Paraguay (2012)

Degree of reliance on imported energy: 

<p>
Paraguay depends on imports to meet the demand for petroleum and petroleum products.&nbsp; In 2009, fuel imports represented 14.5% of total merchandise imports.</p>
<p>
The development of Itaip&uacute; and Yacyret&aacute; has turned Paraguay into the world&rsquo;s third largest electricity exporter, having exported 3,882 ktoe of electricity in 2007. Simply, the country produces far more electricity than it consumes, generating massive energy surpluses for export. Royalty payments from the two binational hydroelectric plants are a major source of state revenue. Income from these plants reached US$615 million in 2007 (US$420 million from Itaip&uacute; and US$195m from Yacyret&aacute;) equivalent to 18% of registered exports.</p>

Main sources of Energy: 

<p>
Total installed electricity capacity (2009): 8,766 MW, nearly five times Paraguay&rsquo;s peak demand of&nbsp;&nbsp; 1,810 MW.</p>
<p>
A significant share of its large hydroelectric generation capacity comes from the Parana River, located at its Southeastern border, which provides abundant water for the operation of the Itaip&uacute;, Yacyret&aacute;, and Acaray hydroelectric power plants. Revenues from electricity exports to Brazil and Argentina represent about 23% of total Government revenues and 4% of GDP.</p>
<p>
The country generates nearly all its electricity from three hydropower plants: Itaip&uacute;&nbsp; (14,000 MW), a binational dam that it jointly owns and operates with Brazil and supplies 94% of the country&rsquo;s electricity demand, its own plant Acaray (250 MW) and Yacyret&aacute; , a binational project with Argentina with an installed capacity of 3,100 MW and still under further extension.</p>
<p>
Despite the abundance of hydroelectric resources, electricity accounts for only 14% of the end consumption of energy in Paraguay, while biomass (firewood and charcoal) accounts for 52% and hydrocarbons for 34% (2009).</p>
<p>
Total primary energy supply (2009): 8222,5&nbsp; kTEP</p>
<ul>
<li>
Hydropower: 68%</li>
<li>
Wood and other biomasses: 25%</li>
<li>
Plant residues: 7%</li>
</ul>
<p>
The fuels derived from biomass resources (like wood and plant residues) and hydropower are the primary sources of energy within the supply matrix of primary energy. It is important to highlight that the production of biomass and hydropower is 100% national, thus there is no import of any kind.</p>

Country: 

Paraguay

Extent of the network: 

<p>
In 2009, about 98% of the population had access to electricity, whereas in 2003 the corresponding figure was only 90%. The National Interconnected System (NIS) of ANDE covers virtually all the national territory. There are also other private regional networks that are connected to the energy power network of ANDE. However, it becomes difficult to cover the electricity supply in certain isolated regions in the country due to technological and economic reasons, where it is being studied the installation and in some cases being implemented other renewable energy alternatives for electricity generation.</p>
<p>
Two 500 kV lines connect Paraguay with Brazil and Argentina. Metropolitan distribution grids in the country are mainly 220 kV, with 66 kV feeders from this.</p>

Capacity concerns: 

<p>
Paraguay has abundant hydroelectric resources, being one of the world&#39;s largest generators of electricity per capita and a major exporter. However, significant transmission and distribution losses are impeding the development of productive activities in rural and urban areas and suggest the need for greater investment.</p>
<p>
In Paraguay, there is a high dependence on imported petroleum fuels considering that Paraguay lacks a hydrocarbon production sector and the only refinery is currently inactive. These factors have been of great consideration at the national level due to the effects that this entails in terms of energy security and sovereignty and due to the macroeconomic impacts on the country&#39;s balance of payments.<br />
&nbsp;</p>

Potential for Renewable Energy: 

