Venezuela is widely known for its vast oil reserves, estimated to be the largest in the world in terms of proven reserves. This oil wealth has been a key source of income for the country for decades, as Venezuela heavily relies on revenue from oil exports. However, the Venezuelan oil industry has faced various challenges in recent years. Despite these difficulties, oil remains a fundamental pillar of the Venezuelan economy, and the government is implementing policies and projects to revitalise the sector and increase production. Venezuela is currently not on par with other countries in the energy transition because its energy comes from fossil fuels rather than renewables. However, there are several cases of renewable energy production.

Despite Venezuela’s significant potential in renewable energy, the country has yet to make progress in transitioning to a more diversified energy matrix, both nationally and internationally. In this context, Venezuela ranks among the top ten megadiverse countries in the world, with a large portion of its territory protected by parks and reserves that could facilitate the development of renewable energy projects.

In addition to oil, Venezuela has other significant energy natural resources. The country has substantial potential for hydroelectric, solar, and wind possibilities. The Guri Dam, located in the Bolívar state, is one of the largest in Latin America and provides a significant amount of electrical energy to the country.

However, despite this potential, Venezuela has faced problems in its energy sector in recent years. The lack of investment and maintenance in energy generation facilities has led to difficulties in electricity supply. Furthermore, regarding hydroelectric energy, the main problem is the transmission, not the generation of energy.

Over the past 28 years, the average share of renewable energy consumption in Venezuela, expressed as a percentage of total final energy consumption, has been approximately 15%. The highest value recorded during this period was 16.64% in 2007. The renewable energy market in Venezuela is projected to grow at a compound annual growth rate of over 3.5% from 2022 to 2027.

The most important types of renewable energy technologies in Venezuela are:

• hydropower;
• wind;
• solar;
• biomass; and
• green hydrogen.

In this context, the Renewable and Alternative Energy Bill (RAE Bill) considers these sources as renewable energy resources. Additionally, the Law on Rational and Efficient Use of Energy (LREUE) defines alternative energies as those capable of generating electricity through means other than conventional energy sources, such as hydrocarbons and hydroelectricity. According to this law, renewable energy refers to energy obtained from natural primary sources that can regenerate, such as solar, wind, bioenergy, hydraulic, geothermal, tidal, and biogas. This classification is commonly found in other legal systems. However, the law notably excludes nuclear energy from the definition of alternative energies.

There have been several minor developments. In June 2024, the Venezuelan government introduced a plan to generate solar energy in the Andes region, which has been severely affected by electrical failures. During a meeting with the National Council of Productive Economy, which includes the states of Mérida, Táchira, and Trujillo, the Venezuelan President explained that the initiative would involve collaboration with China, India, and Turkey. The project aims to generate 3,000 megawatts of solar energy to enhance the stability of the national electrical system. Additionally, a solar farm will be established in Mérida using panels imported from China.

Furthermore, in May 2024, the Ministry of People’s Power for Ecosocialism (MINEC) participated in the First Venezuela Renewable Congress 2024 to discuss the national government’s role in promoting energy sustainability in the country.

Also, the Ministry of People’s Power for Electric Energy (MPPEE) announced that on 20 July 2024, the 38 wind turbines of the Paraguaná Wind Farm, located in the Falcón state, came into operation. It also announced that 14 wind turbines will be put into operation in the coming months. According to the MPPEE’s announcement, with the start-up of this equipment, 1.2 megawatts will be generated by each wind turbine, which will generate approximately 40 to 50 megawatts more for the National Electric System.

Venezuela lacks a specific regulatory framework for implementing renewable and alternative energy projects (such as solar, geothermal, wind, and hydropower) that utilise new technologies in place of fossil fuels.

However, it is worth mentioning that the National Assembly has been reviewing a draft bill since December 2021, which was proposed by the MPPEE (Renewable and Alternative Energy Act). The existing laws, including the Rational and Efficiency Use of Energy Law and the System and Electricity Service Organic Law, do not provide the legal basis for renewable and alternative energy projects.

The principal laws and regulations governing the energy market, among others, are:

• the National Constitution;
• Organic Law of the Electrical System and Service (OLESS);
• LREUE (Law on Rational and Efficient Use of Energy);
• Waste Management Law;
• Organic Law of Special Economic Zones; and
• Constituent Law of the Homeland Plan, Simón Bolívar National Project, Third Socialist Plan for the Economic and Social Development of the Nation 2019-2025 (which defines itself as a constitutional law).

