Electricity sector in Paraguay

Paraguay is the only country in Latin America with almost 100 percent hydroelectric generation capacity (8,116 MW) in 2005.[2]

Paraguay operates two binational hydroelectric dams. Itaipu dam, by far the largest power station in the country, is operated with Brazil and has an installed capacity of 7000 MW (86 percent of Paraguay's generation capacity). Yacyretá, the second largest hydroelectric facility, has an installed capacity of 900 MW (11 percent), and is operated with Argentina. A third plant, Acaray has an installed capacity of 210 MW (3 percent). Thermal plants contribute less than 0.1 percent.[3]

All of Paraguay's electricity for domestic consumption comes from a single facility, the binational 14 GW Itaipu hydroelectric dam.[1]

Source: ESMAP, 2006. Installed capacity shown for Itaipu and Yacyretá refers only to the Parguayan share in these plants.

While total generation amounted to 51.17 TWh in 2005, consumption was only 5.01 TWh, with exports as high as 43.8 TWh.[4]

In 2005, total electricity consumed in Paraguay was 5.01 TWh, which corresponds to 849 kWh per capita.[4] Electricity generated by Itaipu and Acaray, located in the East of the country, is transported to the West (to the Asunción area), where over 60% of the total national consumption is located.[3]

Electricity consumption by consumer group is divided as follows:[3]

• Residential: 41%
• Commercial: 18.3%
• Industrial: 26%
• Others: 14.2%

In 2004, the country consumed only 16% of its 50% share of Itaipu's production, exporting the rest to Brazil. As for Yacyreta, Paraguay consumes less than 1% of its share, exporting the rest to Argentina.[1]

The electricity interconnections that allow power exchanges with Brazil and Argentina are:

Source: ESMAP, 2006

In 2005, the average number of interruptions per subscriber was 16.4, while duration of interruptions per subscriber was 7.58 hours. While the number of interruptions is just slightly above than the weighted average for LAC, 13 interruptions, the duration is well below the weighted average of 14 hours.[5]

Despite consuming less than 6 TWh per year and exporting close to 45 TWh per year, Paraguay faces blackouts as well as a serious risk of suffering an energy crisis. This is the result of the limitations of both the transmission and distribution systems. The ceiling of the system is placed by ANDE's at 1,700 MW, with demand above 1,500 MW in 2008.[7] Transmission capacity is urgently needed to avoid a supply crisis [7] in a system in which quality and an adequate technical service is practically nonexistent.[3]

Different authors believe that the price received for the electricity sold to Brazil (from Paraguay's share in Itaipu) and also to Argentina to some extent (from its share in Yacyreta) is currently too low. The “fair price” established by the Itaipu Treaty was conceived on the basis of a “compensation for concession of energy” and not on the basis of a commercial exchange. This price has remained very low (about US$2.81 per MWh). It is argued that, if this price was more in line with actual electricity prices in the Brazilian market, Paraguay would have enough resources to strengthen its electricity transmission capacity.[7]

In 2005, distribution losses in Paraguay were has high as 31%, well above the 13.5% weighted average for LAC[5] and up from about 22% in 2001 [8]

System losses have become a serious problem in the last few years, having followed a continuous upward trend. The highest percentage of losses occurs in the National Interconnected System (SIN), while the remaining corresponds to the bi-national enterprises. In the SIN, distribution losses represented 23% of the total in 2003, while transmission losses, according to ANDE, were 7.3%. ANDE has established a 23% target for electricity losses for the year 2010.[3]

Law 167/93 indicates that the Vice ministry of Mines and Energy (under the Ministry of Public Works and Communication) is responsible for establishing and guiding energy policy, as well as for the study of the technical, economic, financial and legal aspects that promote energy use. However, the Vice ministry does not have the adequate resources to effectively perform its functions.[7]

In practice, all the energy responsibilities are concentrated in ANDE, which is the de facto electricity regulator and provider. ANDE also elaborates the tariff structure, which is then analyzed 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.[3]

ANDE controls the country'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's share of Itaipú and Yacyretá, the two bi-national hydroelectric facilities (See bi-national facilities above).