<p>
The energy consumption matrix in Paraguay is characterized by having a greater proportion of RES than non renewable. In fact, 66% of the total energy comes from renewable energies; situation which differentiates this country from others.</p>
<p>
<b>Solar energy</b><br />
With an average global horizontal irradiance of 5.0-5.5 kWh/m2/d, Paraguay has good potential for solar energy uptake. CEDESOL, a non-profit organisation involved in many Andean nations, has installed solar water heaters and cookers in several rural villages in the country. EURO-SOLAR is currently installing distributed solar power generation systems to rural communities in the country.</p>
<p>
<b>Wind energy</b><br />
Most regions in Paraguay have an average wind speed above 5.9 m/s, making Paraguay an ideal country for wind power uptake. No wind power projects are currently planned for the nation.</p>
<p>
<b>Geothermal energy</b><br />
Despite considerable geothermal potential in neighbouring countries, Paraguay has few geothermal resources, and no projects using the technology are currently planned.</p>
<p>
<b>Hydropower</b><br />
With an estimated reserve of 56,000MW, Paraguay has one of the highest hydroelectric power potentials per capita in the world. In a typical year the country generates approximately 51.3 billion kWh of electricity and consumes just 3.5 billion kWh. On the Parana River, Brazil and Paraguay have built the Itaipu Dam, the 2nd largest hydropower facility in the world. The installed capacity of the facility is 14 GW. Hydro energy (71.9%) represents by far the most important RE source to the extent that Paraguay can export 30% of hydro energy.&nbsp;</p>
<p>
<b>Biomass Energy/Biofuels</b><br />
Biomass accounts for approximately 10% of the current renewable energy capacity of the country. Paraguay&rsquo;s ethanol production capacity is over 200 million litres annually. Projections indicate that by 2014, the country could produce 300 million litres of ethanol, consume 250 million litres and export the balance, saving fewer dollars in importing petroleum and even generating more exports.&nbsp; Six alcohol plants are in operation, encouraged by legislation in 2005 requiring a minimum bioethanol blend for 85 octane petrol (24%) and for 95 octane petrol (18%). Although about one-third of sugar cane production is destined for alcohol production, it is not enough to meet demand. In response, in 2008 the Government introduced a required minimum 1% biodiesel content in domestic vehicle fuel, rising to an eventual 20% maximum.&nbsp; Currently, there are eight small biodiesel plants operating but, as with bioethanol, total production is not enough to comply with the initial 1% target.</p>

Potential for Energy Efficiency: 

<p>
The most feasible application of RETs in the field of thermal energy in Paraguay should be aimed mainly at improving energy efficiency and sustainable management of forest resources. The use of firewood and charcoal as fuel for thermal energy (industrial and residential use) can significantly improve in efficiency, especially in the rural residential area.</p>
<p>
Since the consumption of firewood mostly coincides with rural families, who typically have low-income and who mostly also extract firewood for cooking and heating from their surroundings without any apparent cost, it is difficult to incentivize this sector of the population to use other energy sources such as electricity or LPG. Therefore it is not to be expected that this will change, especially in rural areas.<br />
&nbsp;</p>

Ownership: 

<p>
<b>Electricity market</b><br />
The current legal framework, Law 966 that created the state utility <i><b>Administraci&oacute;n Nacional de Electricidad </b></i>(<i><b>ANDE</b></i>, <a href="http://www.ande.gov.py">www.ande.gov.py</a>) in 1964, does not entertain the possibility of private sector participation.&nbsp; Paraguay&#39;s state-owned utility, controls the country&rsquo;s entire electricity market.&nbsp; Attempts to privatize ANDE in the past have failed, as the Government reportedly faced stiff resistance from Government employees.</p>
<p>
Paraguay is co-owner of two large hydroelectric power stations, Itaip&uacute; Binational with Brazil and Yacyret&aacute; Binational with Argentina. The Itaip&uacute; power station is the largest producer of electricity in the world, with an installed capacity of 14,000 MW, and supplies 77% of Paraguay&#39;s electricity. The Yacyret&aacute; hydroelectric power station has an installed capacity of 3,200 MW. ANDE owns 50% of the equity capital of the binational entities that operate the two power stations.&nbsp; In addition, there are two private entities that distribute energy in limited markets within Paraguay. Compa&ntilde;&iacute;a de Luz and Fuerza S.A. (CLYFSA) buys energy in bulk from ANDE and distributes it in the Villarrica area (east of Asunci&oacute;n), applying tariffs fixed by ANDE. For its part, the Association of Mennonite Colonies (in central Chaco) operates its own thermal generators and distributes ANDE energy in the associated colonies.</p>
<p>
<b>Petroleum market</b><br />
State-owned <i><b>Petroleos Paraguayos</b></i> (<i><b>PETROPAR</b></i>, <a href="http://www.petropar.gov.py">www.petropar.gov.py</a>) has a monopoly on all crude oil and petroleum product sales and imports in Paraguay. It operates Paraguay&#39;s sole refinery, the 7,500-bbl/d Villa Elisa facility.</p>

