No plans, no progress make Peru’s energy transition uncertain

In Peru, greenhouse gas emissions come primarily from land use change, followed by oil and gas-fired power generation.Renewable wind, solar and biomass energy accounts for 6% of the country’s power, although the goal is to reach 20% by 2030.According to experts that spoke to Mongabay Latam, the Peruvian energy policy is not fit for purpose and the country lacks a direction of travel for its energy transition.

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“Three years ago, I bought a solar panel so we could have light at home. Before that, we could only light our house with candles. We don’t have power, so everyone gets a solar panel that provides whatever energy they can get their hands on, but it’s not enough,” says one of the inhabitants of Peru’s Huarca community in Espinar, Cusco. She does not want her name published, because those living in the mining corridor of southern Peru who protest mining activities fear the consequences of speaking out against the companies that operate here.

Not everyone has electricity in Huarca, she adds, maybe only half the town does. The solar panel she bought in 2021 cost her 1500 soles (about $400). Until then, she says, there was no light in her house. “It’s a small panel… and it’s only enough to light the two rooms of our home.”

Only 33.5% of households — some three out of every 10 homes — in the rural areas of Espinar Province have electricity, according to the latest population and housing census conducted in Peru.

While copper is an excellent conductor of electricity, in Espinar, where large copper mines are located, electricity is not available to the entire rural population. Image by Miguel Gutiérrez / Cooperacción.

Paradoxically, copper, which is extracted from the area’s mountains, is an excellent conductor of electricity — used in electric cables, solar panels, wind turbines, electric vehicles and batteries — and there is an increased demand for it, given its role as a strategic mineral in the energy transition.

But while the world is talking about new ways to generate renewable energy and reduce emissions, Espinar’s houses can barely light a couple of light bulbs. “It seems contradictory to us and shows how unfair the energy transition is. The mineral is extracted to provide power in other places, but it does not benefit the local families who must live with the direct impact of the activity,” says Paul Maquet, the energy transition project coordinator at CooperAcción, an organization that promotes social, environmental, political, cultural and economic rights.

The situation in Espinar can be seen in many other parts of Peru. The Amazonian region of Loreto in northern Peru also highlights the country’s problems with energy access, along with a lack of access to cleaner energy sources. Loreto is not part of the National Interconnected Energy System (known by its Spanish-language acronym, SEIN — the power grid connecting all of Peru’s energy sources — but is instead supplied by energy that essentially comes from oil.

So, what is being done to overcome Peru’s energy gap? Is there a clear plan to end its dependence on fossil fuels? And which renewable energy sources are the country’s best options?

There is a global commitment to switch from fossil fuels to renewable energies like solar. Image by Ministry of Energy and Mines.
The uncertain path to energy transition

“The issue of energy transition is barely discussed in Peru. The wider public does not talk about it; we do not talk about the role of gas in the transition, or the plans to move forward with renewable energies. Nor are electromobility goals discussed,” says Juan Luis Dammert, Latin America director at the Natural Resource Governance Institute (NRGI). “The energy transition process is a global discussion and Peru has to adapt to this reality.”

Scientists have been warning for several decades about the consequences of greenhouse gases (GHGs) — such as carbon dioxide, methane, and nitrous oxide — and the urgent need to abandon fossil fuels as one of the sources of GHG generation remains high on the agenda.

At the last United Nations climate change conference, COP28, held at the end of 2023 in Dubai, an explicit mention of the need to abandon fossil fuels was included in the text for the first time. The conference also proposed tripling global renewable energy capacity by 2030, moving towards the middle of the century with net-zero emission energy systems worldwide, reducing GHG emissions, as well as adopting zero- or low-emission vehicles.

These discussions are not a recent development. Since the 1990s, global agreements have sought to reduce the levels of GHGs emitted each year. The Kyoto Protocol (1997) and the Paris Agreement (2015), adopted during the UNFCCC’s Conferences of the Parties (COP), were two milestones. These global events laid the foundation for all countries to commit to reducing their emissions.

