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Potential of Alternative Energy Sources in Peru

Pavel Borecký

Renewable energy is ancient. For millenia people have collected firewood for cooking and heating,

they have built water mills and ships for sailing, or last but not least relaxed in hot springs. Some

about 200 years ago people has begun to exploit with growing intensity the fossil resources: coal,

petroleum, natural gas and later, uranium – with the then unknown consequences for climate and

world peace. These non-renewable sources are now running out.

Road to Energy Efficiency

„…seeking that the present one, as well as the new generations, become responsible users

and cooperate towards sustainable development by way of increasing efficiency, through the

improvement of consumption habits and the selection of adequate electrical equipment and

appliances, as well as the intense use of renewable energies, efficient architecture, in accordance wih

the climatic conditions of each region.“ (Asia-Pacific Economic Cooperation, 2011) In September

2009 the government of Peru organized a workshop on efficient use of energy where the

Referential Plan for the Efficient Use of Energy 2009–2018 was approved. The objective is to

reduce consumption by 15% until the year 2018 in relation to the projected demand for that year,

without affecting production and neither services of the different economy sectors nor the comfort

of the residential sector. The greater effectiveness will lead to savings that will optimize the consump

tion in every sector. (Asia-Pacific Economic Cooperation, 2011) Yet, Peruvian road has another start.

Days of Economic Growth

“Since 2002, the Peruvian economy has been a top performer in Latin America. Between 2001 and

2008, prior to the financial crisis, the economy grew by an average of 8.8% in real terms, the highest

rate of any South American country.” (The World Bank, 2011) Peru’s rapid economic growth in recent

years, as electricity consumption nearly doubled between 1998 and 2008, has led to an increase in

energy demand, especially in the industrial and transport sector. (Picture 1)

Management of Energy Resources in Tropics and Subtropics

winter semester 2011/2012

Picture 1 Share of the Final Energy Consumption by Sectors, 2008, APEC

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Growth could not materialize without the fuel. As technology run the show Peru’s total oil

production increased by over 50 percent from 2000 to 2010. (US Energy Information Administration,

2011) Demand crying for associated natural gas has risen significantly in recent years, from 56 billion

cubic feet (Bcf) in 2005 to 123 Bcf in 2009 due to enormous exploration which proved gas reserves in

the large Camisea project in southeast Peru. … Another major gas field is being explored in southern

part of the country at Madre de Dios, with some experts predicting that this field could be as large as

Camisea. According to Oil and Gas Journal, Peru had proven natural gas reserves of 12.2 trillion cubic

feet (Tcf) in 2011, the sixth largest reserves in South America. (US Energy Information Administration,

2011)

Narrow Path towards Development

As fossil fuels being actually solar energy stored in once living nature, one closer look can put into the

question extraction of such a wealth. Since 2003 nearly three quarters of the Peruvian Amazon has

been leased to the international oil industry for the highest bid. (Picture 2) Deemed by California-

based NGO Amazon Watch “the most damaging project in the Amazon Basin,” the Camisea Gas

project has been the subject of widespread controversy in Peru. Up to 75% of gas extractions will be

operated within a state reserve set aside for indigenous peoples living in voluntary isolation. (The

Amazon Watch, 2009)

Picture 2 Share of Internal Gross Energy Supply, 2008, APEC (DHG, DGE, DGM of Peru)

If we overlooked rights of indigenous people towards their ancestral land and biodiversity under the

threat, one would have to still consider other dimensions of economically simplified relation of

supply and demand. The transport sector activities have the most CO2 intensive emissions

showing total emissions of 12.3 million tons at the end of 2008. The second largest pollutant

sector is the industry sector. Emissions have increased robustly with around 2.8 million tons

in 1992 to around 7.0 million tons in 2008. (Asia-Pacific Economic Cooperation, 2011)

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Climate change is the issue, but national economy matters more as political leaders have been

regularly showing us. With South American hydrocarbon-driven economies based on export of

commodities, not knowledge societies producing added value to products, the serious concern exists

about volatility of markets; prices are more variable. Next challenges are appreciation of the currency

which can make other parts of the economy less competitive and widespread taxation corruption. As

