Renewable energy

August 24, 2019

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THERE is some level of seriousness on the part of the government to encourage renewable energy, as is evident in the vigour with which the prime minister’s taskforce on the subject is working to draft the renewable energy policy. But significant snags have arisen that have stalled the process, and if they are not resolved effectively, it could damage all the efforts that are being put in. One of the challenges is to figure out how to deal with those renewable energy projects that had already been approved, especially by the provincial authorities, under the old tariff system at a time when the government wants to move towards competitive tariffs. It is an important aspect because both sides to the dispute — the government and the investors — have valid arguments, and the number of projects that stand to be impacted by the decision is very large — 140 in total equalling a power-generation capacity of close to 8,000MW.

The investors say that the competitive bidding for tariffs should apply to future projects, not those already in the pipeline that have seen considerable time and resources spent on them to develop proposals in the Independent Power Policy mode, and that are at various stages of approval. Meanwhile, the government feels that the number of projects in the pipeline is so large that making an exception for them at this stage will push the beneficial impact of competitive bidding too far into the future. Both considerations have merit. Investors want predictability on the policy horizon, while the government is right to point out the speed with which renewable energy prices are dropping and make an attempt to capture the benefits of this development for the larger public interest. The question then arises: how do we resolve this issue? Whatever specific course of action is taken, the government, and in particular the leaders of the prime minister’s taskforce, must ensure that the public interest is held supreme, and is over and above commercial interests. The public interest lies in widening the role of renewable energy in our mix, as well as capturing the benefits of the declining prices. Similar issues arose when Nepra moved to reduce the upfront solar tariff a few years ago, but that did not do any major damage to investor interest in Pakistan’s market for renewable power. Perhaps the current taskforce can look to that moment for guidance.

Published in Dawn, August 24th, 2019