Energy Reform in Paraguay

DESCRIPTION: Upon a considerable donation made by La Corporación Andina de Fomento (“CAF”), the SDSN Association will engage with the Center for Sustainable Development (“CSD”), housed in Columbia University, to initiate and coordinate a sustainable development plan for the country of Paraguay. For the purpose of promoting and advancing sustainable development in Paraguay, CSD will launch a project comprised of two primary components:

Component I – Planning for the decarbonization of Paraguay’s economy by 2050, grounded in an analysis of current and projected energy needs by 2050 and recommendations for policy actions. This component aims at planning for Paraguay’s decarbonization pathway in line with Paraguay’s commitment under the Paris Agreement. It involves three deliverables. The first deliverable is a macroeconomic energy planning model, anticipating the energy demand until 2050 by sub sector (transportation, industry, and buildings), and an energy supply that progressively becomes net-zero carbon by 2050 by leveraging existing hydropower sources for accelerated domestic needs (rather than exports) and relying on the development of additional clean and renewable energy. The second deliverable is a resource adequacy model to understand how to minimize the cost of electrification of the economy. The third deliverable is a set of policy recommendations to further support the electrification of the economy.

Component II – Evaluating transition alternatives in the context of regional integration through power interconnectors and fostering a regional conversation about the opportunity.
This component will aim at including the regional dimension attained in the models developed in Component I, with the objective to suggest a mutually beneficial regional interconnection. Indeed, a regional interconnected grid improves the adequacy of decarbonization to economic growth as it reduces the variability of power generation relatively to the average load while minimizing the need for energy storage as a percentage of the average load. This component will also design a strategy to enable Paraguay to take the center stage of this regional energy integration.

The methodology to be used is composed of several steps. The first step will study the current electricity sales in the region (Southern Common Market [MERCOSUR] and beyond) and the
existing interconnectors by type of electricity source (hydropower and gas). At the macroeconomic level, the second step will collect the current and projected supply and demand of electricity of the countries surrounding Paraguay. These first two steps will leverage the 2019 World Bank report on regional interconnection in MERCOSUR. The third step will forecast electricity trade in the region based on the sale of excess electricity supply (hydropower and renewables till 2050 and gas only over the medium term) limited by optimal electricity transmission losses. This step will involve the development of a regional electricity flux model which will be able to compare policy implications and decarbonization strategies. The fourth step will be to integrate regional electricity sales from Paraguay into the model to assess how regional integration can enable Paraguay to decarbonize faster without hurting economic growth.