The Economist stated, Chile, Peru and Venezuela still rely on raw materials for more than three-

quarters of their total exports. (The Economist, 2010)

“The research and development technology (R&DT) and innovation issues in Peru have been

of low importance in the public policies. In Peru, science, technology and innovation issues

are not part of the long-term national agenda. Despite the political discourse about improving

competitiveness and joining the knowledge society, the government has made limited

efforts so far. … The economic support for science, research and development through loans

funding and national budget is very low (around 0.15% of gross domestic expenditure),” highlighted

eight economic experts of APEC in Peer Review on Energy Efficiency in Peru. (Asia-Pacific Economic

Cooperation, 2011) Comparison of international trend speaks for itself. (Picture 3)

According to 2008 report of U.S. Energy Information Administration (EIA) the growing demand is

likely to be fulfilled by Peruvian untapped reserves of natural gas and petroleum. (US Energy

Information Administration, 2011) Even influential EIA does not give the state much hope for cleaner

and sustainable future and, until very recently, the way of development narrowly determined by

Peruvian leaders did not promise any considerable turn. However, where is no glimpse of revolution

one might at least look for indications of certain evolution.

Picture 3 Gross domestic expenditure on R&D as a % of GDP, 2008, APEC

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Institutional Framework – One Step Forward

Along with an innovative Energy Efficiency Referential Plan 2009 – 2018 came into power one more

important document - proposed National Energy Policy Plan 2010 – 2040 which is being used as a

guideline pattern for newly created General Directorate of Energy Efficiency (Dirección General

de Efficiencia Energética – DGEE). Body under the Ministry of Energy and Mines will be directly

responsible for developing energy efficiency policy, energy planning and the promotion of renewable

energy and energy efficiency programs. (Asia-Pacific Economic Cooperation, 2011)

The declaration of policy statements has led to the promulgation of new laws on science, technology

and innovation and on competitiveness, as well as the adoption of the concept of innovation

systems as a policy instrument. However, the implementation of such laws has been poor so far.

The Directorate has only been in existence since July of 2010 and its 1 million USD is very small in

light of the scope of its current and future activities. (Picture 4)

Above all, underfinanced Science, Technology and Innovation

National Council (CONCYTEC) established in 1968 by the

Peruvian government received improved tasks within a

specific program on “Clean Technologies” which focuses on

research and development of alternative technologies to

improve the reduction of emissions, achieving social

security on local and regional level. (Picture 5)

After short exposition into the past, review of consequences

related to economic growth and institutional overview, we will

examine the sources directly.

Picture 4 Potential with Renewable Energy - Projection from 2012 to year 2020, (International Finance Corporation, 2009)

Picture 5 The five pillars of energy efficiency in Peru, 2008, APEC

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Current Status of Renewables

According to recent data from the International Energy Agency (IEA), renewable energies amount to

almost 29% of the total primary energy supply (TPES) in Latin America. At first, this figure looks

relatively high and somewhat impressive, especially if we compare it to the 5.7% share of renewables

of OECD countries and the 0.7% share in the Middle East. (Global Energy Network Institute, 2009) For

sure such figure is heavy weapon when it comes to political negotiation, yet reality is more complex.

The Latin American renewable energy sector is almost entirely dominated by two forms of

renewables: hydro energy and biomass, which covers 36% and 62% share of the total of renewables.

Hydro Energy

Hydro plants have been particularly important in the production of electricity as it represents 60% of

total electrical production in Latin America. Hence, several countries like Brazil or Paraguay have

become dependent almost entirely on the hydro sector in generating electricity; it has created

problems when there are extended dry periods and water levels fall down significantly.