The MPPEE is responsible for establishing guidelines and policies for rational energy use. When developing policies on efficient energy use, the MPPEE must co-ordinate the formulation, approval, and implementation of policies with other public bodies with similar competencies. In this context, the MPPEE includes the Office of the Deputy Minister for New Sources and Rational Use of Electric Energy, which in turn comprises the General Directorate of Alternative Energy, the General Directorate of Atomic Energy, and the General Directorate of Rational and Efficient Use of Electric Energy.

Furthermore, the Renewable and Alternative Energy Bill states that the MPPEE will be the governing body in this area.

In general, the Constitution does not reserve any activity, industry, exploitation, service, or asset exclusively for the state, as such a reservation must be established through an organic law.

The Constitution establishes concurrent competencies regarding electric energy between the National Public Power and the Municipal Public Power. Moreover, the OLESS regulates the electrical system and the provision of electrical services at the national level, ensuring universal access and state control and oversight.

In this context, the Republic, citing considerations of security, defence, strategy, and national sovereignty, has reserved for itself the activities of generation, transmission, distribution, commercialisation, and dispatch within the electrical system. Under the OLESS, these activities are required to be conducted under state control, with the the state-owned company Corporación Eléctrica Nacional S.A. (CORPOELEC) or its successor tasked with their operation and service provision. This includes subsidiary companies established specifically for these purposes.

Therefore, there are restrictions on the private sector’s ability to develop projects for the generation, transmission, distribution, commercialisation, and dispatch of the electrical system using alternative energy sources, as these activities are reserved for the state as stipulated by the OLESS.

The state, through CORPOELEC (the operator and service provider established by OLESS), may create joint ventures for the construction of infrastructure, and the production and supply of goods and services necessary for the activities of the national electric system. In any case, the state will retain control over the decisions and operations of these companies by ensuring a stake of at least 60% in their share capital.

On the other hand, the Draft Law on Renewable and Alternative Energies establishes that renewable and alternative energy sources, including the minerals thorium and uranium, are considered energy resources and are public domain assets under state regulation. It also declares the development of renewable and alternative energies to be of public interest and strategic importance for the nation.

However, as previously mentioned, this is a draft law that may be subject to modifications.

Please see 2.3 Regulated Activities and 2.4 Ownership and Transfer of Control.

Venezuela has historically led the Andean region in electricity generation, reaching a peak capacity of 32,000 MW, sufficient to meet domestic demand and export surplus to neighbouring countries. However, the country’s hydroelectric generation is currently underutilised. Despite having a hydroelectric potential of around 20,000 MW, according to Observatorio Venezolano de Servicios Públicos (OVSPV), Venezuela currently generates only about 20% to 30% of this capacity.

The main applicable rules and regulations include the OLESS, LREUE, regulations pertaining to the provision of electrical services, and quality standards specific to the distribution of electricity.

Currently, research and development of biogas are limited to isolated projects in rural areas, small-scale businesses and academic initiatives, and some state projects that have yet to see significant growth. The historical dependence on fossil fuels and affordable access to services have hindered the adoption of this technology, which offers socio-environmental and energy benefits. Agricultural producers, who could potentially produce biogas, cannot cover the costs independently and lack state incentives.

Moreover, the Waste Management Law states that released biogas must be reused to minimise its impact on global warming. Additionally, its use for energy purposes must have government approval.

Currently, there is no significant development in geothermal energy. However, the country has many locations where geothermal manifestations occur. These manifestations come in various forms, such as hot springs, mineral waters, thermomineral waters, and sulfurous waters with different temperatures. So far, most of these thermal sources in Venezuela have been used for tourism and therapeutic purposes.

There have not been any significant developments in this area, nor have there been specific regulations on this issue.

Currently, no specific regulations are applicable to this matter (regarding renewable energy). However, the OLESS stipulates that both the generation and transmission of electricity must be carried out solely by CORPOELEC. CORPOELEC is responsible for installing and operating generation plants in independent systems, focusing on alternative and eco-friendly energy sources, per the National Electric System Development Plan.

Self-generation, intended exclusively for the producer, operates independently of the National Electric System (NES), and is regulated by law. According to current regulations, self-generation systems with a capacity of 2 MW or more require authorisation from the MPPEE. Energy transmission must also be carried out exclusively by CORPOELEC. The dispatch of the electric system is the responsibility of the National Executive through the MPPEE, per the law and its regulations.

