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May 7, 2019

Geothermal Country Overview: Potential in Peru

The Fate of Geothermal Development in Peru

As we continue with our Geothermal Country Overview blog series, we zoom in on the potential in Peru – one of the fastest growing economies in Latin America. Peru boasts the infamous Macchu Pichu and is home to 17% of the Amazon rainforest (it takes up about 60% of Peruvian land space). If this isn’t attractive enough for your next trip, Peru is home to approximately 3000 MW of geothermal potential. Most of this potential is concentrated along the country’s ‘Southern Volcanic Belt’. So, what is the future of geothermal here and how have plans been progressing for development?

More than 500 geothermal source manifestations and 61 potential geothermal fields are located throughout the country and possess a preliminary estimated potential of around 3,000MWe. Peru’s geothermal potential is one of the most attractive in South America. Its resources are strategically located in areas where most of the largest mining projects are located. The development of geothermal sources could increase installed generation capacity in southern Peru where there are mining investments.

Peru’s energy supply relies heavily on hydro and natural gas sources. Both sources are vulnerable to environmental and social impacts. Droughts, floods, and geological hazards affect water supply and infrastructure integrity. Concerns are associated with the construction of large hydroelectric projects and gas transportation facilities posing serious challenges to the granting of social licenses and impacts on generation. The country’s energy policy aims at securing energy self-sufficiency in a competitive environment through the promotion of private investment.

Geothermal power generation in Southern Peru could improve the country’s power reserves. Since 2010, several geothermal companies got involved in geothermal exploration in Peru and the Peruvian government along with technical and financial support from the Japanese Cooperation Agency (JICA) and issued a national Geothermal Master Plan in 2012. Several foreign and national geothermal companies applied for government authorizations for geothermal exploration and by June 30, 2014, seven companies were granted 29 authorizations covering an area of 272,500 ha by the Ministry of Energy and Mining (MEM). The Master Plan was aimed at fostering the implementation of a geothermal industry in the country. Despite the potential and interest, development is still struggling to succeed. According to the World Energy Council (WEC), there was an installed capacity of 3MW of geothermal power since 2016.

Image: Arequipa’s iconic volcano Misti rises above a green valley in Southern Peru (Colm Linehan, Flickr)

Geothermal energy offers the opportunity to provide services like electric power for communities and industries. The geothermal industry can also provide environmental benefits (reduced environmental pollution and carbon emissions). But arguably for Peru, direct use of geothermal energy for heating purposes is one of the most important advantages. Geothermal development in Peru has been constrained by a complex set of problems and issues. These are primarily the lack of geothermal and social context knowledge, the political and policy framework, the regulatory framework, and the infrastructure and implementation support. Limitations exist which prohibit the pace of geothermal development. There are current issues being addressed to promote geothermal development in Peru as follows:

  • Formulate a concrete development plan which includes the target for power generation by renewable energies, where geothermal to be set at 5% of total electricity demand.
  • Consider options to improve the current legal system as it pertains to resource risk and high capital costs which may hinder private sector development for geothermal power generation.
  • The only existing incentive for promoting geothermal power generation projects is currently the fixed-price purchase system of generated electric power through the tender for renewable energy projects. The system has not been qualified as an effective measure in promoting the developments by the private sector since the purchase price has not been examined yet.
  • The availability of experts on geothermal power generation and utilization in governmental institutions is quite limited.

Communities, government, and geothermal companies are key stakeholders for geothermal development. The geothermal industry in Peru needs to realize the goal of effectively and sustainably utilizing the available resources to satisfy the socio-economic and environmental expectations and demands of the stakeholders of the geothermal industry. Recent Peruvian governments have been promoting “Social Inclusion”. This engages accessing the instruments and resources for socio-economic development and contributing to fulfilling the expectations of those involved.

From a social perspective, thanks to inter-institutional communication work among national, regional and local governments, communities and geothermal company representatives, the geothermal industry has been accepted by local communities. One of the plans, “The Renewable Energies Plan” proposes that by the year 2040, 17.3% (~4321 MWe) of the total electric power generated shall come from renewable sources like mini hydro, wind, solar, geothermal and biomass. Out of this total, it is estimated that geothermal will be the most important supplier with 34.7% followed by wind with 31.1%. The communication, information sharing, and exchange work by the geothermal companies were reasons for the creation of the Peruvian Geothermal Association (APG) in July 2012. Representatives from Andes Power, Ecoenergy, Enel Green Power, Hot Rock, and Alterra Power Corp. / Magma Energía Geotérmica Perú signed as the first official members of the APG.

That wraps up our Geothermal Country Overview: Potential in Peru blog post.  Read more of our #GeothermalFactsandStats blog posts here and follow us on all of our social media platforms. #geothermalcountryoverview



Geothermal Country Overview: Potential in Peru, Author: Elizabeth Bullock