Peru had 7.2 gigawatts (GW) of installed electricity generating capacity in 2008, with 3.2 in

hydroelectric generators. EIA expects total capacity to expand by around 70 percent between 2010

and 2020. (US Energy Information Administration, 2011) The government plans centre on the

Marañón river deep in the Amazon Rainforest with the capacity to generate 10 000 MW from six

dams. Last year the government signed an agreement under which Peru will export up to 6 000 MW

of electricity to Brazil, a plan that would involve mainly Brazilian companies investing around 20

billion USD. Ecological and human-rights groups are mobilizing, because indigenous people along the

river have not been consulted about the hydroelectric schemes. (The Economist, 2011)

Picture 6 Top Countries with Installed Renewable Electricity by Technology, 2008, US Department of Energy

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Position of Global Energy Network Institute experts who reported on renewable energy potential of

Latin America is very strict: “Apart from creating energy security concerns, large hydro has caused

serious environmental and social problems, particularly in sensitive regions like the Amazon

Rainforest. … Large hydro cannot be properly considered a form of clean, sustainable energy,

particularly if viewed from the context of sustainable development.” (Global Energy Network

Institute, 2009)

Biomass

Due to its widespread non-commercial use in developing countries, solid biomass is by far the largest

renewable energy source representing 9.3% of world TPES, or 73% of global renewables supply.

However, statistical data does not distinguish between traditional and industrial/modern biofuels

mainly produced in OECD countries. The biggest share of solid biomass, 85.9%, is produced for

residential cooking and heating in developing countries situated mainly in South Asia and sub-

Saharan Africa. (Glorbal Energy Network Institute, 2009)

Seemingly neverending Amazon provides nowadays firewood and charcoal to meet 10% of energetic

demand in Peru which also causing deforestation in the same communities. As urbanization and

expansion of the electric grid are spreading, there is positive signal that the percentage of traditional

biomass will keep shrinking as people turn to other sources of energy. In case of industrial biomass,

great CO2 reduction potential has been recognized in bagasse as byproduct of sugarcane and

sorghum production and biowaste management, the segment grew on average at 10.4% annually

since 1990 (Global Energy Network Institute, 2009), through utilization the materials into biogas and

liquid biomass. Summary is now more obvious. “Environmentally friendly” and “environmentally

unfriendly” kinds of biomass exist.

The most common opposition against hydro and biomass power is based on criticism of the

dependency on large hydro dams which causing problems when there are droughts and the water

levels fall significantly as the result of climate change. Industrial biofuels do not contribute to

reducing greenhouse gases, whereas traditional biofuels and production of charcoal can lead to

deforestation. Both practices therefore cause crucial environmental and social problems and cannot

be considered as sustainable.

In any case if we did not count large hydro and unsustainable biofuels production, the region would

not be much better in use of renewables than rest of the World. Though, geographical location of

the state gives the country extraordinary chance to refute all the long-lasting controversy.

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Underutilized Boosters of Economy

Wind Energy

The Laureles was once remote community in Uruguay. Actually, it is still remote but not abandoned

by society. It was selected as part of a technology transfer project by University of Uruguay Work

Group among the others from Argentina, Peru and Brazil to enhance its productive activities of

ecotourism and craftworks selling. The simple wind energy system provides them a support to their

resolution to continue with their lives there. Community expressed their perception of the benefits

expected in its quality of life through an increase in the number of tourists and of their craftworks

production. (Ventura Nunes, 2007) The project showed example of good practice. Small scale and

decentralized renewable energy solution can contribute to quality of life at any place on the Earth.

According to 2008 Renewable Energy Data Book wind energy is the fastest growing renewable

energy technology worldwide and its generation grew by a factor of almost 7 between 2000 and

2008. (US Department of Energy, 2009) It is not underestimation that Peruvian exploitation of wind is

zero (International Energy Agency, 2010), even though the potential for wind power is large in the

country. The World Bank Group estimated total investment potential of wind energy in Peru to 3.400

million USD. (Picture 4) The greatest potential is concentrated along the west coast of the country

where the prevailing ocean winds blow on-shore year round. (Annex 1)

