The Government of Peru is preparing to relaunch tenders to develop new hydroelectric power plants , with the aim of encouraging private investment, diversifying the generation matrix and strengthening the security of the electricity supply in the face of the growth of variable renewable sources.
The initiative contemplates the possibility of establishing guaranteed rates through 10, 15 or 20 year contracts, a mechanism aimed at improving the financing conditions of projects that require significant capital outlays and long construction periods.
The announcement was made by Guillermo Shinno, Peru's Minister of Energy and Mines, during the inauguration of the Pecier-FISE 2026 International Electricity Sector Expo, where he presented part of the government's agenda aimed at promoting new investments in energy infrastructure.
The proposal gains relevance in light of projections for the Peruvian electricity system, which anticipate a possible deficit of up to 800 megawatts (MW) of efficient generation reserve during peak demand hours in 2029, if sufficient capacity is not incorporated.
According to the diagnosis included in the 2027-2036 Transmission Plan, the efficient reserve shortfall would reach 150 MW in 2027, increase to 500 MW in 2028 and reach 800 MW in 2029.
In this scenario, hydroelectric expansion appears as one of the components of the official strategy to support the functioning of the system and accompany the incorporation of new solar and wind power installations.
The Ministry of Energy and Mines (Minem) believes that the increase in these technologies must be complemented by investments capable of contributing to the stability and continuity of the electricity service.
Long-term contracts and new rules to attract investment
One of the main aspects of the government proposal is the design of instruments that provide greater economic predictability to hydroelectric power plant developers.
In particular, the Executive is considering establishing remuneration schemes with contractual horizons of up to two decades, although the final conditions still need to be evaluated together with the Private Investment Promotion Agency (ProInversión).
The mechanism seeks to address the financial and construction characteristics of this technology, whose projects can take between seven and eight years before beginning commercial operation.
For this reason, the stability of income over extended periods is one of the elements considered by the authorities to facilitate the participation of private investors.
However, this announcement does not imply that the contractual terms are finalized. The duration of the agreements and their financial characteristics remain subject to evaluation.
In parallel, the Ministry is working on the approval of pending regulatory provisions that are relevant to the development of the electricity market.
These include the bidding regulations and the regulations concerning complementary services, instruments that are part of the agenda for updating the sector framework.
If this timeline is met, the sector would have new regulatory definitions before the end of 2026, although the dates for calling for future hydroelectric tenders have not yet been specified.
This regulatory advancement comes within the framework of Law No. 32249 , which modifies Peruvian electricity market regulations to promote diversification of the energy matrix. According to Energía Estratégica , the draft bidding regulations have already received a favorable evaluation from the Multisectoral Commission for Regulatory Quality and include long-term contracts of between 10 and 15 years , separate purchases of power and energy, and contracting by time blocks.
However, the conditions for participation by existing power plants and new projects remain divergent among the main market players . While EDF Perú proposes reserving long-term tenders for new facilities, companies like Kallpa, ENGIE, and Statkraft advocate for competition between operating generators and future developments. ACCIONA, in turn, proposes extending contracts to up to 20 years to facilitate financing for new investments.
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The availability of long-term supply agreements is also a concern for the sector. During the Future Energy Summit Peru 2026, César Butrón, president of the Board of Directors of the Economic Operation Committee of the National Interconnected System (COES) , warned: “They are not achieving financial closure. That is the big problem; there are not enough long-term contracts.”
In this scenario, the approval of the regulations would not necessarily imply an immediate call for tenders , given that some of the current contracts of the distributors will expire in 2030 and 2031. Therefore, the definition of the schedules, energy volumes and award conditions will be crucial in establishing when new hydroelectric projects and other generation technologies will be able to compete.
Renewables aim for 20% while electricity demand grows
The investment strategy also responds to the anticipated changes in the composition of the national generation.
According to projections communicated by the head of Minem, non-conventional renewable energies, mainly solar and wind, could represent approximately 20% of electricity generation towards the end of the five-year period.
This expansion poses new operational requirements for the system, especially in relation to the availability of generation to support the supply when production from technologies dependent on weather conditions decreases.
Consequently, the Government plans to maintain a mix of sources that includes hydroelectric plants and natural gas-fired thermal generation, in addition to the planned growth of solar and wind power installations.
However, the development of new thermal projects also faces constraints related to the future availability of fuel.
Shinno warns that Camisea's current natural gas reserves have a horizon of approximately 10 to 13 years, a circumstance that could condition investment decisions in new power plants of this technology.
Given this situation, the Executive plans to coordinate actions with the Ministry of the Environment (Minam) to analyze the conditions that will allow progress in the development of additional reserves.
The availability of gas thus becomes another component of energy planning, due to its impact on the viability of new investments in thermal generation capacity.
On the other hand, insufficient efficient reserves could increase the use of diesel-powered plants, whose higher generation costs would have economic consequences for businesses and consumers.
This risk arises while national demand for electricity continues to grow.
Between January and August 2026, Peruvian electricity production registered an increase of nearly 5% compared to the same period of the previous year, reflecting a greater need for supply.
The composition of consumption also makes it possible to identify the main sectors that drive the system's requirements.
According to the 2023 energy balance cited in the official information, mining and metallurgical activity accounts for 35% of electricity demand, followed by industry, with a share of 22%.
Residential consumption accounts for another 20%, while commerce makes up 13% of the total.
In this context, the relaunch of hydroelectric tenders is part of a broader agenda aimed at expanding available capacity and establishing conditions for the entry of new investments.
Defining the contracting mechanisms, approving the pending regulations, and coordinating with ProInversión will be key aspects in determining how the initiative will move forward and under what conditions private developers can participate.
The challenge for the authorities will be to reconcile the expansion of renewable energy sources with the timely addition of capacity that helps maintain continuity of supply, especially given the needs projected for the next three years.
By Emilia Lardizabal
By Ailén Pedrotti
By Energía Estratégica
