ISLAMABAD: The government has recovered Rs118 billion in additional revenue from consumers through increase in electricity tariff over a period of one year.

This was stated on Wednesday by Energy Minister Omar Ayub Khan at a joint news conference with Special Assistant to the Prime Minister on Petroleum Nadeem Babar and Power Secretary Irfan Ali.

He said that Saudi Arabia was being allowed to launch solar power projects in Balochistan and Gilgit-Baltistan for which there would be no bidding.

The minister said a total of Rs229bn in additional revenue was recovered by the power companies during one year. This included Rs111bn collected through loss reduction, enhanced recoveries and theft control while Rs118bn came from increased tariff.

He said the previous government had launched major LNG-based power projects having an average tariff of Rs17 per unit, but the present government was encouraging maximum capacity addition on the basis of ‘lowest tariff’ through competitive bidding. This would mostly be done through Alternative and Renewable Energy (ARE) sources for which the federal cabinet had approved a new policy on Tuesday.

In response to a question, Mr Khan said the PML-N government abruptly stopped ARE projects of about 3000MW in 2016 to make room for expensive LNG-based power plants of an equivalent capacity. He said the previous government did promise to go for induction of ARE projects on the basis of lowest tariff and international competitive bidding, but did not take any steps for actually implementing such decisions.

He said the draft ARE policy approved by the federal cabinet this week would now be forwarded to the Council of Common Interests for endorsement and that the provinces had already cleared the policy at the level of board of directors of the Alternative Energy Development Board.

Through the new policy, Pakistan is offering $40bn worth of investment opportunities in the ARE sector. The policy sets a target of 8,000MW of capacity addition through ARE projects (other than hydro) by 2025 and 20,000MW by 2030.

This means the government is eyeing to have 30pc renewable energy in the system by 2030. Coupled with hydropower, the minister said, the total renewable share in electricity generation would be increased to 60-65pc by 2030.

He said about $700 million worth of investment had already started to flow in after the recent signing of agreements by 12 renewable energy companies, with an average tariff of 4.3cents per unit. He said ARE tariffs were continuously declining and would play a major role in bringing down the overall electricity cost in the country and resultantly help revive industry and business and generate jobs and enhance the country’s competitiveness and exports.

Mr Khan said one of the key elements of the new policy was to encourage manufacturing of ARE equipment in the country. As such, the renewable energy companies were now interested in the production of solar panels and wind turbines in Pakistan. Many Danish, Chinese and Japanese companies have shown interest in the manufacturing of wind and solar power components in Pakistan, he said.

Talking about the salient features of the new renewable policy, Mr Baber said the rule of upfront tariff had now been abolished and all future tariffs would be set on the basis of competitive bidding. The government would set the target every year for capacity addition, identify the grid availability and invite bids from investors accordingly.

The current renewable policy was totally different from the previous one under which the investors used to choose the site, fuel and cost. Now the government would provide the site, type of energy required and would award the contract to bidders offering the lowest tariff, he explained.

In response to a query on induction of government-to-government agreements in the new policy, Mr Ali said the “G-to-G provision” in the policy was restricted only to the underdeveloped areas in Balochistan and Gilgit-Baltistan and there would be a window for inducting ARE technologies without bidding. The remaining capacity additions across the country would be based on transparent competitive policy for lowest costs and tariffs.

Answering another query about capacity payment to the wind and solar power companies, Mr Babar said the concept of capacity payments had been done away with under the new policy. The investors would now be paid against the approved lowest tariff for the unit of energy supplied and not for staying idle as was the case with all existing projects.

Published in Dawn, November 21st, 2019