COES: No risk of power rationing, but there is a risk of high electricity production costs

If new investments in more efficient generation are not made, the supply of low-cost electricity in the national interconnected electricity system (SEIN) could be exhausted in just two years, after which the country would have to use more expensive plants.

This warning was made by César Butrón, president of the Economic Operation Committee of the National Interconnected Electric System (COES), who, at the Peru Energy North event, explained the situation of electricity supply and demand and its impact on the market.

What is the supply of electricity generation?

In principle, he pointed out that there is enough installed capacity to generate enough energy to rule out the possibility of power rationing or blackouts, at least until 2034, in the northern, central and southern areas of the SEIN.

Currently, the SEIN regularly employs low-cost generation plants, such as hydroelectric and natural gas thermal plants, as well as wind and solar, and, occasionally (in extraordinary situations), diesel plants.

However, Butrón projected that if no new low-cost plants are built today, such as wind and solar or natural gas plants, between 2025 and 2026 the country will begin to use diesel plants on a regular basis, which will raise costs.

The latter would be in a scenario of little growth in demand and the economy in general, but if it grows more, the higher cost of electricity production could be seen as early as 2024, he said.

How much could the cost of generation rise?

He said that today production with low-cost installed capacity is US$30 per megawatt per hour (MW/h), but if diesel-fired plants were to be used continuously, the cost of production would skyrocket to US$180 per MW/h.

In other words, he concluded, there is no possibility of rationing, but there are high costs.

Who would assume the higher costs?

Although in the first place this higher cost would be assumed by the generators themselves (since they have fixed-price electricity sales contracts with the distributors) and would not be passed on to regulated consumers, he did not rule out that this would affect free customers.

He said that in the case of free customers (mining companies, industries and large companies), the impact that the increase in the cost of energy would have on them will depend on their contracts (with generators or distributors).

At the end of last year, as a result of the drought and the drop in hydroelectric power production, the use of diesel thermoelectric power plants increased, and electric companies indicated that since November they have passed on the higher cost through price increases to their free clients.

Electricity demand

In addition, the COES projection is given in a scenario of contraction of energy demand, because while in previous years such demand grew at rates of between 8% and 10% per year, now the committee estimates that this year, for example, will grow between 3% and 3.5%, a rate that will continue until 2034.

"The projection can be adjusted, but I can assure that in the next three years this projection will be like this, since mining projects (which are the most energy demanding) take four to five years to establish themselves and start consuming electricity," he said.

He also indicated that the information COES has is that until 2034 not a single large industrial project is expected to add to the growth of electricity demand, due to the political noise.

Meanwhile, the vegetative growth of consumers in general is not going so well because the economy is not growing (as in previous years).