As part of these commitments, Peru pledged to reduce its GHG emissions by 30% by 2030, according to Peru’s Third National Communication to the UNFCCC in 2016, a document that countries submit to the UN to report on their progress.

Peru has made a commitment to reach 20% non-conventional renewable energy by 2030. Image by Ministry of Energy and Mines.

That percentage was increased in December 2020, when Peru declared it would reduce greenhouse gases by 40% by the end of the decade. This promise is detailed in a Supreme Decree, which declares the climate emergency to be of national interest, and also sets out its goal to become a carbon neutral country by 2050.

The Ministry of Energy and Mines (MINEM) is less optimistic about Peru’s GHG reduction pledge. The former deputy minister of electricity, Jaime Luyo, told Mongabay Latam that the ministry has made estimates regarding GHG reduction, and that the 40% figure is unrealistic. “Initially they said there was going to be a 20% reduction, then it was increased to 30% and someone then said 40% but, really, from our point of view, the most reasonable expectation would be around 20% by 2030.”

The environment ministry responded to Mongabay Latam by means of a statement, saying, “It is possible to fulfil these commitments. Our goal is ambitious, but necessary to minimize the effects of climate change.” The document also states that “the Ministry of Environment is involving the MINEM in certain areas to come up with a joint vision for Peru through 2050. This includes an update to the National Strategy for Climate Change, which contains an objective linked to reducing greenhouse gas emissions in energy production.”

It is clear that these two key parts of the government disagree on the country’s path towards GHG reduction, the abandonment of fossil fuels, and how to proceed with its energy transition.

According to Denisse Linares, a specialist with the sustainability program at the organization Derecho, Ambiente y Recursos Naturales (DAR), “There is no evidence of talks between the MINEM and the Ministry of Environment (MINAM) on the issue of energy transition. The MINAM usually takes care of environmental policies and the MINEM usually implements them, but we have no evidence that this is happening.”

Peru has identified the sources of pollution it needs to address. The country’s primary source of greenhouse gas emissions comes from land use change, such as converting forests and pastures into cropland. The second source is power generation through oil- and gas-fired power plants, followed by industrial activities like manufacturing and construction, as well as air, land, and maritime transportation, along with other activities that burn fossil fuels.

According to the latest National Greenhouse Gas Inventory (INGEI) from 2019, the total sum of all sources of CO2 emissions in Peru is around 210 million tons of CO2eq, a figure equivalent to 42,393,973 gasoline vehicles driven during an entire year. Of this total, 63 million tons, which is a third of emissions, come from generating power.

Emissions from the burning of fuel for transportation account for a significant share of greenhouse gas emissions, with the latest INGEI calculation putting this figure at 12.2%.

Peru’s energy transition therefore requires an urgent reduction in GHG emissions, but the experts Mongabay Latam spoke to point out that the country has not yet found a way to achieve this.

The second source of greenhouse gas emissions is power generation through oil- and gas-fired power plants, followed by industrial activities like manufacturing and construction, as well as air, land, and maritime transportation, along with other activities that burn fossil fuels. Illustration by Tobías Arboleda.
Energy sources

“The energy transition process is a long one; we estimate it will take at least three decades. By 2050, we expect clean renewable energy production to surpass that of hydrocarbons,” said former Deputy Minister Luyo.

Non-conventional renewable energy generation in Peru — via wind, solar, bagasse, and biogas — began in 2010, according to data from the economic operation committee at COES, a private body that manages SEIN’s operations. Back then, it accounted for barely 0.2% of the total energy produced in Peru. Fourteen years later, non-conventional renewable energy production was at 6.25% per year, according to data from 2023.

Peru’s goal is to reach 20% non-conventional renewable energy production by 2030, as established in the Supreme Decree declaring the climate emergency to be of national interest. But there’s less than six years left, and the country is yet to reach one third of its pledged 20%.

Former Deputy Minister Jaime Luyo says it will only be possible to reach between 15% and 20% of non-conventional renewable energy production by 2050.