Furthermore, the Draft Law on Renewable and Alternative Energies establishes that users of the NES must demonstrate the use of self-generation systems with renewable and alternative energy sources under the criteria and conditions determined by the governing authority.

NES users may install technologies, equipment, parts, and components of self-generation systems with renewable and alternative energy sources, provided they do not cause disturbances, anomalies, failures, distortions, fluctuations, variations, or any imbalance or irregularity in the NES. Any use change that implies a variation in concentrated load electrical demand must be reported and notified to the MPPEE for authorisation.

All alternative generation that delivers energy to the NES must comply with the applicable regulations and the guidelines established by the MPPEE.

All installations that use renewable and alternative energies must adhere to the technical standards of safety, quality, efficiency, and warranty established by the MPPEE, to protect the health and integrity of people, ensure environmental protection, and maintain optimal operation of the installations during their useful lives.

There are no specific provisions regarding the transportation and storage of electricity from renewable sources. Nonetheless, as mentioned in 2.3 Regulated Activities, the OLESS mandates that the state has exclusive control over the activities of generation, transmission, distribution, commercialisation, and dispatch of the electrical system, justified on the grounds of security, defence, strategy, and national sovereignty. The state-owned company CORPOELEC is tasked with carrying out these activities and is responsible for service operation and provision.

There are currently no specific regulations addressing these issues, as Venezuela has yet to witness significant developments in renewable energy sources such as wind and solar. Consequently, the intermittency associated with these energy types has not posed a notable challenge to date. That said, the country has faced instances of intermittent electricity supply, primarily due to issues within the transmission system rather than deficiencies in hydroelectric energy generation. This situation may present a promising opportunity for foreign investment to address infrastructure deficiencies.

There are no specific regulations on this matter due to the lack of significant developments in the renewable gas sector. The Organic Law of Hydrocarbons and the Organic Law of Gaseous Hydrocarbons, along with their respective regulations, provide the primary provisions concerning associated and non-associated gas.

There are no specific regulations on this issue due to the lack of significant developments in this area.

There are no specific regulations on this issue due to the lack of significant developments in this area.

Per the OLESS, electricity distribution must be carried out exclusively by CORPOELEC. CORPOLEC must provide the MPPEE with up-to-date information about the distribution networks that are accessible for state and private use. The MPPEE co-ordinates with municipalities to oversee public lighting services in compliance with applicable laws. Similarly, the commercialisation of electricity is the exclusive responsibility of CORPOELEC.

More significant advancements in gas from renewable sources need to be made from a legal and corporate standpoint.

Currently, there have been few significant developments in this area.

Currently, there have been few significant developments in this area.

The renewable energy certificate trading segment has not yet experienced substantial growth in Venezuela. However, the Venezuelan stock market presents a potential platform for attracting foreign and local investment in sustainable finance. For instance, the Caracas Stock Exchange could establish markets for bonds and financial instruments related to sustainable finance and market segments for other sustainable assets such as CRUs (Carbon Removal Units). In practical terms, the Venezuelan securities regulator (SUNAVAL) could authorise the Caracas Stock Exchange to create special market segments for trading these CRUs, catering to both local and foreign investors.

The Development Bank of Latin America and the Caribbean (CAF) has announced its goal to strengthen the carbon markets of its member countries and enhance the competitiveness of carbon credit supplies in the region. In this context, the Latin American and Caribbean Initiative for Developing the Carbon Market (ILACC) aims to boost the global competitiveness of carbon credits produced in Latin America and the Caribbean by improving the conditions for future voluntary and regulated markets. In any case, obtaining the necessary approval for carbon market certification credits in Venezuela has not been easy.

The renewable energy market in Venezuela remains underdeveloped, and its regulatory framework is not yet fully established. There is a lack of diversity among market participants, as well as an absence of significant projects or specific regulations to govern the development of onshore renewable energy projects. As a result, the regulatory environment does not currently provide comprehensive guidance in this area.

Similarly, offshore renewable energy development is hindered by the immaturity of the market. The regulatory framework remains underdeveloped, and there is no significant diversity among market players or projects. Consequently, no specific regulations currently address offshore renewable energy development.

There is no particular legal regime for the financing of renewable energy projects. However, the RAE Bill establishes that the MPPEE, in co-ordination with the competent bodies and entities, will promote the local production of equipment, components, and goods for using renewable and alternative energies and will promote national financing schemes.

