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From Potential to Progress: Assessing Energy Resources in Paraguay

by | Mar 30, 2024

Paraguay has emerged to reveal its strategic position to the world as a country of freedom, democratic conviction, respect for the rule of law, contracts, and free enterprise. Paraguayan leaders recognize that these elements are the foundation of attracting new investors to the South American nation. To further spur the nation’s economic progress, the government is concentrating on developing energy resources in Paraguay.

Energy is vital for development. With low-cost electricity and an ample and reliable supply, internal demand will be covered, and there will also be surpluses of energy resources in Paraguay for export.

Investors will be drawn to energy resources in Paraguay

Add to this the expectation of finding precious pockets of natural gas, whether in “traditional” basins or shale exploitation. The potential for attracting investment in the Paraguayan energy sector is positive in the long term. New infrastructure, storage plants, transportation pipelines, access roads, improvements in communications, and a business boom in real estate and technology services are urgently needed. Energy resources in Paraguay are a great engine of the economy.

Recently, the Paraguayan vice minister and head of the country’s gas, oil, and electricity industry sector, Mauricio Bejarano Martí, expressed his vision for the country as a leader in South American energy resources. Bejerano Martí highlighted some elements that every international investor should take into account when examining energy resources in Paraguay:

  • Currently, the energy generated in Paraguay is 100% renewable (water generation)
  • As relevant information: on Sunday, November 12, 2023, a record of 4,312 MW was recorded in electrical energy consumption.

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Brazil is the largest consumer of exported Paraguayan energy

In light of the above-noted information, the primary market for any surplus electricity generated by Paraguay could be, without detracting from the domestic market, Brazil (the largest market in Mercosur, bordering Paraguay). Brazil broke two records in the solar energy sector in September 2022. It surpassed 19 gigawatts (GW) of installed power from solar photovoltaic sources and reached the historical mark of 13 GW of installed power. (Source: Brazilian Photovoltaic Solar Energy Association Absolar et al. and also: analysis of the association and the National Confederation of Industry (CNI)). The data from these sources indicates that installed capacity could double in the future.

As an example, in electricity generation via solar, the demand is practically new since Paraguay has, as has already been indicated, water as its primary source of electricity generation (two binational hydroelectric plants). To further expand energy resources in Paraguay, the country is ready to embark on new initiatives related to solar energy. For this, legislation has been enacted that would stimulate the solar industry. The “maquila” legislation, for example, is a regime of investment incentives to export goods or services based on a contract with a foreign company; that is, it contracts the services of a company established in Paraguay to produce under this regime. This could be applied to measures aimed at expanding the export of Paraguayan energy production.

Additionally, there is a developing interest in investment in Paraguay’s oil and gas energy resources. This is even though gas is seen as a transition source between fossils and renewables. The reality is, however, that natural gas will always be a source of energy of global importance. This being considered, Paraguay has significant gas reserves, and only private investment is needed for their exploitation. Investors must take advantage of the new state stimulus for the sector to explore new territorial blocks.

Investments in photovoltaic and wind energy

The work for the future of energy resources in Paraguay is to diversify into solar photovoltaics and wind and significantly boost the E&E (exploration and exploitation) of oil & gas.

In the context of the aforementioned, Bejarano Martí has indicated that 2024 will be the first tender for solar photovoltaic generation (the Paraguayan government is developing a regulatory framework and a bidding document). Its initial objective is to fund the first important photovoltaic solar plant in Paraguay, 100 MW in Central Chaco (north of the country), to inject energy into the national power grid. This project aims to ensure that the country’s citizens have access to quality electrical energy. Additionally, there are plans for a floating solar plant project to be located in the reservoir between Paraguay and Brazil (Itaipú), which would add to energy resources in Paraguay.

Since January 6, 2023, Paraguay has had Law No. 6977/2023 in effect, “which regulates the promotion, generation, production, development, and use of electrical energy from non-conventional, non-hydraulic renewable energy sources.” The law declares that the generation of electricity via renewables may be carried out by natural or legal persons domiciled in the country and established following the legislation (SA-type companies established in Paraguay).

In conclusion, Paraguay stands poised at the threshold of significant progress in its energy sector, driven by a vision of sustainable development and economic prosperity. With a firm commitment to renewable energy, particularly hydropower supplemented by emerging solar initiatives, the nation showcases its dedication to environmental stewardship and technological advancement. As it prepares to embark on new ventures in solar photovoltaics and explores the potential of its oil and gas reserves, Paraguay beckons investors with a regulatory framework designed to foster growth and innovation. With laws in place to promote non-conventional renewable energy resources in Paraguay and ambitious projects on the horizon, the South American nation emerges as a place of opportunity in energy resources, poised to shape its future while contributing to regional energy security and sustainability.

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