Mariano Castro, former deputy minister of environmental management within the Ministry of Environment, says that during the drafting of the Supreme Decree, under Pedro Castillo’s government, the final item for negotiation was the increase of non-conventional renewable energies to 20% by 2030. “We are between 5% and 6%, so the question is how we will reach 20% from 2024 to 2030. This is a politically and legally enforceable goal.”

Renewable energy plants, including hydropower plants, can be found in 12 departments in Peru. Most of them, around eight, operate in coastal regions, and the rest in the Andes. There are no renewable energy plants in the Amazon regions, according to the COES renewable energy map from December 2023.

However, the Amazon regions have the highest percentages of areas without access to electricity. According to a report about the infrastructure gap and access to energy and mines services, some 16.7% of rural homes across the country do not have electricity, representing 257,144 households.

The largest shortfall is in the Amazon regions of Amazonas, Madre de Dios, Loreto, and Ucayali departments of Peru, with the latter two barely reaching 50%.

The energy access gap is greater in the Amazon regions, such as Loreto, Ucayali, Amazonas and Madre de Dios. In some, it is as low as 50%. Image by Yvette Sierra Praeli.

Pedro Gamio, former Deputy Minister of Energy and a professor at the Pontificia Universidad Católica del Perú (PUCP), points out that “oil has an expiration date as the main source of supply for the economy, and the rest of the world is showing that the path to energy transition is essential in these times to reduce pollution. In terms of the electricity market, there is no doubt that solar and wind power are the leading players.”

Gamio says that if renewable energies are not developed in the short term, rising electricity prices will become a problem, which will seriously affect the Peruvian economy. “These technologies have advanced so much that we now need to simply break the barrier that prevents solar energy from being commercialized in the free market,” says Gamio, adding that there are currently 28 billion soles ($7.5 billion) in projects in Peru waiting to make solar energy production a reality.

“Right now, the proposals are not moving forward because there are lobbyists taking advantage of the instability crisis and lack of continuity of government. This means that Peru does not have clear goals and is one of the countries that has made the least progress in the development of alternative renewables, despite having extraordinary potential,” Gamio adds.

A national plan that is not moving forward

“Peru does not have a clearly defined energy transition policy. The closest thing to it has been the NAMAs [Nationally Appropriate Mitigation Actions], which are basically loosely agreed-upon national policies linked to the COPs’ objectives,” says José Carlos Ugaz, a renewable energies researcher at the University of Campinas in Brazil and former researcher at the Center for Renewable Energies of the University of Engineering in Peru.

Ugaz explains that the MINEM, a key player in the energy transition, does not currently have a department exclusively focused on it. It only has a general directorate for energy efficiency that “has identified some objectives for the transition,” but has not yet concentrated on the underlying issues.

Peru does not have a solid policy for the energy transition process, say experts. Image by Ministry of Energy and Mines.

Meanwhile, organizations such as the Inter-American Development Bank (IDB) have provided loans to Peru to help develop its energy transition roadmap. In fact, in August 2023, the IDB published a proposal supporting an energy transition agenda in Peru (available in Spanish). The document puts forward that, for this transition agenda to become a reality, “several adjustments to the legal and regulatory framework must be made, and eventually there must be an Energy Transition Law (ETL).” This, however, is yet to be addressed.

César Butrón, president of the economic operations committee at COES, raises doubts over a law passed in 2008 during Alan García’s administration. “Legislative decree 1002 created a favorable framework for promoting non-conventional renewable energies, but what it essentially did was allow these energy sources to be introduced without having to compete with others that already existed in Peru.” Every single company that launched operations under the protection of this legislative decree received subsidies, which has resulted in additional tariff charges.

Back then, in 2010, solar energy in Peru cost 632 soles ($221) per megawatt hour (MWh), well above the 129 soles ($45) MWh rate for electricity, which relied on natural gas, hydroelectric power, and oil.

“This difference means the end user incurs additional charges to their tariff. We were all covering the cost of these subsidies that were going to companies that entered the market with high prices. There are 20-year contracts, through 2030, with a guaranteed price. We are all paying 6.3 billion soles ($1.7 billion) just for having renewable energy before its time,” says Butrón.

