Regulatory decree of Law No. 6977/2023 on Non-Conventional Renewable Energy

By BKM-BERKEMEYER

Decree No. 1168/24, issued on February 12, 2024 (referred to hereafter as "the Regulation"), ratifies Law 6977/23 (hereinafter referred to as "the Law"). Pursuant to these provisions, entities intending to engage in energy production from Non-Conventional Non-Hydro Renewable Energy Sources (ERNC) must establish themselves and adhere to the extant legislation of the Republic of Paraguay.

Among its key provisions, the Regulation stipulates that the license granted by the Ministry of Public Works and Communications (referred to as the "Granting Authority"), with a maximum validity of 15 years in accordance with the law, may be subject to renewal for successive periods of up to 15 years, contingent upon fulfillment of all requirements specified by the Granting Authority.

The Granting Authority shall, by resolution, delineate the legal, administrative, financial, socio-environmental, technical, or other pertinent criteria necessary for the issuance of the ERNC License, and establish different categories and subcategories of licenses as deemed appropriate, considering the complexity and/or nature of each project.

Failure to comply with the regulations governing activities delineated within the Law and the Regulation constitutes grounds for license revocation, following an administrative summary procedure.

Furthermore, the Regulation outlines provisions governing the issuance and operation of licenses for ERNC Self-Generators, ERNC Cogenerators, ERNC Generators, and ERNC Exporters as provided for in the Law, detailing their prerequisites and technical directives.

The Law and the Regulation recognize four distinct entities. ERNC Self-Generators may produce energy for self-consumption and, if surplus exists, sell it to the National Electricity Administration. ERNC Cogenerators, typically industrial entities, may generate energy for internal use and sell excess energy to the National Electricity Administration. ERNC Generators are authorized to produce energy for sale, while Exporters may produce and export energy provided buyers are secured within the region.

The Law and the Regulation also envision scenarios wherein the  National Electricity Administration, through competitive bidding processes, may procure ERNC to fulfill domestic demand as outlined in its Short, Medium, and Long-Term Generation Master Plan or to substitute energy production undertaken by the  National Electricity Administration, particularly in instances where it seeks to expand electricity exports produced domestically.

Power Purchase Agreements between the  National Electricity Administration and ERNC suppliers must adhere to the legal framework governing public sector contracts and comply with overarching guidelines established by the Granting Authority.

Additionally, the Regulation addresses the implementation of incentives established by the Law. Annually, the Granting Authority will define, via resolution, minimum investment thresholds necessary to qualify for fiscal incentives, contingent upon the scale of ERNC production, whether categorized as small, medium, or large. Prospective beneficiaries, in accordance with regulatory directives, must submit comprehensive project proposals meeting prescribed criteria to access fiscal incentives. The Granting Authority will render an opinion, which may be favorable or otherwise, regarding the investment proposal.

It is imperative to note that, to qualify as beneficiaries under this framework, interested parties must demonstrate the physical, technical, environmental, and financial viability of their projects by furnishing studies, plans, and projections to the Granting Authority.

Lastly, the Regulation delineates procedures for administrative recourse. In the event of an administrative decision issued by the Granting Authority regarding license cancellation or expiration, licensees may avail themselves of administrative remedies as outlined in relevant regulations governing the subject matter.

Disputes arising during the execution of PPAs shall be resolved within the jurisdiction of the Courts of the Republic of Paraguay, situated in the Capital judicial district.

Furthermore, recent communications from Government Authorities suggest that the  National Electricity Administration may initiate a tender for ERNC generation, potentially amounting to 100 MW, in the Paraguayan Chaco region in 2024.

For further inquiries, please contact Martín Carlevaro (martin.carlevaro@berke.com.py) and/or Marcela Llano (marcela.llano@berke.com.py)