Q&A: ‘Peru has fallen years behind in the energy transition’

Electricity in Peru comes mostly from two sources: hydropower and natural gas, which account for 95% of installed capacity. Wind and solar energy together make up the remaining 5%. This over-dependence and lack of diversification is a cause for concern for the country, and the risks from them have already begun to be felt.

Last year saw intense droughts that meant that, in December alone, the country “spent up to seven times more than usual burning diesel,” according to Brendan Oviedo, a lawyer and president of the Peruvian Association of Renewable Energies (SPR).

A proposed law to promote investments in renewable energy is currently awaiting discussion in the Peruvian congress – a bill which, according to experts, could help to reduce the final cost of energy for consumers. However, the country’s ongoing political crisis has prevented it from being debated and progressing further.

By 2030, Peru hopes to reduce its greenhouse gas emissions by 30%, and is aiming for at least 5% of its vehicle fleet to be electric by the same year. “It is expected that by then, we will have at least 6,600 electric buses as part of our public transport fleet, and more than 70,000 light vehicles,” Oviedo said, but lamented that “We are very far from that.”

In his interview with Diálogo Chino, Oviedo discussed the state of Peru’s energy transition and barriers to it, pointing to a need for “urgent changes” and long-term thinking.

Diálogo Chino: How is Peru doing in its development of renewable energies?

Brendan Oviedo: Unfortunately, we have lagged behind for several years. In 2008, we had our first law to promote renewables, and that created a very beneficial contracting scheme for projects. Four rounds of tenders followed, the last of which was awarded in February 2016. Wind, solar and hydroelectric projects of up to 20 megawatts were awarded. But since then, there hasn’t been much more. Now we are in a different situation and we need change ­– we need to diversify our energy mix.

This need for renewables has been talked about for a long time.

Definitely. We have commitments [for emissions reductions] under the Paris Agreement to 2030 and 2050. By 2050 the goal is carbon neutrality. However, we are not currently clear how we are going to achieve it, despite being one of the countries in the region with the greatest potential to generate renewable energy, only behind Brazil.

What factors are preventing Peru from accelerating this transition?

We need political will, and we have not had it in recent times for various reasons. However, there are currently a couple of bills being discussed in the congress’ Energy Commission to open up or modify the contracting structure, which would achieve a substantial reduction in the prices paid by all users. This is a proposal identical to the one made in Chile a few years ago, which allowed a great development of renewable energy projects. Just to give you an idea, the current cost of generation in Peru is around US$60 [per megawatt hour]. And in Chile this has reached US$13.

Peru has great wind and solar potential, and we have to take advantage of it

Recent events seem to have emphasised the need for Peru, much like the whole region, to diversify its energy mix. What went wrong?

In December, due to the latest droughts – the most intense in recent decades – we had a crisis. It was thought that it would rain in December, so the gas power plants in Chilca, the main ones in the country, were scheduled for maintenance. However, it did not rain and diesel had to be burned to generate energy. And the costs were multiplied by six or seven times. These situations will continue to occur given the fragility of our system – a system that grew without planning, and in which almost all of its energy comes from gas and hydroelectric plants in the centre of the country. We need to diversify and decentralise.

However, there are sectors that claim that Peru has enough energy...

The reserves at Camisea, the gas field which provides 40% of Peru’s energy, spread across just a few square kilometres – it is not infinite. We have to look at more options. Peru has great wind and solar potential, and we have to take advantage of it. This will allow us to reduce the risk of any kind of interruption that could affect the population.

We have to foresee what could happen in the future. Climate change has to push governments to accelerate the transition to renewable energies, in Peru and in the region, because we are feeling the impacts more and more.

It seems to come back to the same thing: a lack of planning.

That’s right, there is no political will. If there were, we would have already begun an energy planning process. It is not that Peru is not attractive, nor that the private sector does not want to invest. Our [electricity] demand requires just over 8,000 MW of capacity, and we have over 13,000 MW [across all sources]. There are more than 20,000 MW of renewables projects currently being studied. Companies are investing in developing projects. If the political will was there, renewables could easily cover at least 30% of the country’s total energy demand.

Other detractors say that renewable energy generation can also have a high level of pollution, and also causes social conflicts. What would you say to this?

In terms of social conflicts, we have to demand that all companies work respecting all the rights of workers and the population that could be affected. But this applies to all types of investment – not just renewable energy production.

On pollution, we have to understand that as humanity we are making a transition from one economic model of life to another. While we can talk about the fact that there is going to be pollution in the extraction of materials [such as lithium for batteries] and in the production processes, we have to be clear that there are also technologies being developed right now that will be more sustainable and low impact. In the future there may be batteries that will last forever, and we will develop in that way. We have to be clear that we are in a transition and along the way all the processes will undoubtedly be improved.