According to Butrón, just two years ago, the prices of non-conventional renewable energies — solar and wind — finally dropped enough to compete with the cost of other energy sources. “Now the only alternatives available for development in Peru is renewables, wind and solar, nothing else, because geothermal is still very expensive. Only now are several wind power plants being built without subsidies, with prices of 123 soles ($33), 131 soles ($35) and 142 soles ($38 MWh).”

In 2010, the price of solar energy was well above that of energy from natural gas, hydroelectricity, and oil. Image by Ministry of Energy and Mines.

Mariano Castro, former deputy minister of environmental management, points out that the current Peruvian energy policy dates back to 2010 and has not been updated. Peru’s national energy plan for 2010-2040 is a six-page document that Castro says is made up of “merely guidelines, because it is not really considered a policy in the strictest sense of the word. It is not fit for purpose, is incomplete and insufficient … It has no indicators, no goals and no public policy that complies with the requirements established by the National Center for Strategic Planning (CEPLAN).”

Castro also points out that Peru’s energy transition process should be established in the General Government Policy, which is presented when each president begins their term of office.

The last General Government Policy was presented by Dina Boluarte in March 2023. “No priority has been given to environmental or energy issues. There really is an absence of vision regarding the energy transition. The last thing to be approved was the National Environmental Policy in June 2021, when Francisco Sagasti’s government was coming to an end,” says Castro.

Peru’s climate change strategy for 2050, which contains the objectives, guidelines and indicators for climate policies in Peru, has been in the process of being approved since 2022. “The national strategy must contain elements linked to the energy transition,” says Castro, who is now director of a forests program at FCDS Peru.

There are also draft bills in the Congress of the Republic aimed at promoting renewable energies, which are not discussed or approved with the same speed as proposals regarding fossil fuels.

Mongabay Latam reviewed the minutes of all sessions held by the Congress of the Republic’s Energy and Mines Commission between August 2015 and November 2023 and found that promoting fossil fuels is prioritized over renewable energies. This is proven in the 13 bills that refer to fossil fuels, compared with the six that mention renewable energies.

“There are those who call for the State to become more involved in generating revenue from oil, and those who call for private investment to be promoted because they say it is more efficient. Both groups share the idea that oil activity should be encouraged,” says Vladimir Pinto, a coordinator for Amazon Watch in Peru, in one of the articles in this series focusing on negotiations in the Congress of the Republic around the country’s energy sources.

In the Congress of the Republic, there are 13 bills aimed at promoting fossil fuels compared with six on renewable energies. Image by Agencia Andina.
Wind power plants in Peru produce around 6% of the country’s energy. Image by Ministry of Energy and Mines.
Oil versus renewable energy

“We have solar and wind energy; we have biomass; there are even hydroelectric power plants, although they have an environmental impact due to the amount of water they hold. We therefore need to decide what to do with these energy sources,” says Luis Chirinos, a researcher with the Institute of Nature, Earth and Energy (INTE) at the Catholic University of Peru (PUCP).

SEIN’s map, which shows Peru’s entire power grid and brings together the country’s various sources of energy, features hydroelectric, solar, wind and thermoelectric power plants, the latter of which is dependent on hydrocarbons.

According to information from the MINEM, Peru has 46 definitive concessions for renewable energy plants — wind, solar and hydroelectric — and another 23 are in the study stage.

At this point, just 6% of the interconnected grid is made up of non-conventional renewable energy sources, i.e. wind, solar, and biomass. It seems that the commitment to reach 20% of energy generated by renewable sources by 2030 is still a long way off.

Today, the largest energy source in Peru is hydrocarbons, mainly natural gas, which is considered a transitional energy source because it emits less CO2 than oil and coal — approximately half of that produced by coal. However, recent research suggests that natural gas emits other greenhouse gases as well as carbon dioxide, such as methane, its main component.

