A new-old approach

December 02, 2019

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THE Alternate and Renewable Energy Policy 2019 is set to land before the Council of Common Interests (CCI) for approval on Dec 11 amid dispute between the federal and Sindh governments.

Under the new policy, the federal government claims to be offering $40 billion worth of investment opportunities in the alternate and renewable energy (ARE) sector. The policy sets a target of 8,000 megawatts of capacity addition through ARE (other than hydropower) by 2025 and 20,000MW by 2030. This means the government is eying to have 30pc renewable energy in the system by 2030.

Coupled with hydropower, the total renewable share in the country’s electricity generation would be increased to 60-65 per cent of clean and green energy by 2030, according to Federal Energy Minister Omar Ayub Khan.

A day after the alternate and renewable energy policy (AREP) was cleared by the federal cabinet, Sindh Energy Minister Imtiaz Shaikh announced opposition to the draft policy at the CCI level because it was against the interests of Sindh and that not a single ministerial level meeting was held on the proposed policy.

However, the federal Ministry of Energy said the Sindh’s energy secretary was asked thrice by Omar Ayub Khan, who is also the chairman of the board of directors of the Alternate Energy Development Board, for his approval of the minutes and he did confirm the minutes.

A day after the renewable energy policy was cleared by the federal cabinet, Sindh announced that it would oppose the draft policy at the CCI level because it was against its interests

The federal ministry also claimed that “all provinces including Sindh were not only consulted at every step during the formulation of this policy, but it has also been ensured that the role of the provinces in all future approvals and implementation of renewable energy projects is prominent and pivotal”.

Provinces, particularly Sindh, believe that provincial powers enshrined under the 18th constitutional amendment have been trespassed by the Centre under the AREP 2019.

The Centre argues that the new policy envisages a steering committee, responsible for making annual procurement plans for ARE projects, to be approved by the AEDB Board. All provincial governments, represented by secretaries of energy departments, would be the members of the steering committee along with the Power Division and the AEDB, with equal voting rights.

The provinces say that the introduction of the steering committee under the federal AEDB and to be headed by a joint secretary of the Ministry of Energy actually compromised provincial rights and powers granted under the 18th amendment, hence unacceptable.

In Sindh’s view, the AREP should flow out of the National Energy Policy (NEP) as a mother document, which was not yet in place. The NEP has to set future targets and shares to all technologies of power like renewables, nuclear, gas, hydro, coal, etc, and to all provinces keeping in view demand centres and sustainable and affordable energy mix. Under the NEP, the Centre is required to have a regulatory control on the integration of provincial shares without affecting the administrative authority of the provinces.

Private sector energy experts also have reservations over the fact that the draft AREP did not set targets in megawatt capacity for each technology on a yearly basis. “Policy should be clear on how many megawatts in wind or solar will be injected into the system and in how many years,” said Gul Hassan Bhutto, a private energy expert.

Also, the new policy eliminates the role of the private sector in unsolicited ARE projects but grants such an opportunity for government-to-government projects. The power division has argued that unsolicited government-to-government facility was primarily being offered for Saudi investment and that too in Balochistan only.

Sindh is also agitating over the issue of existing investors who had been issued letters of interest (LoIs) worth over 6000MW but could not proceed ahead after a ban imposed by the previous government that was practically confirmed by the new policy. It wants those investors to be given the right of refusal or reimbursement of their costs already incurred in the bidding process.

The private sector has been waiting for the government to open up the transmission line for private sector investment while emphasising the need for upfront policy and administrative action to reduce system losses still ranging 18-20pc in the distribution network.

The opening of transmission network to the private sector and availability of provincial grids has to ultimately lead to the development of a merchant market instead of a monopolised national grid under the National Transmission and Despatch Company.

More importantly, hydropower projects of fewer than 50MW are not covered under the AREP 2019, but they need to be made part of it as under the 2006 renewable policy for sustainable development of the sector.

The Centre believes that the new policy promised equal rights to all the provinces in identifying projects as well as their implementation while the Centre would be supporting the process through its oversight and collaboration with the provinces to ensure a transparent structure for the procurement of new projects on a competitive basis.

All these technicalities and the nitty-gritty need to be conclusively settled at the professional level before these are taken up for approval at the highest political forum.

Published in Dawn, The Business and Finance Weekly, December 2nd, 2019