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...
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World Bank, Washington, DC
2019
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| 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 |
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okr-10986-313982022-09-19T12:16:54Z Learning from Developing Country Power Market Experiences : The Case of Peru Rudnick, Hugh Velasquez, Constantin ELECTRICITY ENERGY DEMAND POWER MARKET POWER SECTOR REFORM COMPETITION EMERGING MARKET ECONOMIES RENEWABLE ENERGY HYDROPOWER NATURAL GAS 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. 2019-03-14T19:56:04Z 2019-03-14T19:56:04Z 2019-03 Working Paper http://documents.worldbank.org/curated/en/122241552317273992/Learning-from-Developing-Country-Power-Market-Experiences-The-Case-of-Peru http://hdl.handle.net/10986/31398 English Policy Research Working Paper;No. 8772 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Peru |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ELECTRICITY ENERGY DEMAND POWER MARKET POWER SECTOR REFORM COMPETITION EMERGING MARKET ECONOMIES RENEWABLE ENERGY HYDROPOWER NATURAL GAS |
| spellingShingle |
ELECTRICITY ENERGY DEMAND POWER MARKET POWER SECTOR REFORM COMPETITION EMERGING MARKET ECONOMIES RENEWABLE ENERGY HYDROPOWER NATURAL GAS Rudnick, Hugh Velasquez, Constantin Learning from Developing Country Power Market Experiences : The Case of Peru |
| geographic_facet |
Latin America & Caribbean Peru |
| relation |
Policy Research Working Paper;No. 8772 |
| description |
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. |
| format |
Working Paper |
| author |
Rudnick, Hugh Velasquez, Constantin |
| author_facet |
Rudnick, Hugh Velasquez, Constantin |
| author_sort |
Rudnick, Hugh |
| title |
Learning from Developing Country Power Market Experiences : The Case of Peru |
| title_short |
Learning from Developing Country Power Market Experiences : The Case of Peru |
| title_full |
Learning from Developing Country Power Market Experiences : The Case of Peru |
| title_fullStr |
Learning from Developing Country Power Market Experiences : The Case of Peru |
| title_full_unstemmed |
Learning from Developing Country Power Market Experiences : The Case of Peru |
| title_sort |
learning from developing country power market experiences : the case of peru |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/122241552317273992/Learning-from-Developing-Country-Power-Market-Experiences-The-Case-of-Peru http://hdl.handle.net/10986/31398 |
| _version_ |
1764474238520000512 |