Solar Energy

The opportunity for solar power is excellent in Peru with the greatest potential found year-round

along all western states the country. It is more evenly distributed then wind energy (Annex 3), as

good portions of the region lie within the Sun Belt Region of highest solar radiation. Thus, except for

site specific adverse microclimates, solar energy is a predictable and reliable resource, capable of

being transformed to heat and electricity by means of several technologies in different stages of

development and its commercial availability. (Global Energy Network Institute, 2009) The current use

of solar energy in any form is zero. (International Energy Agency, 2010)

Geothermal Energy

Geothermal energy is a technology set to be very important in the future. With geothermal energy,

heat is extracted from within the earth’s crust and transformed either into a hot water system, or if

there is plenty of this energy, a geothermal power plant. Especially in the southern region of the

country (Annex 2), there is good resource potential for generating geothermal energy. (Global Energy

Network Institute, 2009)

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Wave and Tidal Energy

Along with other forms of energy available in the ocean, represent an enormous energy potential for

coastal countries in the region. Unfortunately, technologies to tap such energy resources are still far

from commercialization. (Global Energy Network Institute, 2009) Importance of this source is rising

when we realize how abundant the coastline to inland ratio of most countries in Latin America is.

OECD countries are not blind towards investment potential of developing countries and if such an

activity is driven by socially and environmentally responsible decisions and it helps to increase share

of renewables in energetic mix, there is no reason to hinder it. British company ABB claim to be

participating in the Peruvian construction of the most remote wind sea farm in the World. The 400

MW farm will avoid the emission of 1.5 million tones of CO2 annually. (UK Trade and Investment,

2010) On the opposite side the government and its institutions are the one to create reliable and up-

to-date development maps in order to attract direct foreign investment. It counts for all renewable

sources of energy alike.

Renewables at the verge of Conquest

Why “new” renewable source are not more favored while maps (Annex 1, 2, 3) show that, besides

the already mentioned dominant two renewable energy sources, there is enough potential to expand

greatly the other renewables in Peru?

Opinion of GENI is pragmatic: “Since the region has an abundance of resources such as oil, gas and

hydro, it is in general easier, cheaper and more technically feasible to keep exploiting conventional

energy resources than to invest in renewable energies or create appropriate renewable energy

policies. Another common explanation is that the development of renewable energies clash with the

interest of powerful players, particularly large energy companies, and, therefore, there are few

incentives to promote them. (Global Energy Network Institute, 2009)

Surprising might be that EIA in its country analysis not mentioned renewables as potential area for

future development, for instance, through established DGEE. They forecasted the deepening of

exploitation status quo: “The Peruvian government has enacted a series of policies to attract foreign

investment and increase energy security by promoting the use of domestic natural gas and

hydroelectric resources.” (US Energy Information Administration, 2011) Isn’t it, first of all, guideline

for well-established American commodity extractors?

APEC addressed energy efficiency of the country stating that: “The Peruvian government has

focused the robust use of natural gas in the economy because of the high natural gas

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proven reserves. … High dependency of petroleum products is still a challenge in the economy.”

(Asia-Pacific Economic Cooperation, 2011) The Review Team gave 51 recommendations to Peru.

There are 6 of them which author considers the most essential: to develop and implement

National Energy Policy Plan 2010 – 2040, to make state awareness campaign, to improve thermal

power plant efficiency, to built Pan-American electricity grid, to implement new transport

technologies such as HYBRID cars, to continue construction of public transport, to improve national

public education, to increase GDP expenditure in science, research and technology development.

Peru has already established institutions responsible for this task. General Directorate of Energy

Efficiency and Science, Technology and Innovation National Council should follow and fulfill approved

plans and gain even more executive rights. Because promulgating the transition into knowledge

society without any real investment into education, research and innovation could result in weak

stumbling behind those who did not regret to support human resources.

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References

Asia-Pacific Economic Cooperation. 2011. Peer Review on Energy Efficiency in Peru. [Online] May 2011. [Cited: January 5,

2012.] http://www.ieej.or.jp/aperc/PREE/PREE_Peru.pdf.

