The El Niño phenomenon will also hit the electricity costs of Peruvian homes

The Peruvian Government will authorize a greater flow of natural gas from Camisea for electricity generation, in order to prevent marginal energy costs from going from US$30 MWh to US$250 MWh in the event of an El Niño phenomenon (FEN). A situation of this type would cause electricity rates for 32 million Peruvians to skyrocket in the medium and long term.

He electric system Nacional is a great circuit that never stops and is powered by various companies, each with a different technology. When a hydroelectric has problems because there is a lack of power in the rivers, the energy that it stops producing must be supplied by another. Then, the thermoelectric is used; that is, turbines turned with the ‘burning’ of gas or diesel (like a car engine). But this way is more expensive and polluting.

This is something that, according to the Economic Operation Committee of the National Interconnected System (COES), occurred in November and December 2022, when the low hydrological contributions they raised the costs from US$30 MWh to US$160 MWh. A ‘low hydrology’ occurs when, due to weather effects, there is little water in the upper lagoons. So, the rivers, which go downhill, have no strength either.

Education Manager seeks to protect schools from the El Niño Global phenomenon. Photo: Clinton Medina/The Republic

For this reason, the Ministry of Energy and Mines (Minem) has submitted a project that modifies Supreme Decree 017-2018-EM, which establishes gas rationing mechanisms for cases of total or partial shortages, and authorizes another cause to prioritize the attention of the Natural Gas Transporter (TGP) to electricity production.

It happens that, if they are still going to have to ‘burn’ fossils to produce electricity, gas will always be cheaper than diesel. The costs, on average, would go up to US$40 MWh.

“Currently, gas is prioritized to generate when there is congestion in the pipeline or transmission lines, but now the problem of the lack of rain arises. More than a change of decree, another cause is authorized to prioritize the attention of transport to electricity production”, says Jaime Luyo, Vice Minister of Electricity.

The Minem maintains that the initiative should not affect the mass use of natural gas for domestic use, because there are enough resources to help the electricity demand in case of emergencies. Nor does it consider economic effects for the supplier, since in 2022 the electric companies paid almost four times what Peru LNG paid to get the gas from Camisea by ship.

Collateral damage

So at what point yes, gas is prioritized for electricity? For example, if the TGP pipeline is cut or shirt stops working, priority is given to the regulated market (32 million Peruvians). Some free clients (large industries) would even be restricted, explains Rafael Laca, an expert at Enerkory. But the norm did not include the FEN as causal.

“In the global consumption of gas for the domestic market —apart from exports—, the generators consume between 65% and 70%; they are the big buyers”, says Laca.

For his part, the former director of Hydrocarbons Erick García warns that strengthening the interruptible contract scheme (the one that the company contracts from time to time) over firm contracts (long-term, which ensure investments) could affect the development of infrastructure for gas networks.

Instead, it suggests a reordering of the system that includes accelerating the transit of Southern Energy Node to natural gas and a greater availability of the resource in the cold reserve, in order to anchor costs.

reactions

Jaime Luyo Kuong, Vice Minister of Electricity

“The electricity market must follow a downward path because it is supposed to we have cheap gasbut, contradictorily, prices for housewives and small businesses continue to rise.

Erick García, Former Director General DGH

“We have an inefficient oversupply (diesel). If a power station fails today or there is a drought, Peru will work with the most expensive source. Can it be said, thus, that the system is reliable? I do not think so”.

Rafael Laca, Enerkory Specialist

“The news of low hydrology it was already had, they have taken a long time. Electric users are the ones who financed the Camisea pipeline and Minem questions why they now pay triple what is exported”.