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Business & Finance

IEEFA questions Pakistan’s latest long-term power sector plan

  • Says new ICGEP plan prepared by NTDC cannot be considered to be a 'least cost and minimum risk' plan
Published July 16, 2021

The Institute for Energy Economics and Financial Analysis (IEEFA), a US-based nonprofit corporation that examines issues related to energy markets, has pointed out a number of issues in Pakistan’s latest long-term plan for the power sector — the Indicative Generation Capacity Expansion Plan (IGCEP) for 2021.

In its latest report titled, ‘IEEFA: Pakistan’s new long term power plan – one step forward, two steps back’, the institute said that the new ICGEP plan prepared by the National Transmission and Despatch Company (NTDC) cannot be considered to be a “least cost and minimum risk” plan.

It was of the view that the power plan negates its own stated goal to “improve decision-making under different long-term uncertainties while assuring a robust generation expansion plan with least cost and minimum risk”.

The report said that despite some improvement the 2021 IGCEP does not appear to achieve this goal due to a number of significant steps since the 2020 version.

“On the positive side, the power demand forecasts for all three scenarios in the new IGCEP (low, medium, and high economic growth) have been reduced. The new forecasts look more realistic than the IGCEP 2020 forecasts and are closer to IEEFA’s own high-level forecast of power demand at 2030,” the report stated, as excessive power demand forecasting is often the root of the costly overcapacity.

Electricity demand growing faster than renewables: IEA

Overall planned thermal power capacity for 2030 has been cut back by around 7,000 megawatts (MW) relative to the 2020 version. Almost 3,000MW of this is reduced coal-fired power.

“However, planned wind and solar capacity to 2030 has been slashed by an astonishing 17,000MW under the new version of the IGCEP. The 2020 IGCEP was compliant with Pakistan’s renewable energy target of reaching 30% renewable energy capacity by 2030 but the new IGCEP has abandoned this and now only reaches 12% by 2030.”

The report pointed out that the IGCEP has itself stated that renewable energy are quickly becoming cheaper as compared to other modes of electricity production and the trend is set to continue. Despite this, the IGCEP has significantly cut wind and solar capacities, which cannot be considered a least-cost plan.

Furthermore, with the ever-increasing power sector circular debt and pressure from the IMF to increase power tariff cutting down on cheaper power generation sources does not make sense, said the report. “This new plan has Pakistan going in the opposite direction to the rest of the world where solar and wind installations are accelerating,” the report said.

Instead, increased focus is placed on hydropower, IEEF highlighted. “The new version of the IGCEP considers hydro to be ‘renewable’ and plans for 61% of generation to come from wind, solar, bagasse and hydro by 2030, in line with the Prime Minister’s statement at the December 2020 Climate Ambition Summit that Pakistan was aiming for 60% power generation from ‘renewables’ .”

However, in Pakistan’s Alternative and Renewable Energy Policy 2019, which set a target to reach 20% renewables capacity by 2025 and 30% by 2030, hydro was not considered among renewable technologies, identified the report.

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It said that if hydro is now to be considered ‘renewable’ then the 30% by 2030 target has already been surpassed given the existing hydro capacity in Pakistan and the policy is made completely redundant.

The report said that due to Pakistan’s track record of major hydro project delays, the decision to reduce the outlook of the new IGCEP to 2030 is highly questionable. “The 2020 version included a 2030 and a 2047 time horizon but the latter has now been dropped – the outlook is now only 9 years. There is a significant likelihood that proposed hydro projects won’t be finished within this timeframe.

"Wind and solar have very short construction periods that give more certainty to power development planners

“Much is made of the increased energy security provided by hydropower but increased energy security could have been achieved at lower cost through more emphasis on wind and solar," it said.

The report said that the policy change to include hydro within the renewable energy category, combined with a target of 60% clean energy by 2030 that heavily relies on hydro and slashes wind and solar, means that there is significant risk locked into the new IGCEP.

There is a high likelihood that major hydro projects will be delayed and the 60% by 2030 target will be missed. Meanwhile, the positive impact of the declining cost of solar and wind is also largely foregone in the new plan which is instead exposed to the risk of major cost over-runs for the large dam projects.


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