The signing of long-term power purchase agreements (PPAs) in Peru is going through a period of consolidation.
Driven by the volatility of the spot market and the need to certify green consumption, more and more private actors, especially mining and agribusiness, are betting on this model.
However, the growth of these agreements faces challenges such as a lack of electrical infrastructure and regulatory clarity. Luis Stefano Roncal Ballena , a PPA specialist and zonal manager for La Libertad and Piura at CVC Energía, explained that PPA prices have shown significant evolution in recent years. "Eight years ago, prices were around $25, but recently contracts were being signed for $65 or $70."
“Today the average is around $42 or $45 per megawatt-hour,” the executive explained in an interview with Energía Estratégica. This transformation was partly due to the contingencies the country experienced from a lack of water in its reservoirs, which drove up prices in the spot market and forced the activation of high-cost thermal reserves. “We had peaks of up to $200 per MWh in the spot market,” he recalled. In that context, renewable PPAs emerged as a safe haven for companies seeking predictability and competitiveness. Roncal highlighted the case of ENGIE and a mining company with the Punta Lomitas wind farm, an example of a direct contract between a generator and a large consumer. “These types of projects are a source of motivation.”
Mining companies are very interested in this model, he stated. Despite the market's dynamism, regulations still have room for improvement for new projects .
While a legal amendment allowing solar generators to sell energy to distributors through time-of-use auctions has been approved, the technical procedures have not yet been published . "The law is in place, but until the procedures are published, nothing will happen," Roncal emphasized.
This lack of clarity, he explained, makes it difficult to access financing and delays key investment decisions. "We don't know how billing will be handled or how the indicators will be calculated."
"With a clear, implemented, and published regulatory framework, the signing of PPAs will be boosted," he noted. For CVC Energía, this situation impacts the entire chain. The main player is the State.
Without clear rules, progress is impossible, Roncal stressed.
According to the executive, other countries in the region, such as Colombia, have mandatory quotas for distributors that promote the use of renewables, but Peru still lacks clearly defined incentives. Beyond regulatory challenges, the most pressing obstacle to renewable energy development in Peru is physical: the existing electrical infrastructure is insufficient to keep pace with the growth in generation.
The areas with the greatest potential, such as the north for wind and the south for solar, face serious grid limitations . "Between the north and the south, the infrastructure is very congested."
"There are greater energy losses and that affects price competitiveness," Roncal explained.
In that regard, he warned: "There may be too many generation projects in the country, but if the main conduit for that energy to reach customers is deficient, having more plants is useless." From his role at CVC Energía, the executive emphasized that the company seeks to provide comprehensive solutions for generation, transmission, and marketing.
"We are looking to electrify areas to develop agricultural activity," he said.
Through Coenergy, a company within the group, they are executing solar projects in Piura, Viacurí, Olmos and Tacna, focused on territories with high agro-export potential.
"We are currently handling many connection requests in new concessions such as Tacna," he noted.
The impact of these initiatives, he stated, transcends energy.
Where there were once deserts, today there are agro-export companies.
"I think we've done our bit in that development," he reflected.
Therefore, he insisted that state support will be key to accelerating the processes.
We guarantee quality through our infrastructure.
“That’s why we’re asking the government to activate the projects we have in our portfolio,” he emphasized. Faced with an increasingly demanding and competitive market , PPAs are presented as an effective way to guarantee renewable supply, traceability, and price stability .
But its expansion will depend, to a large extent, on the ability of the State and the private sector to support this dynamic with networks, regulations and strategic vision.