Electricity & water

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In the last three decades, the investment in electricity and water has outperformed the GDP growth in other sectors with occasional exemption of the construction sector, particularly in recent years. This development has been possible basically to the liberalization of the energy sector, the enlargement of the energy grid, and the economic growth perspectives which implied an increasing demand for energy. The water sector has also seen some improvement, although some challenges remain in this area.

electricitytrendThe energy supply capacity in Peru has changed from 60% hydroelectric/40% Thermoelectric ratio in 1995 to 30% hydroelectric/70% thermoelectric in 2014, mainly due to the large investments in the latter given the large gas reserves found in Camisea and in operation in the last ten years. In fact, effective energy production has seen a soaring increase of 75% since 2008 whilst hydroelectric power generation has only increased in 12%. As a result, the current ratio Hydro/Thermo energy supply to the market has gone from 60/40 to 50/50.

Additionally, the Peruvian government is committed to increase the use of renewable energies up to 5% of total energy production. Hence, it is promoting investments through public tenders for biofuels, wind and solar energy plants. In 2012, the first solar energy plants feeding the national energy grid with 200 Gwh began operations and by the end of 2014 granted Ergon Peru the project to build 500,000 solar panels in rural areas. Likewise, at the beginning of 2014 the first wind power turbines began operations supplying additional 257 Ghw to the national energy system.

electricitytableAlternative energies have a vast potential in Peru which could lead the country to become a major player in energy generation in the region. In fact, according estimates of the Ministry of Energy and Mines, the current power generation based on renewable resources represents less than 10% of the total capacity of more than 83,000 MW. The access to regional markets through an interconnected system and the efforts to bring electricity to rural areas, which today represent a national coverage of 93% (in 2008 it was only 84%), shows a sector with big potential for investors. To know more about the energy sector, please visit the site of the Ministry of Energy and Mines or download the National Energy Plan 2014 – 2025.

A similar situation but with major differences can be seen in the water sector. Peru has 2'043.548 million cubic meters (MCM) per year flowing by 106 watersheds. It also has 12,200 lakes in the highlands and more than 1,007 rivers, with an average water availability of 2,458 MMC mainly concentrated in the Amazon Basin. However, its availability in the country is irregular, since nearly 70% of the rains occur between the months of December and March, contrasting with periods of extreme aridity in other months.

.waterpalnPeru has three drainage basins: the Atlantic (97.7% of water resources), the Pacific (1.8% of water resources) and the Titicaca (the remaining 0.5%) . Ironically, a large part of the population is located mainly in the Pacific basin, creating a problem of water stress. As a result, 9 out of 10 Peruvians live in arid, semi-arid and sub-humid areas.

Thus, although Peru has the highest per capita availability of renewable fresh water in Latin America (74.546 MMC / person per year), the distribution of water resources is asymmetrical. Distribution of urban concentration and productive activities do not fit water availability in the three drainage basins, creating a situation in which the demand for water is greatest in areas where the availability and water is scarce.

To deal with this reality, the Peruvian government issued in 2012 the National Policy on Water Resources, also known as Policy 33, and created the National Water Authority (ANA) as the governing body of the National System for Water Resources Management. This National Policy focuses relies in six pillars: Integrated water management; Awareness creating; Investment and financing of water infrastructure; Risk management and control of its uses; Information and multisectoral support; and, Institutional strengthening. More information about the National Policy of Water Resources can be found here.

  

Peru: On the Road to OECD