Minister for Power Omar Ayub Khan recently stated that 20 per cent of the electricity output will be based on renewable energy by 2025. It will increase up to 30pc by 2030, he added.
The goal is laudable as it will reduce greenhouse gas emissions, which are the main cause of rapid global warming. It will also reduce Pakistan’s dependence on imported fuels by replacing them with indigenous renewable resources that are available in abundance.
The focus of this article is on the system of National Transmission and Despatch Company (NTDC), which is in the purview of the government.
In 2016-17, the total energy generation in the country (excluding K-Electric) was 123 terawatt hours (TWh). Only 2.2pc (or 2.7TWh) of it was based on renewables, mainly wind and solar. NTDC estimates that total demand in 2025 will be 165TWh, which will increase to 230TWh in 2030.
This means that the total renewable-based output will have to be 33TWh by 2025 and 69TWh by 2030. Even if a minimum of 1.5-gigawatt renewable-based capacity is added every year until 2030 to meet the target, an annual investment of nearly $2 billion will be required for the next 12 years.
These targets are for new renewables — mainly wind, solar, biomass and geothermal — and exclude hydropower projects. As bagasse-based power addition is expected to be small and the potential for geothermal is yet to be fully explored, solar- and wind-based power will be the mainstay of any future renewables’ expansion project. The potential for wind is mainly in the larger Thatta area of Sindh although wind corridors have recently been identified in Balochistan.
Solar potential, however, exists throughout the country and thus offers a wider appeal. It can be developed on both large and small scales at the level of independent power producers (IPPs) as well as commercial, industrial and small consumers of electricity. Wind-based power is best developed on a larger scale through IPPs as is currently the local practice to award concessions in 50-megawatt power blocks.
To ensure the timely addition of new wind and solar capacity into the system, the first step will be to develop comprehensive medium- and long-term plans. The power planning process should give preference to renewable-based power generation additions over imported fuels, second only to hydropower that has a higher capacity factor.
Both wind and solar technologies produce electricity on an intermittent basis with the former having a capacity factor in the range of 30pc and the later 20pc. On this basis alone, wind projects qualify as a more viable option between the two, although wind corridors will require additional investment to build associated transmission infrastructure.
The cumulative capacity factor of renewable energy projects can be increased up to 50pc by installing wind/solar hybrid plants, which will reduce the intermittency factor and make investments in high-voltage transmission facilities justifiable
Through installing wind/solar hybrid plants, the cumulative capacity factor can be increased up to 50pc, which will reduce the intermittency factor and at the same time make investment in high-voltage transmission facilities justifiable. In the recent past, some wind power developers had expressed a strong desire to install solar PV panels as an add-on to the existing wind farms. But they did not receive clearance from the government within reasonable time. Future plans must include the proviso that any new large-scale renewable projects should be on the basis of hybrid wind/solar arrangement.
Renewable energy projects have negligible operating costs. But they need large capital expenditure to import solar panels, inverters and wind turbines. Foreign currency loans are needed for this regardless of whether the projects are being built by the public or private sector. Due to the paucity of foreign exchange, some innovative financial mechanisms will need to be devised to meet the capital expenditure requirement.
The mobilisation of investment is bound to challenge the ingenuity of the power sector’s decision-makers. The above example shows how maximum benefit can be extracted from wind power plants by hybridising them with solar projects.
As for the country’s solar potential, the total capacity of a large-scale plant in southern Punjab has remained stagnant at 400MW while the cumulative net metering–based capacity to date is negligible. The general sentiment does not appear to be in favour of large solar PV farms as the only solar park in the country has until recently delivered at a dismally low capacity factor of 14pc.
There is a need for considering Concentrating Solar Power (CSP) plants as an alternative to photovoltaic technology due to their high capacity factor. CSP can be equipped with low-cost thermal energy storage, which allows it to provide renewable power at most times of the day. CSP can offer advantages such as allowing for generation to be shifted to times when the sun is not shining or to maximising generation at the peak demand time. It will make sense that any large-scale IPP-based solar projects should preferably utilise CSP technology, which has become highly price competitive in recent years.
The Net-Metering Programme (NPM) was initiated in 2015 under which power consumers are paid back for the electricity they produce from self-installed solar photovoltaic systems. By installing 1GW capacity by 2025 under NPM, the government can avoid making an investment of up to $1.5bn. The NPM approach also makes great sense for a country like Pakistan because it’s a form of crowd-funding that allows consumers to become energy producers.
In 2016, the State Bank of Pakistan (SBP) gave commercial banks a refinancing facility to offer loans for rooftop solar systems at a low interest rate of 6pc. In spite of the financial incentive and promotional effort by distribution companies, NPM has not met much success. The cumulative capacity of all installed systems has not even reached 50MW. The situation calls for a thorough study of the causes of its slow adoption and recommending corrective measures.
A great reliance is being placed on large hydropower projects (HPPs). Besides arranging financing for them, making technical and management arrangements for their timely completion is also a huge challenge. The recent experience of constructing mega HPPs has not been good. Renewable projects are a good hedge against these risks due to their proven technology and reliability.
International financial institutions provide funding for them. Some of the cheaper funding sources, like green climate funds, can be tapped for this purpose. The power sector’s decision-makers have to think of innovative ways to meet the ambitious renewable energy targets for the next 10 to 12 years.
The writer is a former energy group director at Islamic Development Bank.
Published in Dawn, The Business and Finance Weekly, January 28th, 2019