Another problem with natural gas concerns the number of proven reserves in Peru. A report by NRGI shows that the country currently has enough proven natural gas reserves remaining to last around two decades. “If production continues at the current rate, reserves at Camisea, in Cusco, will last about 20 years. If gas reserves were to be increased, there would have to be more exploitation. Some of the lots, however, are in sensitive places because they are in Amazonian land with high biodiversity, or they overlap with Indigenous lands. Engaging in natural gas exploration in vulnerable territories has a high cost in terms of potential environmental and social impact,” says Claudia Viale, a specialist in extractive industries, an NRGI consultant, and author of the study.

The largest source of energy in Peru comes from natural gas produced in Cusco. Image by Agencia Andina.

In December 2023, SEIN reported that 53% of Peru’s energy is generated by hydrocarbon-based thermoelectric plants, 37% by hydroelectric plants, 6% by wind energy, and 2% by solar energy. A smaller percentage corresponds to biomass.

“Although we need energy to carry out important economic activities, the source of that energy does not have to be oil. We have been making efforts to access renewable energy sources that can be used in the Amazon, given that we have continuous sun all year round. It would be unwise not to take advantage of this enormous energy source,” says José Manuyama, a coordinator for the water defense committee in Loreto.

The situation in Indigenous communities is even more complex. Figures from the National Institute of Statistics and Informatics (INEI) show that barely 52% of rural homes in Loreto have energy, a figure far below the national average of 79%. The same is true in other Amazonian regions of Peru; in southeastern Peru’s Madre De Dios, 66% of homes have energy, while in Ucayali this number stands at just 51%.

In Loreto, where oil has been extracted from its forests for over 50 years, it has had a huge impact on the environment. Meanwhile, the price of oil in Loreto’s native communities is also the most expensive in the country. Whereas in Lima the price of a gallon of diesel can cost 15 soles (about $4), in Loreto the same fuel can reach 20 or 22 soles (between $5 and $6).

“The State has never bothered to provide our communities with energy,” says Aurelio Chino, of the Quechua del Pastaza Indigenous Federation (FEDIQUEP). “The government has no real intention of supporting solar energy to improve the quality of life of the population in the area,” says the Indigenous leader in one of the articles in this special series.

Oil exploitation continues in Peru, just as it does in other parts of the world. In 2023, the Peruvian government unveiled a portfolio of 31 areas with potential for hydrocarbon exploitation, both oil and gas, in the Amazon and on the northern coast. Most of the Amazon’s oil areas are located in the Loreto region, while natural gas comes mainly from Madre de Dios. According to the NRGI report, 96% of the country’s natural gas was extracted from the Camisea project, located in Peru’s southern rainforests.

“We cannot become dependent on natural gas,” Viale says, because that would mean continuing with fossil fuels. “We must have a comprehensive strategy on which sources should be produced, and from where.”

Oil is extracted from Loreto’s forests, but power in this region barely reaches 52% of rural homes. Image by Yvette Sierra Praeli.

Another key issue that needs to be addressed is some regional and local governments’ dependence on income from fossil fuels. “Cusco’s regional government and the municipalities located near Camisea, where natural gas is extracted, are dependent on income from gas — for some municipalities, up to 80% of their budget depends on it. It is also a significant part of Loreto’s budget,” says Viale.

This is why, for Viale, the energy transition is not just about replacing fossil fuels, but also about understanding the bigger picture in those areas. “A complete energy transition is not only about energy; it must be accompanied by fiscal reform aimed at fiscal decentralization, and what income is available to subnational governments. In addition, the royalties received now must be invested in diversifying production, and in developing local renewable energy,” she says.

While plans are discussed and decisions continue to be postponed, those living in rural areas and Indigenous communities without electricity are looking for ways to bring power into their homes. Wilfredo Tsamash, President of the Coordinating Committee for the Development of Indigenous Peoples of San Martin (CODESPISAM), had to buy a solar panel to provide light for his home in the native community of Bichain. “Speaking from my own experience, I bought a medium solar panel for my house, just to give me some light and to be able to charge my cell phone, nothing else. But to power a blender? That’s not possible.”

Banner image: Most solar power plants are concentrated in southern Peru. Image by the Ministry of Energy and Mines.

This story was reported by Mongabay’s Latam team and first published here on our Latam site on Mar. 25, 2024.

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