Brazil Will Reduce Energy Imports From Itaipu Due to Increased Demand From Paraguay

The Increase in Energy Demand from Paraguay Will Reduce the Amounts That Brazil Can Import from Itaipu Hydroelectric Plant’s Production.

According to the forecast of the Ten-Year Energy Plan (PDE), starting in 2023, Paraguay’s energy demand is expected to grow at a rate of 5% per year, but the Brazilian electrical system can comfortably absorb this reduction in supply, according to information from EPE this Tuesday, May 14, at the first meeting of the series Dialogues for the Transition to Sustainable Development (Cebds) in Rio de Janeiro, which featured the participation of EPE’s president, Thiago Barral.

“We are carefully looking at this issue of Itaipu. Paraguay has preference for its share of energy and Brazil has preference to buy what Paraguay does not consume. As Paraguayan consumption grows, the available share for import decreases.”

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“In our assessment, this can be easily absorbed. Given the size of the Brazilian market and the scenarios of higher or lower demand growth in Paraguay, this difference is easily absorbed in energy auctions,” said Thiago Barral.

The Battle of Itaipu Renegotiation

The presidents of Brazil, Jair Bolsonaro, and Paraguay, Mario Abdo Benítez, laid the foundation stone for the new bridge connecting the two countries over the Paraná River on May 10. The ceremony, held in the border town of Foz do Iguaçu, was a new demonstration of the good harmony between the two.

The new bridge will be the second binational bridge and will cross the waters that feed the reservoir. The project aims at the development of the Triple Frontier, as the point connecting the two countries and Argentina is called. The project has been underway for more than thirty years. Bolsonaro and Abdo promised this Friday that it will be completed before 2022. The new binational crossing will add to the Friendship Bridge and will cost around 300 million reais, with the funding coming from Itaipu.

Both presidents face a tough challenge: the negotiation over the distribution of energy from Itaipu, the gigantic hydroelectric plant shared by the two countries. According to the current agreement, the smaller country, Paraguay, transfers excess energy at cost to the larger one, Brazil. This agreement, which Paraguay considers unfair, expires in 2023, and the negotiation period coincides with the presidencies of Abdo Benítez and Bolsonaro.

Earlier this year, the federal government set up a working group that will be responsible for the Brazilian proposal in negotiations regarding Annex C of the Itaipu Treaty that led to the construction of the plant 46 years ago. The renegotiation of commercial conditions is expected, which will also take into account the end of amortization of investments and the reduction in the price of energy produced by the bilateral plant.

Annex C provides for the new terms to take effect starting in 2023. The current deadline for completing the work is next Friday, the 17th. In April, the government extended the group’s mandate by another 30 days.

Itaipu Binacional has 14 GW of installed capacity and, in 2018, supplied 15% of all energy consumed in Brazil and 90% in Paraguay. In 2018, it produced 96.6 million MWh. Paraguay is entitled to half of the energy generated, but due to lack of demand, consumes about 15% of its quota. The remainder is imported to Brazil.

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