Roadmap for Sustainable Growth: The Future of Peru's Electricity Sector

The report highlights that electricity demand in Peru has surged in recent years, primarily fueled by the industrial and mining sectors.

The International Finance Corporation (IFC), a member of the World Bank Group, in collaboration with consulting firms PSR and UL Energía e Infraestructura, and supported by The Facility for Investment Climate Advisory Services (FIAS), has released an in-depth report on the evolving landscape of Peru's electricity sector. Titled "Development of the Peruvian Electricity Sector: from SEIN to the Amazon," this study delves into the physical, regulatory, and commercial dynamics of the Peruvian electricity market while offering projections that stretch to 2050.

Rapid Growth Driven by Industry and Mining

The report highlights that electricity demand in Peru has surged in recent years, primarily fueled by the industrial and mining sectors. Projections indicate an average annual growth rate of 2.6% until 2050. Meeting this demand will require substantial investments in generation infrastructure, posing both a challenge and an opportunity for stakeholders.

Shift Towards Renewable Energy and Infrastructure Resilience

Currently, Peru's electrical system is dominated by hydroelectric and natural gas thermal plants. However, the report forecasts a transformative shift, with non-conventional renewable energy sources such as solar and wind expected to comprise 45% of the installed capacity by 2050. The integration of these intermittent renewable energies necessitates enhancements in system resilience, including the deployment of advanced battery storage systems.

Stabilizing Electricity Prices Through Diversification

The diversification of Peru's energy matrix and the increased role of renewable energies are expected to stabilize electricity spot prices over the long term. To support this transition, the IFC recommends implementing financing mechanisms that ease the entry of solar and wind projects, upgrading transmission infrastructure, and expanding rural electrification initiatives.

Inclusive Electrification and Rural Development

A significant focus of the study is the promotion of "inclusive electrification," particularly in the Peruvian Amazon, where approximately 30% of the rural population lacks access to electricity. The report underscores the economic and environmental unsustainability of fossil fuel-based solutions in these areas. Instead, hybrid mini-grids combining solar energy and battery storage are presented as viable, scalable solutions.

Successful implementations in Brazil and Colombia serve as models, demonstrating the applicability of these solutions under similar conditions in Peru. The IFC stresses the need for adaptive regulatory frameworks, incentives, and accessible financing to attract private capital for these initiatives.

Strategic Recommendations and Future Dialogues

Among the strategic recommendations, the IFC emphasizes:

1. Facilitating Financing for Renewable Projects: Creating financial instruments that reduce barriers for solar and wind energy investments.
2. Improving Transmission Infrastructure: Ensuring that the national grid can handle the increased load and variability from renewable sources.
3. Promoting Rural Electrification: Developing sustainable mini-grid solutions to bring reliable electricity to remote Amazonian communities.

Matilde Bordón, IFC Country Manager for Peru and Ecuador, remarked, "This study provides a roadmap for the sustainable development of the Peruvian electricity sector, highlighting the importance of renewable energies and the need for strategic investments to meet the growing demand for electricity. Both recommendations are fundamental to ensuring a reliable and affordable energy supply in the future."

To foster continued dialogue and collaboration, the IFC will present the findings of this study in a dedicated workshop. This event will convene key stakeholders from both the public and private sectors to discuss and strategize the future of Peru's energy landscape.