Investors, lenders critical of renewable energy policy

Updated August 24, 2019


Participants suggest annual targets for each technology should be set and followed up with implementation schedules. — APP/File
Participants suggest annual targets for each technology should be set and followed up with implementation schedules. — APP/File

ISLAMABAD: The private sector and lending agencies on Friday pointed out critical deficiencies in proposed Alternative and Renewable Energy (ARE) Policy 2019 and called for incentives to localise renewable energy technologies for lower projects costs, consumer tariffs foreign exchange outflows and greater job creation.

The concluding session of the two-day consultations on ARE Policy, co-chaired by PM’s Energy Task Force chairman Nadeem Babar and Secretary Power Irfan Ali, was attended by representatives of lending agencies and private sector representative bodies.

These included the World Bank, IFC, ADB, USAID UNIDO and KfW, World Wind Energy Association, Renewable and Alternative Energy Association of Pakistan, Pakistan Wind Energy Association, Pakistan Solar Association, Solar Quality Foundation, Pakistan Sugar Mills Association, Energy Update Group, USPCAS-E and leading law firms and consulting firms.

The representatives of the lending agencies and private think tanks pointed out to the federal government that most of the ARE resources were mostly owned by and located in the provinces, AJK and Gilgit-Baltistan, but the proposed policy appeared to be centre-centric and proposed to be driven by a federal agency Alternative Energy Development Board.

Therefore, the provinces, AJK and GB would be least receptive to federal wishes and implementation priorities to have 30pc contribution in overall electricity supply to renewable sources by 2030 as opposed to the 2006 policy that provided the provinces a greater role in projects awards.

Secondly, the previous policy had greater clarity in terms of 9700MW target for renewable energy as opposed to new policy that set targets as percentage of existing generation capacity that was a moving number and hence sent confusing signals to investors.

A representative from a donor agency questioned the “wisdom behind killing investors of 8 gigawatt capacity (of 2006 policy) with one bullet and offering equivalent capacity to new investors under the new policy” and wondered how the government would attract fresh investors when previous investors cry foul.

The participants suggested that annual targets for each (wind, solar, biomass etc) technology should be set and followed up with implementation schedules.

An official said an ARE power expert in project development and operations Gul Hassan Bhutto was given the opportunity for detailed expert opinion while majority of about 30 participants were given two minutes each and then asked to file their written comments latest by Wednesday next.

He told the meeting that the policy should be a wise and wide document to ensure sustainable procurement and hence the draft required major revisions and changes in line with stakeholders comments so as to ensure sustainable, affordable, available and responsible use of the energy.

He said the previous policy appeared to be wiser but was approved by the Economic Coordination Committee of the Cabinet instead of Council of Common Interests (CCI).

He believed the same policy should have been improved and got approved by the CCI. As a way out, it was argued that a tripartite arrangement between among the federal and provincial governments and investors should be put in place so that none of the stakeholders had overwhelming discretion in decision-making.

The participants also proposed that 145 projects under the 2006 policy involving 8,900MW capacity should be given first right of refusal in case of fresh competitive bidding under clear terms and conditions because majority of them had created significant rights so far and should be given a transition period.

For example, 19 projects of 513MW capacity had been given letters of support, 22 projects of 1,200MW were tariff approval stages and 109 projects of 6,500MW had letters of interest.

It was also pointed out that thermal power plants under 2002 policy were covered by the 2015 policy that was approved by the CCI while similar treatment to ARE projects was being denied that was creating an impression of anti-ARE bias.

Nadeem Babar and Irfan Ali told the participants that investors of 2006 policy would be taken care of separately but majority of the participants showed scepticism as to how the CCI would approve a new policy without settlement of an outstanding matter.

The private sector representatives also highlighted that government was envisaging bidding for solicited projects without feasibility studies which could lead to cartelisation. Therefore, reverse competitive bidding should be considered under reference tariffs to be announced by the power regulator.

One of the participants proposed that the policy should be named as Renewable Power Policy because the ultimate objective appeared to be electricity against the ARE Resources concept of targeting 60 per cent heating and cooling, 30pc transport and 8-10pc power production.

Participants also proposed incentives to encourage localisation of cost factors like concrete poles, transformers, motors and generators etc to bring back manufacturers who had left the market or promote local job creation and least cost energy sources. Under the existing arrangement, the foreign investors would be utilising indigenous resources like wind, solar, land, steel poles, batteries etc and taking out foreign exchange in profits.

It was also pointed out that there was no mention of the resource potential in the policy particularly that of offshore wind. Moreover, the proposed government-to-government renewable energy projects should be considered in the light of lessons learnt from open bidding in Jamshoro Coal-Based Power Project under the ADB that attracted half the price when compared to Sahiwal coal power projects under the China-Pakistan Economic Corridor.

Published in Dawn, August 24th, 2019