Global Energy Network Institute. 2009. Renewable Energy Potential of Latin America. [Online] December 2009. [Cited:

January 10, 2012.] http://www.google.cz/url?sa=t&rct=j&q=geni%20renewable%20energy%20potential%20of%20latin%20

america&source=web&cd=1&ved=0CCQQFjAA&url=http%3A%2F%2Fwww.geni.org%2Fglobalenergy%2Fresearch%2Frenew

able-energy-potential-of-latin-america%2FPotential%2520of%2520R.

Hydro-powered dreams: Hopes and fears of a regional energy hub. The Economist. 2011. February 10, 2011.

www.economist.com/node/18114659.

International Energy Agency. 2010. Renewables and Waste in Peru in 2009. [Online] February 1, 2010.

http://www.iea.org/stats/renewdata.asp?COUNTRY_CODE=PE.

International Finance Corporation. Assessment of The Peruvian Market for Sustainable Energy Finance. [Online] [Cited:

January 12, 2012.] http://www1.ifc.org/wps/wcm/connect/78f59b00493a76e18cc0ac849537832d/SEF-

Market+Assessment+Peru-Final+Report.pdf?MOD=AJPERES76e18cc0ac849537832d%2FSEF-Market%2BAssessm.

It's only natural: Commodities alone are not enough to sustain flourishing economies. The Economist. 2010. September 9,

2010. www.economist.com/node/16964094.

The Amazon Watch. 2009. Peru. [Online] May 2009. [Cited: January 2, 2012.] http://amazonwatch.org/work/peru.

The World Bank. 2011. Peru Brief. Peru. [Online] August 19, 2011. [Cited: January 10, 2012.] http://go.worldbank.org

UK Trade and Investment. 2010. Renewable Energy Opportunities in Peru. [Online] 2010. [Cited: January 8, 2012.]

http://www.google.cz/url?sa=t&rct=j&q=renewable%20energy%20opportunities%20in%20peru&source=web&cd=2&ved=

0CFYQFjAB&url=http%3A%2F%2F212.137.70.163%2Fdownload%2F121929_105650%2FRenewable%2520energy%2520opp

ortunities%2520in%2520Peru.pdf.html&ei=31kQT_WPIa-B.

US Department of Energy. 2009. 2008 Renewable Energy Data Book. [Online] July 2009. [Cited: January 12, 2012.]

http://www.nrel.gov/docs/fy09osti/45654.pdf.

US Energy Information Administration. 2011. Peru Energy Data, Statistics and Analysis - Oil, Gas, Electricity, Coal. Country

Analysis Briefs. [Online] April 24, 2011. [Cited: January 10, 2012.] http://www.eia.gov/countries/cab.cfm?fips=PE.

Ventura Nunes, José Cataldo. 2007. Renewable Energy Supply to an Isolated Rural Community to Enhance Ecotourism

Activities. ISES Solar World Congress 2007: Solar Energy and Human Settlement. [Online] 2007. [Cited: January 3, 2012.]

http://www.springerlink.com/content/vg62n1142336789m/.

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List of Illustrations

Picture 1 Share of the Final Energy Consumption by Sectors, 2008, APEC ..................................................................................... 1

Picture 2 Share of Internal Gross Energy Supply, 2008, APEC (DHG, DGE, DGM of Peru).............................................................. 2

Picture 3 Gross domestic expenditure on R&D as a % of GDP, 2008, APEC .................................................................................... 3

Picture 4 Potential with Renewable Energy - Projection from 2012 to year 2020, (International Finance Corporation, 2011) . 4

Picture 5 The five pillars of energy efficiency in Peru, 2008, APEC .................................................................................................. 4

Picture 6 Top Countries with Installed Renewable Electricity by Technology, 2008, US Department of Energy ......................... 5

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Annexes

Annex 1.: Wind Power Potential, Ministry of Energy and Mines, Peru

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Annex 2.: Geothermal Power Potential, Ministry of Energy and Mines, Peru

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Annex 3.: Solar Power Potential, Ministry of Energy and Mines, Peru