potential of alternative energy sources in peru
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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
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