Energy regulation expert Manuel Gómez Fajardo argues that the debate is not about the technical need for storage, but about its economic viability. “The critical issue emerges when expected revenues are measured against the capital expenditure (CAPEX) required to install backup battery systems,” he said in an interview with Energía Estratégica.

Products 1 and 3 in the auction require delivery in specific hourly blocks, effectively compelling developers to hybridise solar PV plants with battery energy storage systems (BESS). However, the awarded contracts remunerate delivered energy (MWh), not available capacity (MW). This distinction materially alters the project’s financial structure.

“Can this be covered solely with PPA revenues? I do not believe so,” Gómez Fajardo warned.

Under the current framework, revenues depend primarily on payments per megawatt-hour. Yet storage projects typically require additional remuneration mechanisms — such as firm capacity payments or availability payments — to ensure stable cash flows and achieve bankability.

Under Colombia’s existing reliability charge mechanism, known as Cargo por Confiabilidad, firm energy obligations (ENFIC – Energía Firme para el Cargo por Confiabilidad) are recognised based on generation output. Because batteries do not generate electricity independently, they are only partially recognised within this framework.

“As currently structured, ENFIC depends on generation, and storage alone does not contribute to generation,” the specialist explained. This regulatory limitation reduces revenue predictability and increases perceived risk among lenders and institutional investors.

International experience suggests that price arbitrage — buying electricity during off-peak hours and selling during peak demand — can complement revenues, but is insufficient to underpin long-term investment in energy storage.

In Chile, storage deployment accelerated after the introduction of explicit capacity remuneration in defined hourly blocks. This allowed developers to structure more stable revenue streams and facilitated investment in BESS projects, which have become central to addressing grid congestion and curtailment challenges linked to high renewable energy penetration.

Chile’s current storage pipeline:

• 28 projects in operation (1.6 GW – 4.1 hours average duration)

• 6 projects under testing (0.7 GW – 3.6 hours average duration)

• 68 projects under construction (6.8 GW – 4.4 hours average duration)

• 14 GW with environmental approval

• 13 GW is currently undergoing an environmental assessment

In total, Chile has 9 GW of storage projects in operation, testing, or construction, and an additional 27 GW in development.

By contrast, in Colombia, the concept of revenue stacking — combining income streams from energy sales, capacity payments and ancillary services without double remuneration — still requires regulatory consolidation. Without such an integrated framework, the economic signal may prove insufficient to attract conservative capital and infrastructure funds.

Gómez Fajardo stressed the limitations of the auction mechanism itself: “The auction alone will not solve the issue. In a market where 12- to 15-year bilateral power purchase agreements (PPAs) already exist, any less competitive design risks insufficient participation.”

He also distinguished between two fundamentally different business models:

1. Competitive hybrid asset model – Storage operates alongside solar PV in a market-driven framework, relying on enhanced market signals and appropriate regulation.

2. Regulated network asset model – Storage functions as a grid asset with regulated income, akin to a natural monopoly, requiring specific tenders financed through network tariffs.

Mandating storage within a voluntary auction framework does not automatically make projects financeable. Without explicit remuneration for capacity or availability, products that incorporate BESS risk low award rates, particularly in a competitive environment where market participants ultimately determine economic viability.

As Colombia advances its renewable energy transition, the success of large-scale battery deployment will likely depend less on technical design and more on whether regulatory reform aligns revenue certainty with the capital-intensive nature of energy storage investments.