The Republic of Paraguay is located in central South America and bordered by Argentina, Bolivia and Brazil. The country has a landlocked area of 406 752 square kilometres, divided into two natural regions
by the Paraguay River. The eastern zone contains 90% of the population, while the western zone, known
as the Paraguayan Chaco, represents 60% of the territorial surface. The eastern region is dominated by
the Amambay, Mbaracayú and Caaguazú mountain ranges. The Paraguay River is the main fluvial system, navigable by deep-sea vessels from Paraná to Asunción and by medium-sized fleets from Asunción to Corumbá (Brazil). The next largest river is the Paraná River, which extends for 679 kilometres bordering the east-south limits of Paraguay. Paraguay’s population, estimated at 7.3 million, is growing at an average annual rate of 1.5%, exceeding the 1% average annual growth rate for Latin America and the Caribbean overall (Figure 1). Of this population, 62.5% is located in urban areas and 37.5% in rural areas (DGEEC, 2015). The most populated cities are Asunción and Ciudad del Este in Alto Paraná. In 2018, the Human Development Index value for Paraguay was 0.72, below the regional average of 0.76 for Latin America and the Caribbean, ranking Paraguay in 98th place out of 198 countries worldwide.
By the end of 2019, 99.95% of the population had access to electricity, and 69% used modern energy sources – such as liquefied petroleum gas (LPG) or electricity – for cooking purposes (ANDE, 2019a). Between 2015 and 2016, the country’s energy intensity (energy consumption per unit of gross domestic product, (GDP) decreased by 1.85%, from 10 267 kilojoules per USD to 10 080 kilojoules per USD (DGEEC, 2015).
Energy sector overview
The energy supply in Paraguay is dominated mainly by hydrologic and biomass resources, which
represented 41.0% and 36.8%, respectively, of energy use in 2019. Between 2010 and 2019, energy supply grew at an average annual rate of 1.3%, to reach a total of 457.4 petajoules (PJ) in 2019 (Figure 3). There are no recorded imports of crude oil since the closing of the operations of the Petróleos Paraguayos refinery (PETROPAR) in 2005. Paraguay depends heavily on imports of oil derivatives, mostly petrol and diesel, which account for nearly 90% of liquid fuel imports. The import of oil derivatives has increased rapidly in recent years, growing 5.1% annually on average during the period 2010-2019, driven primarily by the increase in the country’s vehicle fleet.
Paraguay is home to around 14 bioethanol plants, which are distributed among 12 alcohol producers
authorised by the Ministry of Industry and Trade (MIC). In 2018, the national bioethanol production capacity reached 550 million litres. The current production, 55% from corn and 45% from sugar cane, doubled the cultivated area of these raw materials during the period 2008-2018 (FAO, 2018). Table 2 shows the six companies with the highest installed bioethanol production capacity, led by Paraguayan Alcohols Industry S.A. (INPASA) and PETROPAR. Biodiesel production capacity has grown steadily, achieving total production of 376 million litres in 2019, up from 138 million litres in 2010 (SIEN, 2019). By 2014, around nine companies had a combined annual capacity of 45 million litres (MIC, 2018). Since 2019, ECB Paraguay S.A. (part of the ECB Group) has been planning to build a second-generation plant with an installed capacity of 3 million litres per day for the production of biodiesel and biokerosene, equivalent to one-third of the conventional diesel currently consumed in the country (MIC, 2019).
Between 2010 and 2019, total final energy consumption (TFEC) increased by 48.8%, from 180.4 PJ to
268.5 PJ. The transport sector accounted for the largest share, followed by the residential, commercial,
industrial and public sectors (VMME, 2012, 2020a), as shown in Figure 4. Between 2010 and 2019, the consumption of biomass increased in the residential and commercial sectors by 20.7% and in the industrial sector by 23.7%. In 2019, biomass supplied 41.3% of the TFEC, mainly from firewood (69.8%) and charcoal (8.1%). Firewood was mainly used for cooking purposes, which has traditionally been based on the use of inefficient stoves. In the same period, the use of electricity increased by 91%, and transport increased its consumption of derivatives (diesel and petrol) by 68.6%. The consumption of LPG at the residential level increased by 7.2% and displaced part of the consumption of firewood for cooking (DGEEC, 2016).
