Minem: Congress delays law that would lower domestic electricity rates by 51%

The approval by the Congress of the Republic of Law 28832 would gradually reduce the costs of electricity generation, responsible for 51% of domestic rates for 33 million Peruvians, through the introduction of new renewable sources, specified the Ministry of Energy and Mines (Minem).

During the Expo Energía Perú 2024, Minem’s general director of electricity, Elvis Tello Ortiz, revealed that marginal generation costs in Peru rose to 200 MWh in 2023 due to droughts and lack of rain.

“We are largely dependent on hydraulic and thermal sources. Energy policy has not achieved the expected diversification […] We had a water deficit in 2023 that made us work with more gas than usual, but it was not enough and diesel began to be used,” said the specialist.

In Peru, the electricity market is divided into three large lines of business, each one with a different impact on the rates paid by the final consumer: generation (51%), transmission (23%) and distribution (26%). Generators sell electricity in advance to distributors.

For this type of sales, there are two large groups of users: regulated (families and small businesses, whose rates are previously set by bidding or contract), and free (large companies that, due to their high electricity consumption, directly negotiate their rates with the generator).

The problem appears when marginal generation costs begin an upward spiral due to climate change, since electricity is generated with fewer hydraulic sources and more with oil turbines. So, future bidding for regulated entities may be affected.

In this sense, Minem considers the promotion of new sources of renewable energy, such as solar and wind, to be essential. Law 28832 seeks to increase, precisely, competitiveness in the generation sector, by separating the sale of energy and power (no longer together), which would make it much more attractive to invest in solar panels, which cannot be shipped overnight supply.

“We are almost 500 MW [en este momento] to begin dispatching electricity with diesel, and that can intensify with dry years (…) Today, greater efficient generation is sought with competition from neutral energies, opening the possibility for distributors to carry out tenders for the supply of energy and power, whether separately or jointly,” said Tello.