Peru Opens Complementary Services Market to Support Renewables

Why It Matters

By introducing price signals and opening ancillary services to new entrants, the reform strengthens grid reliability and lowers integration costs for Peru’s growing renewable portfolio, positioning the market for further investment.

Key Takeaways

• Market-based model replaces administrative framework for complementary services.
• Energy storage and non‑traditional players can now compete for services.
• Costs allocated to agents causing grid deviations via causality principle.
• COES to annually assess competitiveness of each ancillary service.
• Reform supports integration of 952 MW of solar capacity in Peru.

Pulse Analysis

Peru’s power sector has entered a pivotal phase as solar and wind installations surge, pushing total utility‑scale PV capacity close to 1 GW. The existing ancillary‑service framework, rooted in administrative directives, struggled to provide clear economic incentives for frequency regulation, voltage support, and reserve provision. Without transparent pricing, new renewable projects faced higher balancing costs, slowing the transition toward a cleaner grid.

The draft decree announced by MINEM replaces that legacy system with a market‑based model that invites competition among traditional generators, battery storage operators, and other innovative participants. By allocating costs based on causality, the regime ensures that those who create grid deviations—whether large industrial consumers or intermittent renewable plants—bear the associated expenses. Oversight responsibilities are split between COES, which will evaluate service competitiveness annually, and OSINERGMIN, tasked with setting price caps and monitoring market behavior. This structure aims to create a level playing field while preserving system reliability.

For investors and developers, the reform signals a more predictable environment for financing renewable and storage projects in Peru. Clear remuneration mechanisms reduce the risk premium on ancillary‑service contracts, encouraging capital inflows and potentially lowering electricity tariffs. Regionally, Peru could become a benchmark for Latin American markets grappling with similar integration challenges. However, successful implementation will depend on robust data collection, transparent cost‑allocation methodologies, and the ability of new entrants to meet technical standards. If these hurdles are addressed, the policy could accelerate Peru’s renewable ambitions and reinforce its position as a forward‑looking energy market.