Lower and lower. That’s what Pakistan’s wind tariff is getting. For the naysayers, this is proof enough that renewable energy is now at par if not cheaper compared to conventional fossil fuel based generation.
The National Electric and Power Regulatory Authority recently awarded tariffs ranging from Rs4.956/kWh to Rs5.298/kWh to three wind power projects of 50MW each. Compare this with when the wind journey began at a tariff of Rs12.6/kWh and the difference is remarkable.
What is the reason? Falling turbine costs coupled with a higher capacity factor have made capex costs lower while increasing power generation at the same time. The plant capacity factors awarded this time around range from 40 to 44 percent which goes to highlight the increased efficiency of the wind based energy power plants.
The debt to equity ratio for the projects is 80:20 while the tariff is applicable for a period of 25 years. Interestingly, the return on equity (RoE) for these projects is now 14 percent which is a further reduction from the 17-18 percent RoE awarded to previous wind projects.
However, this extremely competitive tariff has not made those in policymaking circles any more conducive to the potential of renewable energy. Nepra has also highlighted the unwillingness of the Ministry of Water and Power (MoWP) and the ineptness of the Alternative Energy Development Board (AEDB) to promote renewables in the energy mix.
Over the years this newspaper has pointed out the false myths regarding renewables unable to become base-load. The grid has been made out to be the main culprit but the grid constraints are not such that they cannot be overcome.
According to the International Energy Agency (IEA) solar PV project costs represent 8 percent of the total energy investment incurred globally last year. Interestingly these costs have come down by almost 15 percent due to lower module prices and a shift in deployment to lower cost regions.
The report also highlights that in emerging economies outside China, “the average size of awarded solar PV projects rose by 4.5 times over the five years through 2017, while that of onshore wind rose by half.” Despite these positive developments globally, the situation for renewables in Pakistan remains bleak. Nepra notes that generation additions over the next three years don’t include major additions of solar and wind.
The competitive bidding framework for renewables which the AEDB was supposed to provide still remains in thin air despite a lapse of almost two years. But not all institutions are acting as a barrier. The State Bank of Pakistan (SBP) has issued concessionary financing for renewable energy projects for up to 50MW up to a limit of Rs6 billion at a rate of 6 percent for a period of ten years.
One would hope that the new government pushes the MoWP and AEDB to facilitate the induction of more renewables in the national energy grid. The rising fuel import bill needs to be brought down and there is consensus amongst energy stakeholders that Pakistan’s share of renewable energy can be increased from its current paltry 5 percent to 25 percent in its overall energy mix.
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