Structure / extent of competition: 

<p>
Law 3009, passed in 2006, allows generation from independent producers, but only for export.</p>
<p>
ANDE is a single, vertically integrated public monopoly that controls the country&rsquo;s entire electricity market, including generation, transmission and distribution. ANDE operates only one hydroelectric dam, Acaray, and six thermal power plants, with total installed capacity of 220 MW. It is also responsible for Paraguay&rsquo;s share of Itaip&uacute; and Yacyret&aacute;, the two bi-national hydroelectric facilities.</p>
<p>
ANDE operates 2,100 miles of transmission lines in the Interconnected National System, divided in 6 subsystems, and 670 miles of distribution lines. It is also responsible for all distribution operations, with two exceptions: CLYFSA (<i>Compa&ntilde;&iacute;a de Luz y Fuerza, S.A.), </i>which has a concession to distribute and commercialize electricity in Villarrica, and the <i>Empresas Distribuidoras Menonitas del Chaco Central</i>.</p>
<p>
PETROPAR is a state-owned, vertically-integrated company, responsible for all sectors of the oil market in the country, including exploration, production, refining and export.</p>

Existence of an energy framework and programmes to promote sustainable energy: 

<p>
The actions related to renewable energies are framed under Objective N&deg; 5 of the Institutional Strategic Plan 2010- 2013. This objective seeks &ldquo;to strengthen the activities related to institutional management in the subsector of renewable sources of energy and power efficiency&rdquo;. In order for this take place, the following needs to be happen:</p>
<ul>
<li>
Elaboration and implementation of a renewable energy development plan, which includes the generation of energy with alternative energy sources for the rural sectors and which promotes the use of biofuels.</li>
<li>
Develop actions for the identification of the potentials of renewable energies in Paraguay (by geographic zones and according to each type of energy source).</li>
<li>
Research for projects that are interesting for international investors who will be willing in investing in renewable energy projects in the country.</li>
<li>
Promote and research on the design of national projects that will be able to enter resources trough Clean Development Mechanism (CDM, Protocol of Kyoto) by the sale of avoided CO2 emissions.</li>
<li>
&nbsp;Design and coordinate the elaboration of activities that are related to the promotion and use of renewable energies within the framework of sustainable development.</li>
</ul>
<p>
In October 2005, the Congress passed <i><b>Law 2748 for Biofuels Promotion</b></i>. Its main objectives are to diversify the supply of RE, diminish the dependence on imported fossil fuel, substitute fossil fuel with renewable fuels, improve environmental quality, develop the farming sector (focused primarily on small producers), and export ethanol and biodiesel. The law sets mandated mixes for gasoline and diesel. Diesel accounts for approximately 70% of the fuel consumption while the rest is gasoline (already mixed with 24% ethanol). In 2008, the Government passed Decree 12240 reducing the VAT on biodiesel and ethanol to 2%.</p>
<p>
The Government&rsquo;s energy strategy aims to develop an efficient electricity sector within the existing institutional framework and to benefit from abundant hydroelectric resources. The limited size of the market, the abundant power available to Paraguay from the <i>Itaip&uacute;</i> and <i>Yacyret&aacute;</i> plants, and the presence of the two bi-national generating entities result in limited scope for independent private generators to invest in Paraguay&rsquo;s electricity sector. The Government is therefore focused on seeking an efficient management of the sector within a public sector framework, and on transforming ANDE into a modern, efficient and financially sustainable public sector enterprise.<br />
&nbsp;</p>

Current energy debates or legislation: 