The possibility of granting tax and other incentives in favour of investors is already embodied in the national legislation, in accordance with the Organic Tax Code, LREUE, the Constitutional Law for Productive Foreign Investment, and the Constitutional Anti-Blockade Law. In this regard, the Organic Tax Code provides for the legal stability contracts of tax regimes and the Constitutional Law of Productive Foreign Investment provides for investment contracts.

The new Organic Law of Special Economic Zones provides for the creation of special economic zones for the development of diverse projects. The special economic zones must promote the dissemination of technical knowledge and the transfer of technology.

In this context, public, private, mixed, and communal investors must sign economic activity agreements with the National Superintendence of Special Economic Zones, with the assistance of the International Centre for Productive Investment. These agreements must include economic, fiscal, financial, and other incentives aligned with the zone’s development plan, as well as performance benchmarks, investment targets, and other project obligations.

The RAE Bill further authorises the President of the Republic to grant incentives to entities subject to the law, as part of broader economic policy measures. These incentives are tailored to the economic, sectoral, and regional conditions of the country and are subject to periodic evaluations by the National Executive. The evaluations will assess compliance with the goals underpinning the incentives, as defined in a specific decree that will outline the terms, frequency, and parameters of such assessments.

There are no specific provisions regarding the cessation of activities, decommissioning, and disposal of renewable energy installations. The Organic Law on the Promotion of Private Investment under the Concession Regime, the OLESS, and the Expropriation Law for Public or Social Utility, among others, establish the general regime applicable to reversion, expropriation, and asset disposal.

The National Assembly has developed multiple bills regarding renewable energy, though many remain unavailable for public scrutiny. The pending bills include the Renewable Alternative Energies Bill and The Green Hydrogen Bill.

Even though there have not been significant developments in renewable energy in Venezuela, the National Assembly’s standing committee on energy and petroleum has developed and published the RAE Bill.

To diversify the national energy matrix, the RAE Bill aims to promote and regulate renewable and alternative energies in all aspects, including development, production, research, generation, transformation, transportation, distribution, commercialisation, use, and utilisation. The RAE Bill would apply to natural and legal persons, both public and private, national, and foreign, involved in the processes and activities regulated by the law in Venezuela.

The RAE Bill describes the following as renewable and alternative energy sources:

• wind energy;
• solar energy;
• biomass;
• small-scale hydraulics;
• geothermal energy;
• tidal and wave energy; and
• other potential sources like nuclear energy, gas, and green hydrogen.

It also designates renewable and alternative energy sources, along with energy minerals such as thorium and uranium, as public assets regulated by the state. Furthermore, the RAE Bill declares the development of renewable and alternative energies as a public and strategic interest for the nation, contributing to energy matrix diversification, strengthening national defence, and ensuring national independence and sovereignty.

The MPPEE is designated as the governing body responsible for regulating and promoting renewable and alternative energies. As such, it is tasked with developing the National Plan for Renewable and Alternative Energies in co-ordination with other relevant ministries. This plan will be integrated into the National Electric System Development Plan and aligned with the National Economic and Social Development Plan. It will set guidelines, goals, deadlines, and mechanisms for monitoring and evaluation to ensure the effective development of renewable and alternative energies. The plan will include projects for the National Electric System, unserved communities, and various sectors based on national priorities.

Regarding self-generation and interconnection, the RAE Bill requires users of the National Electric System to implement self-generation systems using renewable and alternative energy sources, following the governing body’s criteria. Users may install technologies for self-generation as long as they do not interfere with the National Electric System. Any changes in electricity demand must be reported and authorised by the MPPEE. Alternative energy generation connected to the National Electric System must comply with the MPPEE’s regulations and guidelines.

For projects related to renewable and alternative energies, the RAE Bill mandates that such projects, whether by individuals or legal persons, must be registered in the National Registry. Registration requirements and operational guidelines will be published.

Priority projects include renewable energy generation systems for health centres, public services, agro-food sectors, tourism, education, indigenous communities, and other areas defined by the MPPEE.

In collaboration with the Ministry of Industries and the private sector, the MPPEE will promote the creation of industrial conglomerates for the sustainable manufacturing of parts and components for renewable energy systems, fostering integrated production. Users of self-generation systems with renewable and alternative energies must prioritise national technologies and components, except where local production is unavailable. Relevant ministries will establish conditions for cases where goods are not produced locally.