Challenge
The high poverty levels in rural areas of Peru and the growing gap in quality of life with rapidly developing urban areas highlight the importance of investing in basic rural infrastructure, such as electricity, as part of the national development agenda.
The Rural Electrification Project is helping the government increase access of the rural poor to electricity with assistance from the Global Environmental Facility (GEF). When the IBRD and GEF -assisted Rural Electrification Project began in mid-2006, more than six million people in the predominantly poor rural areas of Peru did not have access to electricity. At 30 percent coverage, this was one of the lowest rural electrification rates in Latin America.
Approach
In late 2007, the local team implementing the project was fully integrated into Peru’s Ministry of Energy and Mines. Full integration of project management into the regular operations of the Ministry has facilitated decision-making, sustainability and impact and is an indication that the Ministry has completely accepted the project’s approach to financing rural electrification.
Sustainability and efficiency of the rural electrification service are assured by the fact that the electricity distribution companies prepare, execute and operate the rural electrification subprojects as part of their regular commercial operations.
For the first time in Peru, the project has supported the introduction of renewable energy into the regulated electricity service of distribution companies. In addition to the Rural Electrification Project, the IBRD (with support from the Energy Sector Management Assistance Program (ESMAP) has assisted the government with a program of activities to support clean energy development, especially in the areas of hydropower and Peru’s potential for natural gas.
Results
Overall, the project will provide new electricity service to 100,250 rural households or almost 460,000 people through extensions of the electricity grid by end 2011. As of December 2009, 105,165 people had received new electricity service through the extension of the grid and sub-projects were under construction to provide an additional 255,940 people with electricity by the end of 2010. Additionally, sub-projects had been bid out to extend electricity service from the grid to 93,825 people. The electricity service is provided on a sustainable basis through the regulated operation of electricity distribution companies that have a record of good operational performance in rural areas.
Solar projects have been prepared to provide electricity to an additional 39,300 people living in isolated rural areas that are too sparsely populated to be served by the national or local grid by the end of 2010. The government estimates that 300,000 isolated rural households cannot be reached by extending the electricity grid and will need to be served by renewable energy.
The project is helping rural families use electricity to increase productivity and incomes, which also raises electricity usage levels and makes its provision more economical. Because most rural households have low levels of electricity, for example, to only power lights and a radio or small TV, these households fail to access income-generating opportunities. In rural areas near Cuzco, non-governmental organizations (NGOs) contracted by the project have helped 1,466 families utilize electrical equipment to process cereals, coffee, cocoa, baked goods, meat products, milk, wood and metal products and handicrafts.
The project has prepared a Google Earth-based wind map and is preparing a GIS-based inventory of small hydropower sites to be provided to potential investors of clean generation projects. IBRD wind and hydro experts assisted by bringing state of the art technical expertise to both tasks.
Toward the Future
The Government has requested an additional loan equal to the original amount of $50 million to continue the application of the IBRD sponsored model of rural electrification that encourages efficiency and sustainability by working through the existing electricity distribution companies, while at the same time encouraging them to provide regulated service through renewable energy technologies such as individual solar home systems. This will be especially important to achieve the goal of providing electricity to the estimated 300,000 households living in isolated areas that cannot be reached by grid extension. At the same time, the efforts to promote productive uses of electricity will be sustained and expanded through the new operation and financing from the government’s Rural Electrification Fund.
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