ANDE operates 3,400 kilometres (2,100 mi) of transmission lines in the Interconnected National System, divided in 6 subsystems, and 1,080 kilometres (670 mi) of distribution lines.[1] It is also responsible for all of the distribution, with two exceptions: CLYFSA (Compañía de Luz y Fuerza, S.A.), which has a concession to distribute and commercialize electricity in Villarrica, and the Empresas Distribuidoras Menonitas del Chaco Central.[3]

In April 1973, the governments of Paraguay and Brazil signed the Itaipu Treaty, by which it was decided to create a binational entity to hydroelectric use of the Paraná River. This entity was constituted by ANDE (Paraguay) and ELECTROBRAS (Brazil). US$100 million were contributed in equal parts by both companies.[3]

View of the Yacyretá dam from up-river

In December 1973, the governments of Argentina and Paraguay signed the Yacyreta Treaty, by which ANDE and Agua y Energía constituted the Binational Entity, whose aim is the hydroelectric use of the Paraná river. US$100 million was contributed in equal parts by each company.[3]

In 1971, Paraguay and Argentina created the River Parana Joint Commission (Comisión Mixta del Río Paraná, COMIP), which started to carry out different studies (pre-feasibility, environmental, etc.) for the Corpus project, to be located upstream of the Paraná river, close to the towns of Corpus (in the Argentina Misiones Province and Puerto Bella Vista in Paraguay.[9] In the mid-1980s, Argentina, Paraguay and Brazil signed a tripartite agreement that established the operating height of the project, which would allow to bring into line the operation of Corpus with those of Yacyreta and Itaipu.[10]

The different alternatives for this project are still under study. As a large hydroelectric project, with installed capacity of about 3,000 MW and annual generation of about 19,000 GWh,[11] Corpus is a controversial project that is opposed both at the regional and social levels. In April 1996, in a plebiscite in the Misiones Province, the construction of the dam was opposed by almost 89% of the voters.[9]

In 2006, the average national tariff in Paraguay was US$0.080 per kWh [8] Tariffs for the different consumer groups were:[8]

• Residential: US$0.091/kWh (weighted average for LAC in 2005: 0.105[5]
• Commercial: US$0.090/kWh
• Industrial: US$0.056/kWh (weighted average for LAC in 2005: 0.1075[5])
• General: US$0.075/kWh
• Others: US$0.094/kWh

In November 2004, the Paraguayan Government approved Law 2,501, which broadened the electricity social tariff applied by ANDE. The social tariff is applied to residential users below 150kWh of monthly consumption. Currently, about 37% of total customers benefit from this tariff. ANDE estimates that this share will gradually increase to 56% of the total.[3]

The Environmental Directorate (Secretaría del Ambiente, SEAM) is the institution in charge of environmental issues in Paraguay, focusing on natural resources management and preservation.[12]

Paraguay emitted 3.85 million tons of CO₂ in 2005, which corresponds to just 0.61 tCO₂ per capita annually, the lowest rate in the LAC region after Haiti's.[13]

Currently (August 2008), there are no registered CDM projects in any sector in Paraguay.[14] The low emission factor of a fully hydroelectric system is most likely the reason for the absence of this type of projects in the electricity sector.

Currently, the Inter-American Development Bank (IDB) is contributing funds and assistance to one project in the electricity sector in Paraguay:

• Phase I of a Multi-Phase Power Transmission Program supported through a US$69.5 million credit. The objective of this project, which was approved in December 2006 but has not disbursed any funds as of August 2008, is to strengthen transmission networks in already served areas as well as to extend them to areas still not being served.

The IDB is also providing technical assistance under two activities:

• Support for Paraguay's Electrical Sector Modernization. The objective of this support is to "execute studies that will formulate the fundamental and integrated actions, to increase the total loss management capacity of the ANDE in these categories: i) management of loss, ii) prospection of losses, iii) regularization of systems and facilities, iv) collection of the recovered revenue, and v) loss prevention."
• Development of a National Rural Electrification Program that will explore grid extension, renewable energy and natural gas solutions.