COES: generation would be more expensive from 2025 due to lack of projects

Diesel power generation, the most expensive in the world National Interconnected Electric System of Peru (SEIN), it could skyrocket from 2025 and 2026 if larger generation projects are not completed, among which the non-conventional renewable energy (ERNC) commitments stand out.

Within the framework of Expo Energía Peru 2023, the president of the Economic Operation Committee of the National Interconnected System (COES), César Butrón, warned that scenarios of low force in rivers for hydroelectric generation —such as the one that occurs today—, among other factors, could jeopardize the system, but with more severe implications in the short term.

According to the COES, the projection of demand 2023-2034 in an average scenario would record a growth of 2.9% in the need for energy (from 58,589 KW/h to 78,630 KW/h) and 2.8% in power (from 7,885 MW to 10,681 MW) towards the end of the period, which would not be covered by generation projects of all kinds committed to date in our country.

The COES approach considers only 10 generation works (wind, solar, thermal and hydroelectric) committed to 2027: Punta Lomitas wind farms (2023), Punta Lomitas Expansion (2023), Wayra Extension (2024), San Juan (2024) and Expansion Punta Lomitas (2025); Solar Clemesí (2023); the Talara thermoelectric plant (2023); and the Centauro Stage I (2024), Centauro Stage II (2025) and San Gabán (2027) hydroelectric plants.

“If by 2025 there are no more projects than those that are underway today, and there is nothing else in the future, then we are going to start to burn diesel under normal conditions”, he sent.

To cover the growing demand by 2034, and considering new projects of NCRE As of 2027 —in addition to San Gabán—, the penetration of wind and solar energy in the system would be required to go from the current 6% to 22% in 2030 and 28% in 2034, in order not to compromise greater diesel burning . The COES analysis involves only generation impacts, but not electricity.

“We have a significant diesel reserve that does last until 2034 to meet demand. There would be no danger of rationing, but there would be about production costs, which will be notable, ”he pointed out.

Collateral damage

The head of the COES explained that this increase will translate, although not immediately, on the prices of the electricity to the final consumer, since the free and regulated contracts in the sector are long-term, with fixed prices that are adjusted by economic indicators (exchange rate, oil price, inflation, etc.).

However, he did note that covering the demand for electricity generation by 2034 with an advantage for NCRE will mean a sharp reduction in the consumption of natural gas, specifically, from Camisea. It should be noted that the COES analysis does not consider SIT Gas.

“Obviously, there will be less generation of greenhouse gases. But the companies that use natural gas will surely have contracting problems, since they have take or pay components and, as there is less need, there will be less production in the fields,” Butrón pointed out.

Diesel generation: the most expensive in the national market

Right now, the Peruvian electricity generation market is already burning dieseland the marginal cost rose to more than US$180 MW/h, according to the COES.

Between November and December 2022, energy prices in the short-term market went from US$40 MW/h to US$160 MW/h due to increased diesel burning.

The Ministry of Energy and Mines (Minem) reiterated the importance of approving the bills that seek to give greater impetus to renewable energies in the country, since electricity generation with solar or wind sources will give “better rates for millions of homes and businesses.”

consumption of natural gas estimated for electricity generation between 2023 and 2026 in Peru is between 300 and 375 million cubic feet per day (MMPCD).