissions are .25{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} of the worldwide share. Subsequently, if we decide to a zero web emissions technique, it will hinder Colombia’s capability to compete with different international locations and to spice up its economic system, particularly as a result of the nation has loads of potential in gasoline.

I feel there are very strong arguments to defend gasoline as a transition vitality supply in Colombia. It could actually assist development and employment and assist Colombia turn out to be an more and more aggressive economic system. If the heavy cargo trade, specifically, makes the transition [from oil] to gasoline, it will assist to scale back particulate matter.

I additionally consider probably the most smart choice is to change industrial autos to run on electrical energy. That’s why our wager is on electrical energy. We consider it will likely be one of many huge winners within the subsequent 20 years. There may be 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 prospects. Colombia can tremendously profit from this course of. Now we have the businesses, the contractors, the worth chains, and the experience to assist generate extra resilient transmission networks all through the area.

There are essential development alternatives on this matter, and that’s the reason we’re investing in Peru, Brazil, Guatemala, and Colombia—international locations the place we’ve got a big transmission community, with 1000’s of kilometers of strains 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 essential vitality transmission undertaking. We need 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 development.

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

Colombia has huge 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 may be additionally a chance for biomass vitality. Colombia is already attempting to make sugarcane right into a supply vitality, and I feel it may produce vitality from methane emissions from landfills.

I’ve little question that hydrogen will likely be a viable supply of energy throughout the subsequent ten to fifteen years. We are attempting to be taught from Chile about hydrogen’s potential. Chile already has an extra of unconventional renewables in Atacama. Additionally they have a mining trade that calls for ammonia and warmth, and, in that sense, hydrogen comes virtually naturally to them.

In Colombia, hydrogen’s potential is just not so apparent. To make it possible, we first want vitality obtainable 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 verify they’re much less liable 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. Nevertheless, you already see international locations like Germany with hydrogen stations and autos. And that’s the reason I feel this can be a supply of vitality we have to pay shut consideration to. We have to examine the right way to get there.

Lastly, our latest settlement with Enel will permit us to have a share within the nonconventional renewable vitality 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 concentrate on renewable vitality.

S+B: Apart from investing in renewables, what’s GEB doing to scale back its environmental influence?

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. Slightly than concentrate on a zero web emissions technique, a extra environment friendly strategy to scale back our environmental influence can be to deal with deforestation and unsustainable cattle ranching. I feel that’s the place the actual drawback is.

With this in thoughts, our firm’s technique is predicated on restoring native forests. Now, this isn’t about planting bushes. What biologists have beneficial is for us to concentrate on the restoration of ecosystems. We’re utilizing our electrical and gasoline infrastructure to create corridors that interconnect pure parks and ecosystems. This fashion we are able to increase areas that assist to protect biodiversity and native species. Now we have 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 achieved an incredible job restoring the entire infrastructure that was destroyed within the landslides that hit Mocoa, Putumayo’s capital, in 2017. Now we have realized to construct with little or no influence on nature. We now make towers which are 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 bushes. We now not use bulldozers to put in cables. As an alternative we use drones and really small paths.

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

Many Colombians don’t but absolutely perceive the magnitude of environmental threats. We maintain 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{bce2ac57dae147ae13b811f47f24d80c66c6ab504b39dda4a9b6e8ac93725942} of the yr, La Guajira might have temperatures of fifty to 60 levels Celsius. That might make this area uninhabitable.

The best problem we’ve got is communication. False tales have unfold on social media that we have to struggle in opposition to, for instance, that cows produce inexperienced milk as a consequence of being close to our towers, or that the towers have prompted leukemia in kids. It makes folks consider {that electrical} infrastructure is a risk to the setting and communities, when the truth is, it helps them. For instance, cooking with charcoal and firewood has led to horrible lung ailments.

The empirical information, sadly, will not be being communicated. And it’s so onerous for us to refute these concepts, to persuade people who this infrastructure is just not a risk. We face a really nice problem in Colombia in incomes credibility and the belief of the folks. However it’s our obligation to attempt to earn that belief. And that’s, partially, why we’ve got a method to regenerate ecosystems. We consider it may assist us construct relationships with communities. By way of optimistic outcomes, we are able to present them that preserving nature is appropriate with our infrastructure.

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

 The federal government wants to assist tackle the misinformation drawback. It ought to concentrate on schooling, to verify everybody has a primary stage of information about local weather change threats.

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

There may be additionally the necessity for higher laws to allow the vitality transition. Carbon taxes are, in my view, important. And we should focus on, 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 folks begin migrating from diesel, gasoline, and coal.

This may be achieved step by step. For instance, I consider the homeowners of all these luxurious four-wheel-drive vehicles might pay a carbon tax that compensates for the influence of their autos. After they start to see what it prices to personal these vehicles, they’ll begin to migrate to electrical autos. And in Colombia, we additionally have to have a dialog concerning the type of hybrid autos we’ve got. 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, resembling pico y placa, which restricts visitors throughout rush hours in a number of Colombian cities.

Furthermore, international locations which are implementing these measures—taking enough 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, the US is already desirous about this, by ensuring calls for on international corporations that need to entry its market.

The federal government and the vitality sector even have to consider what will occur with sure industries that may disappear, just like the coal trade. They make use of lots of people. So how are we going to make use of all of those that may very well be jobless sooner or later? And the way are we going to cope with the infrastructure that may turn out 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 assume would have the best influence?

We consider La Guajira deserves a nationwide dialogue. We have to perceive how the native economic system of the Wayuu ethnic group, which lives in La Guajira and could be very poor and susceptible, can turn out 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 growth in a area that has an immense potential if solely the correct 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 an absence of state presence.

I consider corporations like ours can assist by pushing for an essential a part of our taxes to be mixed with social duty applications. That method we can assist remodel La Guajira. However we are able to’t do this alone. We’d like a state that may present the companies and advantages that solely governments can present. Particularly, the state must strengthen its justice system and its capability to conduct legal investigations.

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

Our funding in a digital agenda has helped us, notably with our managerial efforts—our capacity to know what we want and to hint what’s taking place. For instance, we found through the pandemic that we had enormous investments in tools and applied sciences that had been underutilized. We’ve additionally began to embrace automation.

After all, some folks really feel threatened by automation. They fear that they’ll turn out to be irrelevant or that they’ll lose their job. However automation really facilitates development. It permits us to relocate folks to roles the place they’re actually wanted or the place they may very well be extra productive. And computer systems don’t mechanically remedy 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 gained’t flourish.

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

Colombia is at present debating introducing AMI [advanced metering infrastructure], or sensible meters, for vitality consumption. This expertise is just not but broadly obtainable in creating international locations like Colombia as a result of it’s too costly. However as the worth drops, sensible meters will turn out to be obtainable and can permit us to cost for vitality at a median value relative to a timeframe. For instance, if you wish to bake a cake late at evening when fewer persons are consuming vitality, you will pay lower than if you happen to baked it at dinnertime. Our capability to transition into electrical vehicles additionally is dependent upon the convenience of charging autos [at hours] when vitality is cheaper. With this technique, folks might use vitality 24 hours a day and in a way more environment friendly method.

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

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

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

Final yr, we had a cyberattack, although we had purchased all of the safety software program wanted to mitigate the danger of our workers working from house. It occurred whereas we had been attempting to implement our new protection system, and our employees was not absolutely skilled but. They recognized the assault a bit late. Happily, we managed to defend ourselves by shutting down the servers earlier than the attackers accessed delicate databases. In the long run, we had an operational drawback of only some hours. However this was a wake-up name for us, as we realized it was an try and extort us.

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