ISLAMABAD: The Council of Common Interests (CCI) which met on Monday with Prime Minister, Imran Khan in the chair, approved the National Electricity Policy (NEP) 2021 unanimously for 10 years, aimed at providing reliable, secure, efficient and affordable electricity for sustainable economic growth.
After the approval of NEP, Minister for Energy, Hammad Azhar, addressing a press conference, said the policy has been finalised after four meetings of the CCI and more than 100 meetings of various stakeholders.
Under the NEP 2021, a National Electricity Plan comprising 10 policies such as generation and transmission will be formulated in the light of Indicative Generation Capacity Plan (IGCEP), which is yet to be approved by the National Electric Power Regulatory Authority (Nepra).
Hammad Azhar said that in the past capacity expansion was neither based on any logic, plan nor projection, nor the fuel or location of projects. Work had been started on NEP in 2005 but it could not be finalised.
According to the new policy, he said, all principles have been devised in consultation with all the provinces and new projects will be approved in a transparent, least cost basis and through competitive bidding.
Under this policy, targets of renewable energy and long-term hydel projects have also been mentioned.
"Now there will be no upfront tariff on G2G basis. All private investors will be allowed to participate in open bidding in a transparent mechanism," he added.
The Minister for Energy, however, clarified that specific provisions have also been made part of the NEP for strategic and must-run projects but majority of expansion in capacity will be based on ICB basis.
The minister said that Pakistan's key problem of electricity is not generation but a financial problem because of capacity payments which increase circular debt. The second major issue is transmission system. Presently, he said, transmission capacity has been enhanced from 20,000MW to 24,000MW which still requires an addition of 10,000MW. He said, Rs 100 billion has been allocated in federal budget for transmission and distribution systems.
"It’s a big challenge. On one hand, there is circular debt and on the other hand there is an obsolete transmission and distribution system and wrong mix of fuels but we have laid a foundation to resolve these issues on a day-to-day basis,” he continued.
In reply to a question, the Minister for Energy said that the use of existing capacity is another subject as there are many reasons due to which this capacity cannot be used which can be due to circular debt or any other reason.
He said, recently, two mega plants - Tarbela and Guddu and Sahiwal coal power plants – were not fully available. However, within two or three days, the issue was resolved by running other plants.
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 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.
Such 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 hydro power 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 would be 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 ensure sustainability.
Existing public sector thermal plants will be reviewed and assessed for privatization, 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 employee 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 the objective of optimal utilization of resources across the entire value chain.
Copyright Business Recorder, 2021