Electricity sector in Peru
The electricity sector in Peru has experienced large improvements in the past 15 years. Access to electricity has increased from 45% in 1990 to 96.4% in 2018, while service quality and efficiency of service provision improved. These improvements were made possible through privatizations following reforms initiated in 1992. At the same time, electricity tariffs have remained in line with the average for Latin America.
However, several challenges remain. Chief among them are the still very low level of access in rural areas and the untapped potential of some renewable energies, in particular wind and solar energy, due to an inadequate regulatory framework.
The current electricity generation capacity is evenly divided between thermal and hydroelectric sources. A renewed recent dynamism of the electricity sector in the country is based on the shift to natural gas plants, which will be mainly fed from the production of the Camisea gas field in the Amazon rainforest.
The National Interconnected System serves 85% of the connected population, with several “isolated” systems covering the rest of the country. While investment in generation, transmission and distribution in urban areas is predominantly private, resources for rural electrification come solely from public sources.
Electricity supply and demand
Installed capacity
Installed generating capacity Peru is evenly divided between thermal and hydroelectric sources. In 2006, the country had 6.7 GW of installed capacity, 52% being thermal and 48% hydroelectric, with a negligible share of other renewable sources. Of the total capacity, 84% enters the electricity market, while the remaining 16% is generated for self-consumption.However, electricity generation is not evenly divided between the two dominating sources. In 2006, 72% of Peru's total electricity generation came from hydroelectric plants, with conventional thermal plants only in operation during peak load periods or when hydroelectric output is curtailed by weather events. This “underuse” of the country's thermal capacity is due to the high variable costs of thermal generation. In 2004, the country's reserve margin was estimated at 45%. However, when those high cost thermal plants were taken out of the equation, margins fell to as low as 15%.
In an attempt to reduce the country's reliance upon hydroelectricity, the Peruvian government has encouraged greater investment in gas-fired power plants. The controversial Camisea Gas Project has opened up natural gas production in Peru, with the first new 140 MW gas-fired power plant in Tumbes to start operations by the end of 2007. The Camisea project is considered strategic for it is expected to contribute to reduce the existing deficit in Peru's hydrocarbons trade balance by substituting imports and allowing exports.
The dynamic nature of the electricity sector has continued during 2007, with an estimated 9.3% increase in generation, which is expected to reach 30 TWh. This increase is mainly due to the existing positive conditions for thermal generation through the use of natural gas in new plants and also to an increase in hydroelectric generation due to the availability of hydrological resources in the existing hydroelectric facilities.
Demand
In 2006, total electricity consumption in Peru was 24 TWh, which corresponds to 872 kWh per capita per year. The consumption share for the different economic sectors is as follows:- Industrial: 66%
- Residential: 24%
- Commercial: 19%
- Public lighting: 3%
Demand and supply projections
To meet this increasing demand, Peru will rely on natural gas, which is the most cost-competitive option among all other fuel types. As such, it is expected that the installed capacity of gas-fired electricity generation will increase from 0.3 GW in 2002 to 6.0 GW in 2030. It is expected that, from 2026 onwards, natural gas will acquire the dominant share in the electricity generation mix, reaching 44% in 2030 compared with hydroelectricity's 37% share for the same year.
Access to electricity
In 2006, 79% of the population in Peru had access to electricity, a percentage that is below the 94.6 average for the LAC region Peru has one of the lowest rural electrification rates in Latin America. Coverage in the predominantly poor rural areas is about 30%, with more than six million people without access to electricity. In its 2004 National Rural Electrification Plan, the Government of Peru reiterated its commitment to reduce the electrification gap, aiming to increase rural coverage from 30% to 75% by 2013.Service quality
Interruption frequency and duration
In 2005, the average number of interruptions per subscriber was 14.5, while duration of interruptions per subscriber was 18.3 hours. Both numbers are very close to the weighted averages of 13 interruptions and 14 hours for the LAC region.Distribution and transmission losses
Losses in 2006 amounted to 11% of total production. Distribution losses were 6.3%, down from 22% a decade before and below the 13.5% LAC average. Transmission losses for the same year have been estimated at 4.7%.Responsibilities in the electricity sector
Policy and regulation
The National Electricity Office, under the Ministry of Energy and Mines, is in charge of setting electricity policies and regulations and of granting concessions. It is also responsible for elaborating generation and transmission expansion plans and has to approve the relevant procedures for the operation of the electricity system.The Energy and Mining Investment Supervisory Body, created in 1996 as OSINERG, is in charge of enforcing compliance with the Electricity Concessions Law of 1992 and is also in charge of ensuring the electricity public service. OSINERG is as well the body responsible for enforcing the fiscal obligations of the license holders as established by the law and its regulation. Finally, it is responsible for monitoring compliance of the System Economic Operation Committees functions and for determining biannually the percentages of market participation by the companies.