<p>
There are two draft laws concerning the electricity sector. The draft Law on the Regulatory Framework for Electricity seeks to promote modernization and competition in the sector through the participation of private investment in the generation, transport and distribution of electricity based on a system of concessions. This draft also provides for the establishment of a wholesale electricity market and a new regulatory body for the sector, independent of ANDE. As for the draft Law on Strengthening the Paraguayan Electricity Sector, its objective is to provide ANDE with greater resources, partly derived from the royalties generated by Itaip&uacute; Binational, for investing in the modernization of the transmission and distribution infrastructure. In December 2010, both drafts were before the Chamber of Deputies.</p>

Major energy studies: 

<p>
Brazil and Paraguay signed in 2007 a <b><i>Memorandum of Understanding on Biofuels</i></b>. The main areas of cooperation and work are the evaluation of different feedstock; technological development of industrial processes; analysis of the system of infrastructure and logistics; enhance the integration of production and commercial systems; and investment in the Paraguayan biofuels sector. As a result of this, the <i>Paraguayan Biofuels Annual</i> (<a href="http://gain.fas.usda.gov/Recent%20GAIN%20Publications/BIOFUELS%20ANNUAL_...) is an authority on the technology in the country.</p>
<p>
In 2006, the <b><i>Mercosur</i></b> region set up a <i><b>Special Working Group on Biofuels</b></i>. In late 2007, its four countries -Argentina, Brazil, Paraguay and Uruguay- and Venezuela defined an action plan. The main points were: the evaluation of different feedstocks and production areas; analysis of current regulations; identification of research organizations to encourage joint work; analysis of the infrastructure and distribution of fuels; and identification of tools to promote investment in the biofuels sector. In 2008, member countries signed a Memorandum of Understanding to develop a program of cooperation for biofuel technology. Contacts indicate that developments under the two agreements have moved slowly.</p>

Role of government: 

<p>
Law 167/93 indicates that the <b><i>Vice ministry of Mines and Energy</i></b> (<a href="http://www.ssme.gov.py">www.ssme.gov.py</a>) (under the <i><b>Ministry of Public Works and Communication</b></i> (<b><i>MOPC</i></b>) is the institution responsible for delineating sector policy and strategy (with the exception of tariffs and subsidies), for planning and monitoring, for setting technical regulations and quality of service standards, and also for developing new programs.</p>
<p>
As specified by this Law, the MOPC has the responsibility to, according to Art. 25:</p>
<ul>
<li>
Establish policy and guidance regarding the use and management of mineral resources and energy;</li>
<li>
Study the technical, economic, financial and legal steps needed to promote the industrial exploitation of the resources available in the country; and</li>
<li>
Oversee the proper use of the resources corresponding to their functions.</li>
</ul>
<p>
Within the Vice Ministry, the entity that is in charge of the energy is the Department of Energy. Its specific functions are the following, according to Art. 28:</p>
<ul>
<li>
Study, identify and propose alternative energy technologies, according to current and prospective needs of consumption in the country;</li>
<li>
Consider all aspects of national and international energy development, whether conventional or unconventional, and;</li>
<li>
Propose policies, regulations and applications that are of interest to the national development, and which guarantee the best use of all resources available.<br />
&nbsp;</li>
</ul>

Government agencies in sustainable energy: 

<p>
&nbsp;The <b><i>Environmental Directorate</i></b> (<i>Secretar&iacute;a del Ambiente</i>, SEAM, <a href="http://www.seam.gov.py">www.seam.gov.py</a>) is the institution in charge of environmental issues in Paraguay, focusing on natural resources management and preservation.</p>
<p>
ANDE has an office for undertaking &ldquo;Studies of Alternative Generation&rdquo;, which is in charge of investigating and to promoting the operation of decentralized systems of micro-generation from hydraulic, wind, biogas and others resources. In this manner, to focus in renewable energy projects and cover the demand of electric energy in isolated communities.</p>

Energy planning procedures: 

