Paraguay stands at a crossroads, its energy sector facing a stark choice between continued prosperity and potential crisis. The country, long a powerhouse in clean energy exports, must now confront a looming supply crisis as domestic demand surges and infrastructure ages. Experts warn that without urgent investment, Paraguay could shift from energy exporter to a nation grappling with blackouts.
The heart of the issue lies in Paraguay’s heavy reliance on three major hydroelectric dams, including the colossal Itaipú and Yacyretá, which have underpinned the country’s energy security for decades. However, domestic consumption is rising at a pace that outstrips these sources’ ability to meet internal demand. With economic growth averaging 3% annually over the past decade and accelerating to 4.7% in 2023, electricity demand is projected to increase by 6% to 8% annually through 2030. This trajectory threatens to overwhelm the current system.
Guillermo Krauch of the Paraguayan Institute of Electrical Sector Professionals underscored the urgency, stating that the state-run utility ANDE’s annual investment of $300 million is insufficient to maintain the grid, let alone expand it. To meet future demand, ANDE would need to double its investment to $600 million annually, with an additional $1.2 billion required to boost generation capacity.
The regulatory landscape presents another significant hurdle. While a law permits private companies to generate and sell electricity, the lack of a comprehensive regulatory framework has deterred investment. Víctor Giménez, a special projects adviser at the Yacyretá dam, highlighted the consequences, noting that companies often abandon plans to invest in Paraguay due to uncertainties over future power supply.
Diversification emerges as a critical strategy to address these challenges. Paraguay has identified 22 locations suitable for small hydroelectric plants, which could alleviate strain on the transmission grid by generating power closer to consumption centers. Additionally, solar power, particularly in the Chaco region, holds significant potential. Biomass and biogas, which convert agricultural waste into electricity, offer further opportunities for diversification.
The implications for markets are profound. Paraguay’s energy crisis could reshape regional power dynamics, potentially disrupting the flow of clean energy exports and altering trade relationships with neighbors like Brazil and Argentina. The need for $12 billion in investment between 2025 and 2030, and up to $12.7 billion through 2043, presents a significant opportunity for international investors and developers of renewable energy technologies.
Moreover, the crisis underscores the importance of robust regulatory frameworks in attracting investment and ensuring energy security. As Paraguay navigates this challenge, it will serve as a case study for other emerging economies grappling with similar issues. The country’s ability to adapt and innovate will not only determine its own energy future but also send ripples through the broader energy sector.