Washington, DC, April 21st, 2011 – The World Bank Board of Directors approved a US$50 million loan today to continue the implementation of rural electrification in Peru. This new financing for the second “Rural Electrification Improvement Project through the implementation of Competitive Funding of Subprojects” will provide electricity to 140,000 people in approximately 34,000 households.
Among other benefits, access to electricity will avoid the use of kerosene lamps inside homes, which causes respiratory illnesses that primarily affect women and children. Rural electrification will allow rural health centers to provide adequate refrigeration to medicines and vaccines, sterilize medical equipment and use ventilators.
At the same time, electricity increases the time women have to complete home chores, expanding their educational opportunities, their chance to perform economic activities, as well as their ability to participate in community affairs. Additionally, street lighting contributes to public safety.
In that regard, Energy and Mining Minister Pedro Sánchez Gamarra said: “we’re making great efforts toward expanding electrification and reducing the gap between urban and rural areas. We’ve significantly increased public investment in electrification.”
The senior official added that “with this second Project, we continue to seek alternative methods to improve rural electrification, such as the involvement of distribution companies, as well as the use of renewable energy to serve remote locations and the promotion of electricity usage to improve the productivity of micro and small rural enterprises.”
When the first Project began in mid-2006, with World Bank support, more than six million people in mostly-poor rural areas lacked electricity. Rural electrification coverage in Peru was one of the lowest in Latin America. Combined with a lack of other infrastructure, health care and education projects, such shortages limited opportunities for economic development.
That trend has been reversed, however. As a result of a joint effort by the Energy and Mining Ministry (MEM), electricity distribution companies and regional and local governments, it is estimated that the electricity coverage in rural areas increased from 30 percent in 2007 to 55 percent by late 2010.
Through the promotion of productive usages of electricity during the first Project, 40 percent of those in Cuzco who acquired electric equipment to improve their productivity were women. They used electricity to generate income by producing crafts, baked goods and dairy products.
Laura Frigenti, WB Manager for Operations and Strategy for Latin America, said that “the new project represents a great challenge given that it builds upon the achievements of the first Rural Electrification Project, but will be operating under more difficult conditions. It will provide electricity to smaller localities, farther from the grid and with sparser population. This increases the costs of extending the network and will demand a higher use of alternative energy sources such as photovoltaic solar energy systems.”
This new initiative encourages existing electricity distribution companies to provide their services through individual domestic photovoltaic solar energy systems. This supports the goal of supplying electricity to those living in isolated areas.
The new project intends to increase rural electricity coverage by 3 percent, in order to reach a combined total from both projects of a 9 percent increase in coverage.
The project is based upon two main components:
- Investment in rural electrification projects by electricity distribution companies to provide new grid connections using both conventional electricity network connections and photovoltaic solar systems.
- Technical assistance to promote the productive use of electricity and renewable energy, in order to strengthen stakeholder capacity, especially electricity consumers, as well as improving the regulatory framework for rural electrification.
This US$50 million variable spread loan includes an 18-year maturity period and a 17.5-year grace period.