The World Bank Supports an Inclusive, Green and Resilient Electricity Sector for Peru’s Economic Recovery

WASHINGTON – The World Bank Board of Directors today approved a loan for US$ 70 million to finance priority investments in the electricity sector. These investments will contribute to improving the availability, reliability and climate resilience of electricity service in Peru.

The project will focus on low-income sectors in regions without quality electricity services or that experience power outages. It will also promote the development of a greener electricity supply with reduced greenhouse gases (GHG). The World Bank will also provide technical assistance to support the Peruvian government’s energy sector reform to drive the post-pandemic economic recovery.

“Having a reliable, greener electricity source throughout the country is essential to close inequality gaps, increase regional competitiveness and improve the management of natural resources and climate risks,” said Marianne Fay, World Bank director for Bolivia, Chile, Ecuador and Peru. “Through this project, we will support key investments in the electricity sector to strengthen the pandemic response and to reactivate the economy in an inclusive, resilient and sustainable way. This will enable productive activities in all regions and reduce the use of more polluting energy sources,” she said.

According to the Vice-minister of Electricity, Jaime Luyo Kuong, “this project is an expression of the government’s commitment to strengthening the energy sector and generating better conditions for green economic growth and affordable and fair electricity rates to benefit the entire population.” He added that “it will also be an important support for the reform and modernization of the electricity sector, which will contribute to generating cleaner energy and a more climate-resilient system in the Peruvian Andean and Amazonian regions.”

According to Peru’s National Infrastructure for Competitiveness Plan (PNIC), the country’s long-term basic energy infrastructure gap totals US $ 2.1 billion. This gap is even greater if the investments necessary to maintain and modernize existing infrastructure are included to enable it to better withstand and respond to natural disasters and climate shocks.

Delays in key electricity investments have a major impact on the country’s economic growth. More than half of small and medium-sized enterprises surveyed indicate that electricity service is a major constraint for their activities, according to Peru’s National Statistics Institute. Additionally, delays in investments by public utility companies have undermined the resilience of many power systems, both to meet electricity demand and to withstand climate events.

To respond to these challenges, the project will finance the strengthening and expansion of substations and priority transmission lines that are at high risk of outages in 10 regions with high poverty rates. These investments will include location and design specifications to improve climate resilience and to reduce the need for more polluting measures to meet energy demand.

The World Bank will also offer technical assistance and analytical support to the Ministry of Energy and Mines and the Multi-sectoral Commission for the Reform of the Electricity Sector (CSRE) for the modernization of the electricity market. To this end, it will develop a comprehensive plan for institutional and regulatory reforms of the sector, including its resilience to climate change. It will also help identify solutions to the financial and institutional barriers facing public electricity companies.

Project financing totals US $ 95.10 million. Of this amount, the World Bank is financing US $ 70 million, and the Government of Peru, US $ 25.10 million.

World Bank Group Response to COVID-19

Since the start of the COVID-19 pandemic, the World Bank Group has deployed over $157 billion to fight the health, economic, and social impacts of the pandemic, the fastest and largest crisis response in its history. The financing is helping more than 100 countries strengthen pandemic preparedness, protect the poor and jobs, and jump start a climate-friendly recovery. The Bank is also supporting over 50 low- and middle-income countries, more than half of which are in Africa, with the purchase and deployment of COVID-19 vaccines, and is making available $20 billion in financing for this purpose until the end of 2022.