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The future of wind and solar energy in Peru today in the hands of Congress

The future of wind and solar energy in Peru today in the hands of Congress

The Energy and Mines Commission of the Congress will put to a vote today the modification of Law 28832 on energy efficiency, with the aim of lowering electricity prices for citizens and promoting investments in non-conventional renewable energies (RER), such as wind and solar, by authorizing the generators of the latter participate in the tenders directed to the regulated market. To understand the proposal, we must consider that, in Peru, there are three markets for electricity: regulated (31 million inhabitants, mypes and small industries), free (large consumers, such as mining companies) and spot (sale between generators). The first is the highest, while the cheapest at the real competition price is the short-term.

The Central Reserve Bank of Peru (BCRP) even recognizes that our residential rate is the highest in the Pacific Alliance. Chile, where gas is imported at international prices for electricity generation, pays a lower rate than Peru, which has Camisea gas at a regulated price. “We have a distortion in the Peruvian market, where the most affected is the vast majority of consumers. Law 28832 has flaws in its design, which the Ministry of Energy and Mines (Minem) wants to correct, in order to have a minimum of powers in the regulated market”, says the Vice Minister of Electricity, Jaime Luyo.

The idea is that, by allowing the entry of more competitors in the electricity tender for the regulated companies, prices will fall, in addition to encouraging greater investment from a sector that only participates in 5% of the electricity matrix and “whose production values tend to fall”, affirms the deputy minister. The other major objective is to stop resorting to cross-subsidies, such as FOSE, to prevent electricity rates from continuing to rise each year. For example, if you consume more than 140 kW.h/month, an additional charge is added to your bill to subsidize those who consume less. “Solar energy has a greater advantage during the day, so they must admit that it competes by hourly blocks. Each technology competes and submits proposals at the most efficient times”, he points out.

The idea is to encourage greater investment in a sector that only participates in 5% of the electricity matrix.  Photo: diffusion.

The idea is to encourage greater investment in a sector that only participates in 5% of the electricity matrix. Photo: diffusion.

correlate of forces

The position remains divided in Congress. Despite the fact that the proposal has been submitted to public consultation since June 2022, a period in which it has received the approval of business associations and technical entities, such as the osinergmin, some questions have appeared in recent weeks that prevent a favorable vote. “Those who have opposed, at the last minute, are the public distribution companies, led by Fonafe. They are the ones who are really making observations, but they have all stood up. They simply insist that they are going to be harmed,” recognizes Luyo.

At the time, Kallpa considered that any regulation that seeks to promote the entry of RER generation plants must harmonize the existing regulation for other generation technologies, by virtue of which, “certain investments are required of these to guarantee safety in the operation of the system. Meanwhile, the Peruvian Association of Renewable Energies (SPR) expressed that it is “essential to ensure that a relevant percentage of the demand is met by long-term tenders” with contracts of at least 15 years, to affirm the bankarization of new projects of renewable energy generation.

A similar initiative was attempted four years ago to correct some distortions. On this occasion, the Executive’s PL 4565/2022 was worked on from June 2022, with 60 days of public consultation and under consensus with Osinergmin and COES – in addition to the favorable filter of the Council of Ministers in March – until its arrival in Congress in April of 2023, where the legislative initiatives 2139/2021 and 3662/2022 were endorsed.

Electricity in suspense in Peru

Renewable energies are classified into conventional (large hydroelectric) and unconventional (small hydroelectric, solar, wind, geothermal, tidal, etc.). If the project is not approved, the National Interconnected Electric System (SEIN) would not have enough capacity and would have to consume diesel fuel, which is highly more expensive and polluting, according to Minem.

The word

Jaime Luyo Kuong, Vice Minister of Electricity

Minem’s approach is that all technologies compete. This distortion discourages investments, despite the fact that there are 20,000 MW requested for the national market”.

Source: Larepublica

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