At a crossroads: Peru’s hydropower in an era of diversification

For decades, hydropower has been the backbone of Peru’s electricity system. Fed by the Andean cordillera’s vast river networks, large hydro projects have delivered reliable, low-carbon baseload power to mining hubs, cities and rural communities alike. Yet as Peru accelerates its energy transition, hydropower is entering a more complex phase, one defined not by expansion alone, but by adaptation, modernisation, and coexistence with fast-growing non-hydro renewables.

According to Peru Power Outlook, Update 2025, a report by Power Technology‘s parent company, GlobalData, large hydropower accounted for nearly 30% of installed capacity and 47% of electricity generation in 2024, underscoring its continued centrality to the national grid. However, the same analysis points to a gradual decline in hydro’s share of the power mix over the next decade, even as absolute capacity grows.

A mature fleet facing new pressures

Peru’s hydropower sector is characterised by a mature asset base. Flagship plants such as Santiago Antúnez de Mayolo (798MW), Cerro del Águila (510MW) and Chaglla (456MW) have long anchored system reliability, while older facilities like Cañón del Pato and Huinco continue to operate after more than half a century of service.

GlobalData estimates that large hydropower capacity will increase modestly from 4.9GW in 2024 to around 6.2GW by 2035, driven by projects already under construction or advanced development. Yet despite these additions, annual generation from large hydro is projected to decline slightly to 27.1 terawatt-hours by 2035, reflecting growing hydrological stress and competition from other technologies.

Climate variability is a key factor. Prolonged droughts and recurring El Niño events have reduced reservoir levels in recent years, forcing greater reliance on gas and even diesel generation during dry periods. As the report notes, Peru’s high dependence on hydropower exposes the system to hydrological volatility, making diversification not just a policy choice but a resilience imperative.

Investment continues but with a shift in purpose

Hydropower remains a significant destination for capital. Between 2025 and 2030, GlobalData forecasts that 27.7% of total power sector investment, roughly $2bn, will flow into hydro projects, second only to solar PV. Much of this investment, however, is increasingly focused on strategic capacity rather than blanket expansion.

Large projects such as Chadín 2 (600MW), Majes Siguas II (444MW) and Huallaga I (392MW) are progressing, while the long-discussed Manseriche project (7.55GW) remains announced but politically and socially sensitive. Smaller and mid-sized hydro projects, often linked to irrigation or regional development, are also moving forward, particularly in the Andes and Amazon foothills.

Importantly, new hydro investments are now framed within a broader system role. Rather than serving as the sole pillar of renewable generation, hydropower is increasingly valued for its flexibility, storage capability, and ability to balance intermittent solar and wind resources.

From dominance to system balancer

One of the clearest signals in the GlobalData outlook is that Peru’s future renewable growth will be led by non-hydro technologies. Renewable capacity excluding large hydro is expected to surge from 2.3GW in 2024 to nearly 13GW by 2035, with solar and wind dominating additions. By the early 2030s, renewables as a whole are projected to overtake thermal generation in the electricity mix.

In this context, hydropower’s role is evolving from dominant energy provider to system stabiliser. Reservoir-based plants, particularly those with operational flexibility, are becoming increasingly valuable for frequency control, peak shaving and integration of variable renewables. The development of battery storage at sites such as San Gabán further illustrates how hydro assets are being paired with new technologies to enhance grid resilience.

No exit but no expansion mandate

Policy frameworks reflect this nuanced position. Peru has not set explicit new capacity targets for large hydropower, focusing instead on maintaining reliability, upgrading existing assets, and minimising social and environmental conflict. Recent reforms to the Electricity Generation Law, which opened supply tenders to all technologies on equal terms, mean that hydro must now compete directly with solar, wind and gas on cost and performance.

At the same time, national energy plans continue to recognise hydropower as a strategic resource, particularly for energy security and rural electrification. Small hydro, in particular, retains relevance in mountainous regions where grid access remains limited.

Looking ahead

Peru’s hydropower sector is not in decline, but it is undeniably in transition. As the country pursues its goal of a 40% reduction in emissions by 2030 and net zero by 2050, dams will remain essential, not as the sole answer but as part of a more complex and diversified system.

The coming decade will test how effectively Peru can modernise its hydropower fleet, manage climate risks and redefine hydro’s value beyond megawatt-hours. If successful, the country could offer a compelling model for mature hydro markets worldwide: one where legacy assets are repurposed to anchor a cleaner, more flexible energy future rather than compete against it.

Source: GlobalData, Peru Power Outlook, Update 2025

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