<p>
<i><b>National Rural Electrification Program for Paraguay</b></i><br />
In 2007, the IDB approved funding to develop a National Rural Electrification Program (NREP, <a href="http://www.iadb.org/projects/Project.cfm?project=PR-T1039&amp;Language=E...), employing grid extension, and renewable energy and natural gas solutions, to support the Government in its effort for increasing access to electricity services in rural areas. This effort is covering technical, economical, financial, institutional, environmental, legal and regulatory issues relevant to the process of increasing the electricity coverage nationwide in a sustainable way.</p>
<p>
<i><b>Support for Paraguay&#39;s Electrical Sector Modernization (2007)</b></i><br />
This IDB project that aims to improve the financial sustainability and efficiency of ANDE, by financing technological exchange and technical studies to elaborate a proposal to update the regulatory and institutional framework of the electricity sector. The project includes:<br />
(i) a proposal to update the corporate structure and the governance rules of ANDE that helps the company to become a modern, efficient and financially sustainable public entity;<br />
(ii) the design of an institutional framework for the electric sector that is adequately formulated and consistent with the public nature of ANDE; and<br />
(iii) a proposal for a tariff regime that includes a universal service scheme for the sectors with less income, to achieve sustainability in the sector.</p>
<p>
<i><b>Energy Sector Strengthening Project (2010- 2015)</b></i><br />
At the end of 2010, The World Bank approved a US$100 million loan to implement the Paraguay Energy Sector Strengthening Project, seeking to increase the quantity and quality of the national electricity supply while improving the performance of the National Electricity Administration (ANDE, in Spanish).</p>
<p>
The project will seek to satisfy Paraguay&rsquo;s growing demand for electricity, directly benefitting households, companies and local industries by improving transmission and distribution networks at the same time it increases the volume of energy available for commercial or productive uses. The project will also contribute to the reduction of service interruptions and associated losses.</p>
<p>
&nbsp;</p>

Energy regulator Date of creation: 

<p>
Paraguay has no regulatory entity for the electricity sector. Public service tariffs including electricity tariffs are set by the National Economic Team, which consists of MOPC, the Ministries of Finance, Agriculture and Livestock, Commerce and Industry, and of the Central Bank.</p>
<p>
The &quot;National Electricity Administration&rdquo; (ANDE) is in charge of administering the electric sector. This entity was created in 1949 by the Decree No. 3161 of the Executive Branch, was organized by Decree Law No. 2340 of 1950, was approved by Law No. 274, 1955 and currently it is regulated by the Law No. 966 of 1964. This Act was amended and supplemented by Law No. 976 of 1982 and No. 2199 of 2003, respectively.<br />
&nbsp;</p>

Degree of independence: 

<p>
ANDE is an autonomous and decentralized public administration body with legal persona and its own equity capital, charged with the responsibility of meeting the electricity needs of the entire country. This body is controlled directly by the Executive Branch through the MOPC.<br />
&nbsp;</p>

Regulatory framework for sustainable energy: 

<p>
The Law No. 3009/06 of independent production and transport of electric power aims to regulate the <i>&quot;activities of related to independent electric power production, including cogeneration or electric self generation.&quot;(Art. 2). </i>This co-generation or independent generation includes all types of &quot;non-conventional&quot; generation, understanding this as <i>&quot;...independent production of electricity from the use of natural gas, wind power, solar energy, biomass utilization, cell fuel, bio diesel or any other form of non-conventional energy production, including mini hydroelectric generation &quot; (Art. 5)</i>. Unfortunately, it has not been released yet the corresponding decree and therefore it has not been officially defined the regulatory and administrative institutions of this activity and neither the respective procedures and processes.</p>
<p>
There is an obligatory mixture of biofuels with fuels derived from petroleum. In this manner, the sector benefits considering that this leads to the non-application of ISC and a lower rate of IVA of 2%. In addition, the investors also benefit from this due to the reductions of tariffs to the imported capital assets (Law 60/90). It is important to mention that the biofuels are not subsidized, causing this energy source to not be economically viable for the production and mixture when there are unfavourable fluctuations of the market, creating several disadvantages to the continuity of the industries, mainly to the biodiesel sector.</p>
<p>
The Law 2748 for Biofuels Promotion (2005) includes objectives to diversify the supply of renewable energy, diminish the dependence on imported fossil fuel, substitute fossil fuels with renewable fuels, improve environmental quality, develop the farming sector (focusing primarily on small producers), and to export ethanol and biodiesel. The law does not specify the type of feedstock to be used, opening the sector for various projects.</p>
<p>
In the year 2006, the Decree No. 7412 regulated the law of biofuels and established the technical specifications, which the biodiesel must comply with mandatorily. It also mentions that the Vice Minister of Commerce, a body of the MIC, will be the one who will authorize and approve physical or legal entities that are dedicated to the production and sale of biofuels.</p>
<p>
The Law No. 2748/05 also establishes that biofuels producers can enjoy from benefits regulated by Law N&ordm; 60/90 and 2421/04. It further states the obligation to mix biofuels with conventional liquid fuels in percentages will be established by the Ministry of Industry and Trade (MIC), taking into account the actual production in the country. It should be noted that the mixtures of ethanol and biodiesel in petroleum fuels are set by Decree of the Executive Branch of Government, through the Ministry of Industry and Commerce. The sector is also regulated by other legislations from the environmental field (SEAM), those regulatory in nature (INTN), among others.<br />
&nbsp;</p>

