BUENOS AIRES, Argentina, Nov. 5, 2012 /PRNewswire/ -- Peru has the third highest hydro power generation potential in South America and oil reserves estimated in 532.7 million barrels. The substantial Camisea natural gas reserves and significant demand from neighboring countries could turn the nation into a regional hub of electricity production.
New analysis from Frost & Sullivan (http://www.energy.frost.com), 2011 Updated Overview of the Peruvian Electricity Industry, finds that the industry earned revenues of $1.02 billion in 2011 and expects this to reach $1.45 billion in 2016, at a compound annual growth rate of 5.5 percent. It had an installed capacity of 7,986 MW in 2011 and is expected to grow to 11.7GW by 2016.
Peru's strong economic growth has spawned more development, which, in turn, has increased electricity demand and initiated rural electrification projects. The Government's attempts to improve access to electricity played a major role raising electricity consumption, as well as driving the uptake of electricity supply equipment. On the back of these efforts, rural electrification shot up from 80.0 percent in 2008 to almost 92.0 percent in 2011.
"The main areas of growth for participants and industry entrants are gas, hydro, renewables, transmission and distribution (T&D) infrastructure, as well as maintenance, repair, and overhaul (MRO) for existing power stations," said Frost & Sullivan Industry Analyst Dominic Goncalves.
However, project delays, lack of regulations, tariff structure issues, and a maintenance backlog, which is currently narrowing the reserve margin, can hold back pace of growth. The tariff structure has recently been clear and stable but more strategic planning in the energy sector will be necessary to attract foreign investment.
"It is imperative that Peru develops a robust transmission system to facilitate planned generation projects," noted Goncalves. "Favorable regulations and higher foreign investment will be needed to set these projects in motion."
The proposed development of an interregional electricity industry will bolster Peru's electricity sector and its economy. Electricity production in Peru is much cheaper than in the neighboring countries; however, the industry requires more generation capacity to meet both internal and external demand.
"The Peruvian Government aims to make the country a regional electricity hub, exporting to Chile, Brazil, and Ecuador," added Goncalves. "In late 2011, Peru signed an agreement with Brazil to export up to 6,000 MW of electricity; initiatives such as these are likely to drive the Peruvian electricity industry till 2016."
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2011 Updated Overview of the Peruvian Electricity Industry
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