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Peru – Geothermal needs specific promotion to be competitive in upcoming energy auctions

Lima, Peru (Source: Flickr, CC, By: M M)
Alexander Richter 4 Sep 2020

For upcoming renewable energy auctions in Peru, geothermal energy projects and other renewables need specific promotion to be competitive, so the country manager for EDC in Peru.

A recent webinar on geothermal energy for green and competitive mining dealt with the opportunities of geothermal for Peru’s mining sector, yet also highlighted the challenges.

Geothermal entrepreneurs want to compete with all renewables in upcoming energy auctions in Peru, yet would require specific promotion to be competitive in the upcoming call for an RER auction.

But local and foreign private companies continue to bet on the growth of the renewable energy sector and the diversification of the matrix of the country.

Among them, Energy Development Corporation Peru is investing in the development of two geothermal projects with great potential in the southern region of the country.

According to Franklin Acevedo, manager of the company, EDC is making progress in environmental impact studies for its Achumani project, which will be located in Arequipa. This undertaking is expected to be carried out in stages; the first of these would be 100 MW, and could reach up to 350 MW of installed power.

In the following year, they will continue with investments in another 100 MW project but in Moquegua. The so-called QuelloApacheta geothermal project, meanwhile, has an estimated potential of 250 MW in total to be used.

Both projects, with an estimated investment of 1800 million soles each, would require, as well as other eventual projects of this technology, a special promotion plan in order to be competitive in the market.

What does it take to make geothermal projects a reality? The manager of EDC in Peru reviewed three keys:

  • a supply contract is required that guarantees any company the return on investment in projects
  • For this, it is necessary that the State, through the Ministry of Energy and Mines (MEM) decides to promote geothermal energy through the 5th RER auction (Legislative Decree 1002) that allows EDC and other companies to compete for a PPA
  • the entire investment would be borne by the company that obtains the PPA. Likewise, the investment risk in PHASE 2 would be fully assumed by the company, to avoid any involvement of the State.

In the event that the State does not resume auctions and does not promote these generation sources, what alternatives would there be in the private sector?

According to a panel of experts convened by EDC, there is a growing interest from the industrial and mining sector to incorporate base and renewable supplies. In this scenario, geothermal should gain ground.

The webinar “Geothermal energy for green and competitive mining” dealt with this topic in particular.

“Geothermal is one of the best options for providing grassroots energy in the south. Undoubtedly, in the first initial costs of geothermal energy, when introducing this technology to the country, they may be above the market values. But the reality is that later, this cost will be reduced ”, considered Franklin Acevedo.

Source: Energía Estratégica