The recent regulation of Law 7599 on Non-Conventional Renewable Energy, which opens the door to private investment in electricity generation in Paraguay, is seen as an essential step to prevent shortages amid fast-growing consumption, but it raises a warning about the impact on ordinary users' rates.
The new decree defines four categories of private actors in the electricity system: the self-generator, the cogenerator, the exclusive generator, and the exporter. The self-generator may consume its own production and inject surplus into the ANDE grid, with a limit of up to 1 megawatt (MW) without a licence. Above that threshold, authorisation from the Vice Ministry of Mines and Energy will be required. The cogenerator, aimed at large industries that produce electricity and thermal by-products simultaneously, will operate under the same conditions.
The exclusive generator, on the other hand, will be dedicated to producing energy for bulk sale to ANDE, with contracts of up to 30 years. The exporter category, in turn, allows any investor or Paraguayan citizen to trade privately sourced renewable energy directly in the markets of neighbouring countries.
The most radical transformation, however, lies in the relationship with large consumers – industrial or commercial complexes with demand from 30 MW upwards. This group will no longer be compulsorily tied to ANDE's supply and will be able to enter into direct bilateral contracts with private generators, shielding themselves from voltage fluctuations and outages that harm production.
For this energy to reach the consumer, the existing transmission infrastructure will have to be used, which introduces the concept of a wheeling charge to be levied by the state utility. "That, for example, is one of the issues that has not yet been very clearly defined in this regulation," warns engineer Sonia López, a researcher at the Energy Systems Research Group (GISE) of the National University of Asunción.
The expert points out that the entry of new independent suppliers breaks the cross-subsidy scheme that underpins the Paraguayan system, in which the residential tariff does not reflect ANDE's real costs. The private investor will demand a fair and predictable return, and the money to cover these contracts will inevitably come out of the state company's overall revenue.
"For the other categories that want to inject into the grid, whose energy ANDE will buy, there will have to be a tariff increase," López states. "The private supplier will want to be paid fairly. And the money to pay them, one way or another, will have to be reflected in the tariff. This is not unique to Paraguay; it happens in any market where a product is traded," she concludes.