Peru auction looks set to disappoint


November 28, 2014

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The Incas worshipped sun god, Inti. But Peru’s modern leaders are not quite so keen on recognising the power of the sun and wind.

Next month, the government of Peru is set to announce plans for an auction to procure more renewable energy. It is no coincidence that this announcement is due at the same time as a United Nations climate change conference in its capital city, Lima.

And yet, this looks set to disappoint. The government had been expected to seek 500MW of renewable energy capacity in this auction, but it is likely to be far smaller. The National Energy Plan 2014-2025 published this month suggested that the government saw the potential for only an extra 200MW of renewables over the next decade, including wind and solar. This is a great shame.

In theory, there is much in Peru to interest wind investors.

Peru is the third largest country in South America by land mass, and it has neighbours that are making great progress on wind energy. It is next to Brazil, which has a fast-growing market; and it shares the wind-rich Pacific coastline with neighbour Chile. It has the natural wind resources in place to build a significant industry.

Meanwhile, renewables — excluding hydro — still make up a tiny proportion of Peru’s energy mix. Over half of the country’s power comes from fossil fuels (3.9GW), and Peru has one of the cheapest sources of natural gas in the world. Most of the rest comes from hydro (3.5GW). Wind is not the only resource it has in abundance.

Renewables excluding hydro only account for around 2.7% of the country’s energy mix, and this would only grow to 5% even under the Peruvian government’s most ambitious plans. And, on top if that, it just isn’t recognising the potential of wind farms.

For instance, the government last year started a programme to roll out solar panels to provide power to more than 2 million of the country’s poorest residents. This is not direct competition for large-scale wind farms, but it shows that the leaders of the South American nation have latched onto the potential of solar in a way that they haven’t with wind. Maybe Inti is still powerful after all!

And yet, we have seen wind gaining some traction in the country.

In March, Cobra Energia completed work on the 32MW Marcona, which is the first large-scale wind farm in Peru. It is also currently building a 97MW wind farm, Tres Hermanas, which is due to complete in September 2015. Cobra is part of Spain’s ACS Group.

The other big player in the Peruvian market is ContourGlobal, which has invested $250m in two wind farms that completed in August. Its schemes Cupisnique (83MW) and Talara (31MW) are part of the Inka development that completed in September. The firm plans to invest a further $250m in wind and hydro in Peru.

But these are only four projects, not an industry, and we see little evidence that Peru is keen to attract major wind investment. Maybe it will surprise us next month.

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