In 2000, OSINERG was merged with the Electricity Tariffs Commission, currently known as Adjunct Office for Tariff Regulation. Together, they are in charge of fixing generation, transmission and distribution tariffs and the tariff adjustment conditions for the end consumers. They also determine the tariffs for transport and distribution of gas by pipeline.
As for rural electrification, the National Rural Electrification Office is in charge of the National Rural Electrification Plan, which is framed under the policy guidelines set by the Ministry of Energy and Mines. DGER is in charge of the execution and coordination of projects in rural areas and regions of extreme poverty.
Finally, the National Institute for Defense of Competition and the Protection of Intellectual Property is in charge of monitoring compliance with the Anti-monopoly and Anti-oligopoly Law of 1997.
Generation
In 2006, 38 companies generated electricity for the market, while 78 companies produced electricity for their own use. Among the 38 companies supplying energy to the market, four of them accounted for 70% of the total capacity:- EDEGEL S.A.A.: 1,574MW
- Electroperú S.A. : 1,032 MW
- KALLPA Generación
- ENERSUR: 725 MW
- EGENOR: 522 MW
Private companies dominate the generation sector. In terms of participation, state companies hold 31% of generation capacity, with the remaining 69% in private hands. Production percentages are 40% and 60% for the public and private companies respectively.
Transmission
In Peru, 100% of the transmission activities are in private hands. In 2006, there were 6 purely transmission companies that participated in electricity transmission in Perú: Red de Energía del Perú S.A., with 28% of the transmission lines; and Consorcio Energético Huancavelica, Consorcio Transmantaro S.A., Eteselva S.R.L, Interconexión Eléctrica ISA Perú and Red Eléctrica del Sur.S.A., with 15% of the lines. Generation and distribution utilities and the companies that generate electricity for their own consumption operate the remaining 57% of the transmission lines.Distribution
In 2020, 63% of the electricity was commercialized by 22 distribution companies, while the remaining 37% was commercialized directly by generation companies. The companies that stood out for their sales to end-consumers were:Enel, Luz del Sur, Enersur, Edegel, Electroperú, Hidrandina, Termoselva and Electroandes.Public distribution companies supply electricity to 55% of the existing clients, with the remaining 45% in hands of the private utilities. However, in terms of electricity distributed, private companies have the lead with 71% of the total as opposed to 29% for the public ones.
Renewable energy resources
The National Environment Fund was created in 1997 and received the mandate from the Peruvian Congress to identify and promote projects that exploit renewable energy sources, introduce clean technologies, and promote energy efficiency and the substitution of highly polluting fuels. However, the contribution of renewable energy sources other than hydroelectricity is still very limited in Peru.Hydroelectricity
is the only renewable resource exploited in Peru. In 2006, it accounted for 48% of total installed capacity and 72% of electricity generated. The largest hydroelectric facility in the country is the 900 MW Mantaro Complex in southern Peru, which is operated by state-owned Electroperu. The two hydroelectric plants at the complex generate over one-third of Peru's total electricity supply. In February 2006, Egecen S.A. completed construction of the 130-MW, Yuncán hydroelectric plant, located northeast of Lima. The plant will be operated by EnerSur, a subsidiary of Brussels-based Suez Energy International.Construction on the multi-purpose Olmos Transandino Project has been underway since 2006 and in February 2010, the contract for its hydroelectricity power plant is expected to be issued. The power station in northwest Peru's Cajamarca province will have a 600 MW capacity and produce 4,000 GWh annually. Construction of the 406 MW dam on Huallaga River in Chaglla District started in 2012. The 525 MW Cerro del Águila was inaugurated in 2016. In 2012, the Salcca-Pucara hydroelectric project received the last of several approvals it needed.