Peru and the Energy Transition (presentation)

Where is Peru in the Transition?

53% - Hydroelectric

37% - Hydrocarbons

6% - Wind

2% - Miscellaneous

Pledged net-zero by 2050; no renewable energy action since 2015

Political Barriers

Peru has had 5 presidents in the last 5 years, the last full term being served from 2011-2016

Over 85% of Peruvians distrust political parties, 80% disapprove of congress

Ministers last an average of 4-6 months

Gast and hydroelectric companies influence governments and block renewable integration

Ranked 127/180 on corruption perception index

Presidents last an average of 2.27 years since 2000 (11 presidents), less than half the constitutional 5-year term

Explanation Behind the Political Barriers

"Political Cynicism" is the deep distrust than citizens have in the political system

Creates "Political Hopelessness", the belief nothing will change, leading to small, uncoordinated pressure for long-term reforms

"Political Moral Laxity" is the normalization of corrupt behaviour in governments

Peruvians tolerate corporate influence on political decisions

Political Moral Laxity + Cynicism + Hopelessness = low legitimacy in presidents who become disposable, constant political turnover, makes renewable energy policy nearly impossible to be fulfilled long term

The Institutional Barrier

The government has not held a single Renewable Energy Resource (RER) suction since 2015

Decreto Legislativo 1002 (DL1002) required periodic RE targets - the 5% target set for post-2017 was meant to be updated but never was

In 2025, almost a decade later, Peru is still at 5%

Path dependency as infrastructure was built around hydro and natural gas, harder to transition to renewables

No long-term planning + non-technical decisions = massive oversupply and artificially low energy prices

Demand 7,000 MW vs supply 15,223 MW in 2023

The Economic Barrier

Massive generation oversupply means the system marginal cost is anywhere from USD $10-30 per mWh

At these prices, auctions for RE (when they still happened) required subsidies to compete and win

In contrast, Chile's marginal cost is USD $70, creating a market where wind and solar are naturally competitive

Conclusions

Peru's political volatility weakens its institutions, which allows for economic distortions to emerge and persist

These distortions shape market outcomes that reward actors who reinforce the status quo, a self-reinforcing loop that traps Peru's energy policy in place