New Market Research Report: Peru Power Report Q2 2016

From: Fast Market Research, Inc.
Published: Thu Mar 31 2016

Strong growth in electricity consumption , government tenders for power generation and transmissions projects, and robust investor interest in the market continue to support our positive outlook for the Peruvian power sector . We upgraded our forecasts for Peru's renewables as a result of a successful energy tender in Febru ary 2016 , but future opportunities in the market will be li mited by strong growth in hydropow er and gas-fired power plants. D elays in project tendering and implementatio n are the main risk s to our upbeat growth forecast s for th e Peruvian power sector .

Latest Updates And Structural Trends

In February 2016, Osinergmin (the Peruvian public agency responsible for supervising investment in energy and mining) awarded 20-year power purchase agreements (PPAs) for a total of 1,792.2 gigawatt hours (GWh) per year, distributed among 13 renewables projects. Italy's Enel Green Power (EGP) secured contracts for the majority of the energy on offer; EGP obtained PPAs for three renewable energy schemes, involving 126MW of wind power, 180MW of solar photovoltaic power and 20MW of hydropower.

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We have revised up our renewables power capacity and generation forecasts accordingly, but we maintain that non-hydropower renewable energy will play only a minor role in the Peruvian electricity mix over the coming decade - due to greater growth in hydropower and natural gas-fired power generation. Peru's National Energy Plan does not include provisions for growth in non-hydro renewables beyond its target of having 5% of total electricity produced by non-hydro resources by 2018, which will be reached via the auction. As such - barring the launch of a new renewable energy tender in the future - we expect only limited demand for utility-level renewables in Peru, driven mainly by PPAs with the mining sector.

The Peruvian government was expected to award contracts for the development of several hydropower projects over the past few months. The fact that the winners of these tenders have yet to be selected is testament to our view that delays in project tendering, awarding and implementation are one of the biggest risks to developing energy infrastructure in Peru. The main causes for delays include regulatory hurdles, limited institutional capacity, a challenging topography, and opposition from local communities and environmental groups.

The governments of Peru and Chile are working together for the construction of a power transmission line that will link the two countries - allowing for power exports from Peru to its southern neighbour. The 70km transmission line is expected to link the city of Arica and Tacna - provided that political agreement behind the project materialises.

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Contact Name: Bill Thompson
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