Colombia’s electricity market has introduced a significant institutional shift through Resolution 40178 of 2026, establishing a centralised and competitive mechanism for long-term power purchase agreements (PPAs).
The regulation also formally incorporates battery energy storage systems (BESS) as eligible participants, expanding the pool of actors able to compete in these auctions.
However, the structural impact of the measure remains limited. It does not alter the product being traded, nor does it resolve the key economic barriers facing energy storage. In essence, the reform focuses on how energy is contracted, rather than what services are remunerated within the system.
Álvaro Pérez Ramírez, Manager at AFRY, told Energía Estratégica that the resolution “does not constitute a radical transformation of Colombia’s long-term energy contracting framework”.
He emphasised that the main innovation lies in market organisation. By consolidating supply and demand within a regulated environment, the mechanism enhances transparency and improves liquidity.
The new scheme introduces more level playing field conditions for different stakeholders, particularly smaller players, who can now access contracts under terms similar to those of large developers and off-takers. It also enables more predictable deal structuring, both to secure revenues and to procure energy at competitive prices.
One of the most relevant advances is the explicit recognition of BESS within the framework. Nevertheless, the regulation maintains a narrow contractual focus, as it remains centred exclusively on energy transactions.
This means that batteries are unable to capture the value of their technical attributes — such as flexibility, backup capacity and grid stability — which constrains their business case. From a regulatory standpoint, the step is important as an institutional signal, but still insufficient to unlock large-scale deployment.
The inclusion of storage also helps address longstanding regulatory gaps, albeit only partially. While participation in regulated auctions marks a starting point, it does not solve the structural limitations related to monetisation.
In this context, the economic viability of battery systems remains constrained by the lack of complementary markets. Pérez Ramírez warned that “this progress is necessary, but not sufficient”.
Among the key missing elements are intraday markets and ancillary services. These would allow operations to better reflect real-time conditions and would remunerate services such as frequency control and voltage regulation — essential in systems with high penetration of renewable energy.
The absence of these mechanisms forces all storage value to be reflected in the energy price, creating tensions on both the supply and demand sides. In particular, it raises questions about whether off-takers will be willing to accept higher prices to incorporate these costs.
This scenario will be tested in the first auction under the new scheme, which is expected to have an exploratory nature. Its outcome will help determine whether the current design can efficiently match supply and demand, especially for hybrid projects combining renewable energy and BESS.
Pérez Ramírez noted that “there is uncertainty as to whether the price levels required to make storage financially viable can be recovered solely through energy contracts”.
Regarding hybrid projects, the impact of the resolution is expected to be gradual rather than disruptive. While the regulation may facilitate development in certain cases, it does not in itself create the conditions necessary for large-scale deployment.
International experience shows that battery projects typically rely on multiple revenue streams, including price arbitrage, ancillary services, and system capacity mechanisms. In Colombia, none of these revenue channels is yet fully developed.
Even arbitrage presents limitations. Price volatility is not always sufficient to support large-scale projects, while the absence of ancillary service markets prevents the monetisation of key capabilities. In addition, batteries are currently excluded from the country’s reliability charge scheme, eliminating a potential source of income.
In this context, the future of energy storage deployment will depend on further regulatory evolution. Pérez Ramírez concluded that the first auction “will reveal whether the framework can generate price signals aligned with the financial requirements of hybrid projects”.
For now, Resolution 40178 sends a positive signal to the market, but also highlights that the challenge is not only enabling technologies, but designing a market structure capable of capturing their full value.
