Power policy

Technology-specific auctions have been essential for renewables deployment in Peru. In 2008, under Decree No. 1002, the government established auctions to contract on-grid renewable capacity every two years. Since then, five auctions have been held, totaling 1.55 gigawatts of biomass, small hydro, solar and wind. Peru was among the first countries to hold off-grid energy auctions.

Although auctions remained on hold throughout 2021, Peru in December announced several new projects (with one already commissioned as of October 2022), with a solar photovoltaic capacity of 100 megawatts and more than 100 megawatt-hours of energy storage projects.

According to Supreme Decree No. 064-2010, the country intends for renewable energy to make up 15% of power generation by 2030. The importance of this decree is that it has influenced several policies that were defined afterwards.

The Ministry of Energy and Mines in 2015 published Decree 1221, aiming to improve the regulation of electricity distribution and promote access to electricity in Peru. However, it took until 2018 for the Supreme Decree for the regulation of distributed generation to be published for public comments. It proposes a net-billing scheme for installations with up to 200 kilowatts of power, but also a scheme for projects up to 10 megawatts. This decree also establishes that renewable energy generators that are connected to the grid have a feed into the grid, if this doesn’t affect the distribution system. This is intended to provide a significant boost to small-scale solar capacity.

Peru offers priority dispatch to clean energy plants and 20% accelerated depreciation for renewables projects.

According to Decree 1002, the generation of electricity from renewable energy resources is prioritized for daily dispatch carried out by the Committee of Economic Operation of the System (COES), which will be considered as having a zero variable production cost.

Power prices and costs

Power prices in Peru have risen considerably over the past few years. Industrial electricity saw the greatest increase from $79.71 per megawatt-hour in 2016 to $90.75 in 2021, a 13% jump. In the same period, commercial rates rose from $106.40 to $117.34 and residential from $137.57 to $152.47. Even so, Peru’s electricity prices are still among the lowest in Latin America.

Power market

Peru attracted $615.10 million in clean energy investment in 2021. Most went to small hydro and onshore wind projects, with 35% and 22% of the total, respectively. However, from 2016 to 2019, solar attracted the most investment with $252 million, compared with $165 million in wind.

Peru saw a peak in clean energy investment from 2012 to 2014, mostly led by financing of auction projects. In recent years, such investment has plummeted in the country, dropping to $300 million in 2017 and less than $2 million in 2018. The country has received capital from international and national commercial financial institutions, as well as development banks. The biggest lead arrangers are US Overseas Private Investment Corp. (OPIC) and the European Investment Bank, registering $235 million and $213 million on PV and onshore wind, respectively, according to BloombergNEF’s capacity and generation data.

Doing business and barriers

The government is working on several projects focused on electrifying rural areas. Peru in December 2021 issued a tender to electrify the rural Peruvian Amazonia. The Ministry of Energy and Mines hopes to supply electricity to 6,658 households in 125 locations in the Amazon. The plan is to use a combination of off grid PV systems and net metering schemes. The project is under development but does not have a confirmed date of completion.

Peru’s energy consumption has been stable, averaging a 2% increase in demand over the past two years. The country also has fossil fuel subsidies, which it plans to eliminate by 2030. These have created market distortions by artificially lowering the price of gasoline and diesel.

With regard to green hydrogen, a program focused on the promotion and development of green hydrogen is among the long shot ideas that are being considered this year by the newly created domestic hydrogen association commission, H2 Peru.

In terms of corporate power purchase agreements (PPAs), Anglo American signed a 245-megawatt onshore wind deal with Engie in April 2021 in Peru. Solar PPA volumes reached an installed capacity of 656 megawatts as of December 2021, down from the record high of 943 megawatts in 2020.

EV market

Peru has a nascent electric vehicle market even though it has continued to grow in recent years. In 2016, 11 battery EVs were registered while 254 were registered in 2021.

EV policy

Peru in 2020 passed a decree aimed at establishing a better transport system through sustainable means. The government is also aiming to pass legislation in 2023 to allow tax deductions for EV buyers.

Buildings market

Peru has a law focused on promoting energy efficiency, Decree 27345. However, the government has yet to implement any substantive policy support in this sector and the buildings market remains at an early stage.

Buildings policy

The government has yet to implement any substantive policy support in this sector.