Self-Generation or Distributed Generation: Which Regulatory Category Fits Your Company's Solar Project

The regulatory category defines three things that weigh on the return of a business project: which connection procedure the grid operator requires and how long it takes, how the energy the plant delivers to the grid when the company does not consume it is paid, and who must act in the electricity market for that energy to be settled.

Categories are not chosen by preference. They follow from facts about the project: the plant's installed capacity, whether energy will be exported to the grid and where the consumption served by the plant is located. That is why those three facts should be fixed at the start of the design, not at the end, once the proposal is signed.

Resolución CREG 174 de 2021 defines self-generation as the activity of users, individuals or legal entities, who produce electricity mainly to meet their own needs. When they serve their own demand they do so without using distribution or transmission assets; the grid is used to deliver surplus and as backup.

One detail of the definition matters a great deal to companies: the self-generator may or may not own the generation assets. If a third party installs, finances and operates the plant on the company's roof and sells it the energy (the on-site PPA model), the company is still the self-generator. Financial structure and regulatory category are separate decisions.

Within self-generation, size separates two regimes. Resolución UPME 281 de 2015 sets the small-scale limit at 1 MW, measured as the installed capacity of the generation system.

A small-scale self-generator (AGPE) has installed or nominal capacity of up to 1 MW. It is the category of almost every rooftop project for shops, offices, mid-sized plants and agribusiness, and the one regulated in detail by Resolución CREG 174 de 2021, as amended by Resolución CREG 101 072 de 2025 and Resoluciones CREG 101 097, 101 099 and 101 113 de 2026.

For an AGPE using non-conventional renewable sources, such as solar, the surplus delivered to the grid is recognised as an energy credit up to the amount imported in the period, and anything above that is valued hour by hour (article 25). The retailer charges for each kWh swapped: up to 100 kW, the retail component; above 100 kW and up to 1 MW, the sum of transmission, distribution, retail, losses and constraints.

The connection procedure also scales with size. An AGPE exporting surplus with more than 100 kW needs a simplified connection study; up to 100 kW, or without exports, it does not. The application is filed in the grid operator's online system, and Resolución CREG 101 113 de 2026 gave the current text of article 14, which lists the application documents.

An AGPE using renewables has one more advantage the large-scale self-generator lacks: Decreto 929 de 2023 exempts it from reactive energy charges (paragraph 2 of article 2.2.3.2.4.9 of Decreto 1073 de 2015, added by that decree). In an industrial plant with motors and compressors, that difference can matter when deciding whether to stay below 1 MW.

Above 1 MW of installed capacity, the company is a large-scale self-generator (AGGE). Its regime is set by Resolución CREG 024 de 2015, which regulates large-scale self-generation in the National Interconnected System, and, for connection to the distribution grid, by Resolución CREG 174 de 2021 when the declared maximum power is under 5 MW.

The commercial difference is the most important one. The energy credit in Resolución CREG 174 de 2021 is written for the AGPE; the AGGE does not have it. To export surplus, Decreto 1073 de 2015, as worded by Decreto 1403 de 2024, requires it to be represented in the wholesale market by a retail agent or a generation agent. The value of each exported kWh comes from that contract, not from a regulated formula, so the installer's proposal should state which representative and which terms it assumed.

On the procedure, Ley 1715 de 2014 ordered a simplified process for AGGEs exporting less than 5 MW. Resolución CREG 174 de 2021 develops it: a simplified connection study, a guarantee the rule applies to AGGEs with declared maximum power between 1 and 5 MW, and a connection approval whose validity can be extended only once and on listed grounds. Above 5 MW, or when connecting to the regional or national transmission system, the project falls outside that resolution and follows the rules for a generation plant of similar capacity.

The AGGE must also sign a backup contract with the grid operator or transmitter it connects to (Decreto 1073 de 2015, as worded by Decreto 1403 de 2024); for an AGPE that contract is optional. The backup charge is calculated under the regulation and the financial model should include it.

Many business plants are designed so that all output is consumed on site, with zero-export control. In that case Decreto 1403 de 2024 provides that no authorisation of any kind is needed for the connection, that there is no distinction between large and small scale and that there are no capacity limits.

That does not mean there is no procedure. CREG has stated that a self-generator without surplus must comply with the regulation in force, RETIE and the connection procedure with the grid operator, and under Resolución CREG 174 de 2021 self-generators without exports connected to the distribution system follow the procedure without a simplified connection study. It is the fastest route, at the cost of giving up the value of the surplus.

The decision has a design consequence: without exports, the plant is sized against the minimum consumption during sunlight hours, not the average, and output on weekends or holidays with the facility idle is lost. The more stable the daytime load, the less is sacrificed.

Distributed generation is often confused with self-generation, but in Colombian regulation it is a different activity. Resolución CREG 174 de 2021 defines it as generating electricity with a plant of installed capacity under 1 MW, located close to consumption centres and connected to the Local Distribution System. Whoever carries it out, the distributed generator (GD), is a public utility company and, for all purposes, a generation agent subject to the rules of that activity.

The GD does not consume its energy: it sells it. It can sell under the general market rules or directly to the retailer integrated with the grid operator, which is obliged to buy it at a price regulated by article 22 of that resolution, as amended by Resolución CREG 101 072 de 2025.

For a company that wants to cut its bill, this category is almost never the right one: it requires becoming a public utility company and operating as a generator. It makes sense for those who want to turn energy sales into a business, for example with a large roof and little own consumption, and even then it is worth comparing with leasing the roof to a third party who develops the project.

Two newer categories widen the map. The first is remote self-generation: producing at one site and consuming at another over the grid. Decreto 1403 de 2024 set the policy and Resolución CREG 101 099 de 2026 regulated it: the remote self-generator is not subject to the 1 MW small-scale limit, pays the backup and network charges set by the regulation, and its generation asset connects under rules equivalent to those of a plant of its size (those under 5 MW, under Resolución CREG 174 de 2021). It is the category for a company without a usable roof, or with several sites, that wants energy from its own plant elsewhere.

The second is energy communities, created by Decreto 2236 de 2023 and regulated by Resolución CREG 101 072 de 2025: collective self-generation (several users producing for their own demand) and collective distributed generation, within the power and dispersion limits set by Resolución UPME 501 de 2024 (under 5 MW). In its Concepto 14037 de 2025, CREG stated that a legal entity with several commercial metering points can form an energy community. For an industrial park or a group of neighbouring companies it is an option worth studying, bearing in mind that its regulation is recent.

Four answers identify the category of almost any business project. They are questions to settle with the installer at the design stage, with the hourly load profile on the table.

Companies with large loads often find that their optimal plant is somewhat above 1 MW. Before crossing the threshold it is worth comparing two scenarios: a plant of up to 1 MW as an AGPE, with the energy credit and the reactive energy exemption of Decreto 929 de 2023, and a larger plant as an AGGE, with more output but with surplus valued by contract, the guarantee rules and the mandatory backup contract.

There is no general answer: it depends on how much of the output is self-consumed and on what the representative offers for the surplus. If the larger plant barely exports, the commercial difference matters little; if it exports a lot, it matters a great deal. What should be avoided is finding out afterwards, because the capacity declared in the procedure fixes the category.

In both cases the same technical safety requirements apply: RETIE as currently in force, with the text of the four books issued by Resolución 40284 de 2026, which requires full certification for self-generation of 10 kVA or more that exports surplus, and the agreements of the National Operation Council (CNO) on protection and testing for the connection.