Peru to boost renewable investments

A raft of new legislation aims to boost the share of renewables in the power mix and help Peru meet its transition goals, writes Lucien Chauvin

A Peruvian government bill that eyes time block contracts and simplified supply auctions could boost investments in new solar and wind projects.

President Dina Boluarte submitted draft legislation to congress on 24 March to modify the 2006 energy efficiency law, which lays out the basic architecture of power auctions and how electricity is distributed.

The bill joins a growing list of legislation before congressional commissions to increase the participation of renewable energy sources and improve energy efficiency as Peru pushes its energy transition.

The bill would modify only a handful of the 101 articles in the original law, such as simplifying how energy auctions are conducted.

Peru has not held a renewable power auction since 2015. The legislation would allow distributors to sign supply contracts without the need for auctions, make supply contracts more flexible and predictable, and define concessions for isolated systems.

A substantial change, following the example of neighbouring Chile, would allow for contracts that use time blocks tailored to production sources as a way of boosting solar and wind generation. Solar energy would thus be able to win daytime contracts. Chile introduced tenders for hourly energy blocks in 2015.

Another modification stipulates that long-term contracts required by distributors would extend for a maximum of 15 years. The previous legislation did not include a timeframe.

The proposal also calls for a mechanism for power distribution in isolated systems not connected to the national grid.

The country's largest isolated system covers Iquitos, capital of Loreto region in the northern jungle and home to 550,000 people. Electricity is provided by a 48.4MW plant running on diesel.

Add agency

The legislation, if approved by the 130-member congress, calls for the creation of a new operating agency, similar to national grid economic operating committee Coes-Sinac, to ensure that supply is guaranteed.

Coes-Sinac president Cesar Burton says the modifications should help spark more solar and wind investments, but adds that the state needs also to focus on reducing transmission line bottlenecks. "Concessions for transmission lines have been delayed and only the state can resolve this impasse," he says, noting that approved projects take up to three years to be put out for tender.

The newly submitted legislation is part of a growing list of bills drafted in the past 10 months that include incentives for the energy transition. They run from bills to provide tax breaks for renewable power to a measure submitted in October last year to foster investment in green hydrogen.

All of the bills are before different congressional committees.

Peru has the potential for close to 69.5GW of hydropower capacity, 25GW of solar, 20.4GW from wind farms, 2.85GW of geothermal capacity and 450-900MW of biomass generation, according to a 2019 report complied by energy regulatory board Osinergmin.