ISLAMABAD: The federal government has reportedly decided to expand generation capacity only on competitive and least cost bases, except strategic projects, well-informed sources told Business Recorder.
This condition will be part of the new National Electricity Policy (NEP) 2021 to be submitted to the Cabinet Committee on Energy (CCoE), which in its meeting held on February 11, 2021 directed Power Division to revise the draft of the policy in light of the observations made by the CCoE members and re-submit it to the CCoE prior to submission to the Cabinet and Council of Common Interests (CCI). The six guiding principles of new policy will be efficiency, transparency, competition, financial viability, indigenization, R&D and environmental responsibility.
The sources said the criteria for qualification and methodology for selection of new projects will be provided in the National Electricity Policy as the Federal Government will approve such projects on case- to -case basis. The share of renewable energy in total power supply will be increased to 20 per cent by 2025 and 30 per cent by 2030 from about just 5 per cent at present. Hydropower would also be included in the renewable energy category under which its share would also increase to 60 per cent by 2030. Pakistan’s installed capacity is about 35,000MW of which 33,700MW is dependable capacity.
For projects that do not qualify as strategic, any procurement beyond least cost principles will be subject to the provisioning of subsidy by Federal Government/Provincial Government (to the extent of incremental cost of such projects beyond least cost).
The generation mix for the sector will gradually reduce reliance on imported fuels and move towards optimal utilization of local resources such as coal, hydro, renewable sources, local gas, and nuclear.
Generation mix decisions will be made as per system of integrated planning, with the aim of transitioning towards a more affordable and secure generation mix.
Construction of multipurpose water reservoirs and tapping of hydropower potential in the country will be encouraged for power generation. While run-of-the-river plants will be primarily developed for power generation, reservoir-based hydel generation capacity additions subject to provisions to be incorporated in the Indicative Generation Capacity Expansion Plan (IGCEP) on the basis of cross-sectoral decisions by way of a consultative process, taking into account inter alia, legal stipulations, economics of generation, resultant tariff, and demand of the sector. This will address the vagaries of climate change, per capita availability of surface water and exposure to floods.
Nuclear generation capacity additions will be subject to provisions incorporated in the IGCEP on the basis of cross-sectoral decisions by way of consultative process, taking into account economics of generation, resultant tariff, and demand of the sector.
A sustainable renewable energy market will be developed, with a dedicated and gradually progressively increasing share in power generation as per the IGCEP based on least-cost principle. For such market development, zone-based renewable resource assessment will be carried out to identify/prioritize renewable zones on the basis of optimized levelized cost and firm capacity. Future procurement of renewable generation will be based on such assessments. The emphasis shall be on introducing measures to encourage and promote transfer of technology, so that local capabilities are developed for the renewable energy market.
Effective utilization of local coal and gas resources will be promoted for power generation on the principles of least cost and competition. Further environmental considerations coupled with international commitments and cost of mitigation measures shall also be considered for capacity expansion decisions.
Distributed generation, including net-metering additions, will conform to the generation in sector-level integrated planning for the sector. Steps will be taken to integrate distributed ensure its sustainability.
Existing public sector thermal plants will be reviewed and assessed for privatisation, leasing or other options for their possible future integration in the wholesale electricity market, or retirement. The mechanism for assessment and subsequent implementation roadmap will be stipulated in the National Electricity Plan. Such implementation mechanism shall account for the social aspects of employees-related matters including, but not limited to relocations, absorption in other public sector companies, continuation of employment for specified periods on the same terms and conditions, etc.
Sustainable development of the power sector requires that despite varying seasonal energy requirements, sufficient generation capacity be made available to cater for the peak demand of the country. The sharing of investment risks and rationalization of related returns in view of applicable market conditions shall inform the generation capacity additions. Such additions shall also reflect principles of integrated, coordinated and sustainable supply of electricity with an aim of optimal utilization of resources across the entire value chain.
Copyright Business Recorder, 2021