The Itaipú and Yacyretá hydropower plants represent the largest installed generation capacity in the country and are integrated with the electricity systems of Brazil and Argentina. The Acaray hydropower plant is the third largest, followed by small thermal plants using diesel, bagasse and biogas that are mostly managed by the National Electricity Administration (ANDE). Table 4 shows the installed generation capacity by type in 2020; the capacity shares have remained similar for the past decade, with small variations in the installed capacity from bioenergy.
Several factors have contributed to the increase in domestic electricity consumption, including GDP growth, which averaged 3.87% during the 2001-2018 period (World Bank, 2020b); the low cost of electricity; and growing energy intensity in the industrial sector (where average consumption per user grew from 7.7 kilowatt hours (kWh) per month to 90 kWh per month) and in the residential sector (where average consumption per user grew from 231 kWh per month to 363 kWh per month) (ANDE, 2018a).
Transmission and distribution network
In 2019, the National Interconnected System (SIN) comprised 6 682 kilometres of transmission networks. Of the total, 10.6% corresponded to 500 kilovolt (kV) lines, 69.1% to 220 kV networks, and the remaining 20.3% to 66 kV lines. The installed power in transformers reached 15 585 megawatts (MW) distributed in 94 sub-stations. The electricity distribution networks comprised 68 331 kilometres of medium-voltage lines and 85 913 transformers with an installed power of 6 561 MW (see Figure 10) (ANDE, 2019a).
The operational capacity of the transmission system needs to be improved to ensure the quality of the electricity supply. In hours of high demand for the Metropolitan System, the 500 kV transmission lines and the 500 kV to 220 kV transformation sub-station operate at near-maximum capacity, leading to increasing technical losses and risks due to unscheduled interruptions (IDB, 2020b). Paraguay is among the countries with the highest electricity losses in Latin America. In 2019, the electricity losses represented 25.8% of the internal supply of electricity, equivalent to 4 470 GWh; of this, 5.2% was transmission losses and 20.6% was distribution losses (ANDE, 2019a).
Energy and climate action
In 2015, Paraguay’s carbon dioxide emissions totalled 45 841 gigagrams (Gg), around 1% of global emissions. This was up from 40 023 Gg in 2000, representing an average annual increase of 0.97% during the period. On average, the energy sector accounted for 10.3% of national CO2 emissions in the period 2000-2015 (UNFCCC, 2018). Between 2010 and 2018, CO2 emissions from the energy sector (fossil fuels) and biofuels increased from 8 753 Gg to 13 996 Gg, a rise of 59.9%. The consumption of fossil fuels averaged 52% of the total, and biomass5 averaged 41% (as a result of the degradation of native forests). Figure 13 groups the emissions from the energy sector and biofuels.
Renewable Energy Development
Renewable energy development in Paraguay focuses on the use of hydrologic resources and biomass.
Other renewable energy sources were not included in the country’s energy balance as of 2019, although
small-scale wind and solar projects do exist in isolated areas. Energy crops7 such as corn, sugar cane and soybeans have maintained sustained growth driven by the demand for liquid biofuels (bioethanol and biodiesel). The country seeks to take advantage of the potential to produce biogas and green hydrogen by implementing the actions defined in the Energy Policy 2016-2040 and the Sustainable Energy Agenda 2019-2023.
Challenges and Recommendations
This section presents the main recommendations for accelerating the deployment of renewable energy in
Paraguay, based on the challenges identified during the Renewable Readiness Assessment (RRA) process. The consultative process included a review of the literature, insights from interviews, and outcomes from focus groups and multi-stakeholder roundtable discussions held during workshops, along with subsequent exchanges with selected stakeholders. This section groups the recommendations in six areas and identifies the main challenges for each. Within the six groupings are a total of 15 short- to mid-term actions for an accelerated deployment of renewable energy in Paraguay.