Learning from Developing Country Power Market Experiences : The Case of Peru
The Peruvian power market was established in 1992, amid serious supply constraints and financially distressed power utilities. Since its inception, the market has been adapted by competitive market reforms and adaptations due to government-driven p...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/122241552317273992/Learning-from-Developing-Country-Power-Market-Experiences-The-Case-of-Peru http://hdl.handle.net/10986/31398 |
| Summary: | The Peruvian power market was
established in 1992, amid serious supply constraints and
financially distressed power utilities. Since its inception,
the market has been adapted by competitive market reforms
and adaptations due to government-driven public policy
objectives. This paper analyzes the experience of Peru with
power markets, including market design, implementation, and
outcomes. A cost-based power pool with locational marginal
prices was established overnight, with bilateral contracts
among market participants and regulated capacity payments.
After an initial period of rapid investment, sluggish
capacity additions and a prolonged drought in 2003-04
motivated the successful introduction of competitive supply
auctions in 2006, to ensure that needed capacity additions
were made to meet demand growth. Competitive auctions for
renewable capacity have also been successful, attracting
investment at falling prices. However, the market has been
adapted by the government, pushing technology-specific
auctions to develop a balanced mix of gas and hydro power
generation, with additional costs passed through to final
customers. As a result, supply is less prone to hydrological
conditions, but it is now subject to gas transport
constraints; prices are depressed at US$9/megawatt hour; and
the reserve margin increased to 81 percent in 2017. Overall,
continuous adaptations to the Peruvian power market have
delivered competitive outcomes, with concentration falling
steadily and security of supply increasing over the past
decade. However, the mixed approach of competitive forces
and government-driven adaptations for public policy
objectives calls into question the long-term efficiency of
the market. |
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