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Perus Congress is currently debating whether to amend Law 28,832, which would open up electricity generation to free competition. pv magazine spoke to the president of the Peruvian Association of Renewable Energies (SPR), Brendan Oviedo, about how we got to this point and what the sector expects.
When pv magazine interviewed Brendan Oviedo, president of the Peruvian Association of Renewable Energies (SPR), in July 2022 , he mentioned the existence of a legislative proposal from the Congress of the Republic that proposed modifying the tenders of distributors.
"The idea is to migrate to a distribution bidding scheme like the one in Chile, in which time blocks are created and the contracting of power and energy is separated," Oviedo said at the time.
Today, more than two years later, a tortuous path has finally led to a debate in the Peruvian Congress on this proposal to modify Law 28,832 which, among other points, in addition to the aforementioned, would allow electricity generation to be opened to free competition.
"This law seeks to do what Chile did a few years ago," explains the president of the SPR, "which separated power and energy, because power is a concept that, being based on the security of the system, should be measured in a more comprehensive, focused way, as a system, and not by adding up the power of individual power plants. If you want to sell energy, then you have to have a certain power that basically supports the security of the system."
But what is the current situation of the electricity market that is seeking to be changed? Oviedo explains: “Today, with the regulations we have, a solar power plant, for example, cannot sign a long-term contract with a mining company because it would have to go and look for power from another generator, and the operating generator is not going to sell it to them because they are also developing wind and solar projects, so it is not in their interest to have competition, and even less so due to this power restriction to be able to participate in a tender with a distributor.”
This leads to an operation that he describes as follows: “What the generators are doing, which is economically understandable and which is also the case with many renewable projects, is a kind of cherry picking of projects that can give them predictability of construction in the short or medium term, 2, 3 years, and they are signing PPAs (power purchase agreements) with them for a percentage of the estimated production, and with prices that are around 28 to 32 dollars, and subsequently they are going to sell the acquired energy to large consumers at higher prices, losing the efficiency of the purchase cost of said energy.”
"However," he continues, "if I want to enter into a wind or solar project, I would have to take the risk of providing the capital necessary for construction or structure merchant financing , that is, enter the spot market or short-term market to sell the energy for my project at marginal cost, thereby assuming the risk of volatility in said price, a project structure that is complex to finance today in Peru."
Another point that Brendan Oviedo makes on the subject of financing renewable projects is the time. “Banks have almost standardized a 15-year term for financing renewable projects in Peru, so it doesn’t make much sense that there isn’t a market for energy purchase and sale contracts with terms similar to the terms of credit contracts that allow financing renewable projects.”
Regarding the current state of the project in Congress, the president of the SPR acknowledges that it has never been closer to being approved, although there are pressures arising from a certain group, which will be forced to compete for the states renewable resources. "The proposed change seeks to give the system the option of separately purchasing clean and economical energy in hourly blocks, allowing competition of all technologies and resources among the various operating generators and potential new players in the market."
Specifically, "the new bill will allow eight million Peruvian families to pay 16% less on their electricity bills," says Brendan Oviedo.
He says that in Peru there are more than 70 projects ready to develop solar and wind energy, with an investment potential of around 20 billion dollars. "All these projects are ready to compete in public tenders. Opening up the competition will provide better prices for citizens," he concludes. |