Regulatory roles: 

<p>
ANDE elaborates the tariff structure, which is then analysed and approved by the Economic Council of the Executive Power. The Council usually sets lower tariffs to the ones proposed by ANDE, which leads to a lack of resources for the necessary investment for adequate performance of the electricity system.</p>

Role of government department in energy regulation: 

<p>
ANDE is a state-owned utility. No other Government department takes an active role in energy regulation.<br />
&nbsp;</p>

Regulatory barriers: 

<p>
In Paraguay there are several barriers that do not allow the full development of renewable energies; in this manner, thus wasting the vast range of natural resources that exist in the country. First, in Paraguay there is low competitiveness of non-conventional energy sources for electricity generation and second, there is a lack of definition, quantification and investigation of the subject matter of biomass and biofuels. These reasons are some of the several that explain why there is a lack of financing mechanisms for developing re projects in the country.</p>
<p>
In the sector of electricity generation, in spite of the existence of the Law 3009/06 that promotes the production and generation of electric energy in a decentralized manner, there is still one of the most important barriers within this sector. The low cost of hydroelectricity which is comes from the two greatest bi-national hydroelectric power plants (Itaip&uacute; and Yaycret&aacute; dams) makes the other options for generating electricity from non-conventional energy sources non-competitive in the market. Therefore, alternative energy sources for electricity generation only have a high potential for developing in the areas where there is no electricity coverage by SIN, which are usually very isolated rural communities.<br />
&nbsp;</p>

References: 

World Bank (2010): Project appraisal document for the energy sector strengthening project &ndash; Paraguay. Available at: <a href="http://documents.worldbank.org/curated/en/2010/10/12985872/paraguay-ener... [Accessed 28 July 2013]<br />
<br />
OLADE (2011): Observatory of RE in LAC - Paraguay Final Report. Available at <a href="http://www.renenergyobservatory.org">http://www.renenergyobservatory.org... [Accessed 28 July 2013]<br />
<br />
WTO (2010): Paraguay &ndash; trade policies by sector. Available at <a href="http://www.wto.org/english/tratop_e/tpr_e/tp345_e.htm">http://www.wto.or... 28 July 2013]<br />
<br />
OLADE (2011): Observatory of RE in LAC - Paraguay Final Report &ndash; Product 1: Renewable Technological Base Line. Available at <a href="http://www.renenergyobservatory.org">http://www.renenergyobservatory.org... 28 July 2013]<br />
<br />
Paraguay/World Bank Project: US$100 Million to Improve Energy Supply: <a href="http://go.worldbank.org/S9SEONGBE0">http://go.worldbank.org/S9SEONGBE0</a> [Accessed 28 July 2013]<br />
<br />
Administracion Nacional de Electricidad:&nbsp;<a href="http://www.ande.gov.py/">http://www.ande.gov.py/</a>&nbsp;[Accessed 29 July 2013]<br />
<br />
South American Direct Normal Solar Radiation Map: <a href="http://www.temasactuales.com/temasblog/wp-content/Images/SamDirRadMap.jp... 29 July 2013]<br />