When looking at the long list of challenges countries in the region face in relation to economic development, one could think that for a nation like Paraguay energy access is not at the top of the list. After all, when it comes to electricity, Paraguay has an ace up its sleeve: the Itaipu Hydroelectric Dam. Shared with Brazil, the 14 Gigawatts (…yes, 14 GW!) power plant produced more energy as of 2016 than any other hydropower plant in the world, surpassing the Three Gorges Dam on the Yangtze River in China, which has the world’s largest installed capacity (22.5 GW).

Considering this, it is striking to learn that even with this much electricity being generated, Paraguay still relies heavily on firewood and biomass waste as energy sources for the industrial sector. In fact, firewood and biomass sources represented approximately 74% of the energy consumed on average by the industrial sector between 2013 and 2016, much of it by small and medium-sized enterprises (SMEs). Unfortunately, this has become a major driver of deforestation for the country, as only a small part of the firewood comes from certified sustainable sources, a problem that Paraguay recognizes in its 2015 Nationally Determined Contribution (NDC).

The 2004 Zero Deforestation Law (ZDL) was adopted to counteract this trend, especially in the Eastern region of the country, where most of the industrial activity is located. However, considering that the demand for primary energy consumption is expected to grow significantly over the next decade, it is unlikely that the ZDL alone will be able to produce significant results in terms of reducing deforestation if complementary measures are not adopted. Such measures should aim to reduce the need for additional firewood consumption and promote a shift to the use of electricity, which is expected to cover the increase in primary energy needs in the long term, especially after the much-needed improvements in the electricity transmission network are completed. The ZDL regulatory restrictions on the sourcing of non-renewable biomass, as well as the progressively increasing distances between fuelwood demand and supply centers, are expected to drive biomass prices up, making the switch to electricity more and more attractive for the industrial sector.

Full blog by Filippo Berardi | Alexander Vasa

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