Publication: Peru : Overcoming the Barriers to Hydropower

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World Bank
Hydropower has been the major source of electricity in Peru, traditionally supplying more than 80 percent of electricity requirements, and serving as a source of independent generation for major mines and industries. With the development of natural gas in the early 1990s, and the opening of the Camisea pipeline, the Government of Peru's (GOP's) attention turned to providing incentives for the use of natural gas in power generation. This resulted in a virtual moratorium on hydropower development as a result of the very low price of natural gas (below economic cost). With the development of export markets for gas and increased attention to the impacts of climate change, the Government has recently begun to pay renewed attention to hydropower. Recent developments include: (a) introduction of accelerated depreciation for hydropower investments; (b) introduction of a "discount" to permit hydropower to compete with gas-fired plants in auctions; and (c) announcement of a special hydropower auction to be held in 2009 by ProInversion, the state agency for promoting private investment. The intention of this report is to assist the GOP in assessing the potential role of hydropower in the sector and the measures that could be taken to encourage its continued development as appropriate. The study was done at a particularly challenging time. First, there was considerable volatility in energy prices and investment costs, which needed to be incorporated into the analysis. Second, financial markets were in disarray and it was difficult to predict when conditions were likely to normalize. Third, the GOP recently introduced many new policies and regulatory measures through supreme decrees that are changing the regulatory system and may interact in unexpected ways.
World Bank. 2010. Peru : Overcoming the Barriers to Hydropower. Energy Sector Management Assistance Program (ESMAP) reports;. © Washington, DC. License: CC BY 3.0 IGO.
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