Peru could add between 4 and 5 GW of new renewable capacity over the next decade , a volume that, according to Brendan Oviedo Doyle, would represent more than 50% of the country's current electricity demand. However, the realization of this expansion will depend on the new government unblocking long-term tenders and creating contractual conditions to finance the power plants.
The market already has a large portfolio of solar and wind projects under development. According to data from Osinergmin , analyzed during the interview, there are 105 projects with approved pre-operational studies , totaling around 22 GW : 13,778 MW correspond to photovoltaic solar plants and 8,243 MW to wind farms . However, only 14 photovoltaic and five wind projects have received final permits, with an approximate capacity of 3,700 MW by 2030 .
According to the partner in the Energy and Projects Area at DLA Piper Peru, the difference between projects in the planning stages and those that have reached an advanced stage is mainly due to the lack of predictable and bankable supply agreements. “ What’s missing now is the contractual structure that would allow them to finance their projects ,” Oviedo stated during the “It Had to Be Said and It Was Said” streaming event, organized by Energía Estratégica.
The expert explains that having land, permits, and pre-operational studies does not guarantee the construction of a power plant. Developers also need long-term power purchase agreements that ensure revenue and allow them to structure financing through project finance .
During the meeting, the executive estimated that adding between 4,000 and 5,000 MW over the next ten years “is not an exaggeration,” considering the projected growth of the electrical system.
The analysis takes on particular relevance given the imminent change of government. Keiko Fujimori, proclaimed president-elect for the 2026-2031 term, will assume the Presidency of Peru on July 28. As of now, it has not been confirmed who will head the Ministry of Energy and Mines, although Rafael Belaúnde is among the names mentioned for the position.
When asked about that possibility during the live stream, Oviedo highlighted the former minister's willingness to engage in dialogue, though he avoided limiting the sector's needs to a specific individual. "Rafael has already served as a minister, albeit briefly, but he's a political person. I've known him for many years, and I believe he's quite open to dialogue, which is precisely what we need now," he stated.
“ First, we need to focus on planning, second, we need to approve the regulations that need to be approved in the short term, and third, we need to evaluate an institutional restructuring ,” Oviedo listed in the context of “It had to be said and it was said .”
He added: “ We need someone who will sit down and prioritize Peru’s interests .”
It's worth noting that the government published a draft supreme decree for public comment, aimed at establishing a comprehensive long-term energy planning process. The proposal remained open for feedback until the end of the month and was subsequently scheduled to move towards its regulatory implementation.
“ This is a historic milestone in Peru because we have never had a regulation that at least seeks to gather information and identify options to address both the issue of future demand and the supply to satisfy it ,” Oviedo stated during the streaming event “It Had to Be Said and It Was Said .”
Planning would also allow for the correction of structural imbalances. Currently, about 80% of electricity generation is concentrated in the central part of the country , while growing consumption requires transporting energy to the north and south through a network prone to congestion.
Pending tenders and regulations
Among the short-term measures, Oviedo highlights the need to approve the bidding regulations for the regulated demand of Law 32249. The mechanism seeks to enable long-term contracts that improve the bankability of new projects and bring the supply of each technology closer to the times when its resource is available.
Continue reading
The proposal includes three time blocks , which would allow solar and wind power plants to compete in specific time slots with prices tailored to their generation profile. According to the expert, the duration of these contracts will be crucial in aligning with financing terms.
“ Banks like to align the loan term with the product purchase agreement term, in this case the PPA ,” the executive explained. Therefore, he warns that a tender without sufficiently long agreements might not resolve the main bottleneck in the renewable energy portfolio.
The new government will also have to resolve the regulations for ancillary services, intended to govern services necessary for the stability of the system, such as primary and secondary frequency regulation. Oviedo believes that the published text does not fully reflect a market-driven approach and that there is still room for improvement in its design.
“ We don’t see much of a market-driven approach there, but rather an energy security structure that I believe is missing an opportunity ,” he warned. According to the specialist, more competitive regulation would allow efficiencies to be passed on to users and prepare the system for greater penetration of variable generation.
“ I think we should also evaluate something a little broader, not so restrictive, and also consider standalone batteries ,” he added.
The role of energy storage also needs to be defined. The Economic Operation Committee of the National Interconnected System (COES) proposes recognizing the capacity of hybrid renewable energy plants with batteries, although the specialist suggests including independent systems.
“ COES has done well to push this proposal, but I think that now that there is a new government, everything should be reconsidered, not excluding one thing, not preventing the progress of one thing, but I think it should be seen as a whole ,” Oviedo stated.
The modification would require changes to the regulations of the Electricity Concessions Law and a decision from the Ministry of Energy and Mines. Its approval would allow batteries to participate in energy displacement, frequency control, and system backup without necessarily being linked to a solar or wind power plant.
El Niño puts pressure on energy prices again
The reduced water availability associated with El Niño, a climate phenomenon affecting various countries in the region , is once again putting pressure on the Peruvian electricity system. During the live stream, prices were analyzed as close to 700 soles per MWh , compared to a typical average of approximately 150 soles per MWh , in a context of drought, lack of rainfall, and reduced output from some wind farms.
According to Oviedo, the increase is due to the need to replace hydroelectric and wind power generation with thermal units that use imported diesel. “ There is very little rain now, and this, along with other problems, is causing us to have to resort to diesel in recent days ,” warns the partner at DLA Piper Peru.
The situation is bringing the market back to the levels of tension seen during the Camisea gas pipeline disruption. In March, a break in the infrastructure reduced the availability of natural gas for thermal power plants and forced an increase in diesel dispatch, which drove marginal costs to over $300 per MWh .
“ Imagine if that happened today ,” Oviedo warns, recalling that the previous incident occurred during the rainy season. A similar disruption during the dry season and under the effects of El Niño could have an even greater impact on supply costs.
The specialist also notes that the 2023 coastal El Niño event raised marginal costs from approximately $28 or $30 per MWh to $73 per MWh . The current combination of reduced water resources, decreased wind speed, and transmission congestion once again exposes the country to more expensive thermal power generation.
“ These additional costs are being passed directly on to consumers ,” Oviedo points out. The impact can extend throughout the entire production chain, as companies must absorb the electricity price increase, reduce their profit margins, or incorporate it into the final price of their goods and services.
In this context, renewable energy expansion and storage take on strategic importance. Incorporating new solar and wind capacity, along with batteries and an adequate transmission network, would reduce reliance on diesel and mitigate the impact of future weather events or disruptions in natural gas supply.