The approval of the Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30 marked a major milestone for the development and planning of power sector. The approval itself was shrouded in controversy, with the Sindh representative opting to withhold his approval and subsequently Sindh government openly challenging this approval process. Nevertheless, it highlighted a key opportunity for growth in the energy sector: the need for provincial autonomy when it comes to power planning.
Article 157 of the constitution of Pakistan authorises provinces to “construct power houses and grid stations and lay transmission lines for use within the province” and furthermore even to “determine the tariff for distribution of electricity within the province”. Thus, in such cases where neither the power off-take is from a federal entity nor the interconnection by NTDC/Disco, the provinces are free to initiate and operate energy without any financial or contractual obligations.
While searching for the perfect generation mix that ensures provision of low-cost electricity, indigenous power sources, socio-economic benefits and environmental sustainability, a key bone of contention are the types of energy generation sources and projects that are to be added over the coming years. This debate is centered around coal, furnace oil, hydro, solar, wind or the fast-depleting reserves of natural gas. The answer however is not so simple, since it involves prior commitments and obligations, and is especially controversial when regarded as a matter between the federal and the provincial governments. In order to understand this controversy, briefly looking at the issue is imperative.
As per IGCEP 2021-30, Pakistan is expected to have an installed electricity capacity of 61,112MW by 2030, an almost 76% increase over current capacity. The additional 32,783MW of energy projects to be installed are of two types, committed or candidate. 70% of the projects are committed with approved PC-I(s) and secured financing as of March 2021 and mostly constitute thermal energy. The remaining 30% candidate projects are the ones whose energy source was selected on a least-cost basis by IGCEP and consequently all 10,062MW was allotted to wind and solar energy since they are the cheapest. The refusal by member Sindh at Nepra to this proposal was based on the objection the costlier committed projects constitute a huge loss to the national exchequer and will worsen the already heavy circular debt faced by the power sector. On the other hand, Chairman Nepra noted that reconsidering the financial viability of projects which are already at an advanced stage of implementation is not pragmatic.
This brings us to the issue of provincial autonomy and their individual renewable energy policies. Clearly, provincial priorities vary a lot based on their available resources and particular socio-economic problems. For instance, in Sindh, we see that it has the highest share of potential solar and wind resources by far. The Gharo-Ketibandar corridor alone holds potential wind energy resources of more than 60,000MW. Moreover, the province receives an average of about 5.2 kWh per square meter of solar energy throughout the year, a figure close to the average of Texas. Yet while Texas produced 4.4 TWh of energy in 2019 through solar alone, the solar production of entire Pakistan was less than five times that — a mere 858 GWh as per state of industry report by Nepra. Considering such vast untapped potential, of Sindh’s disagreement with IGCEP priorities, and of the freedom allowed to it by the constitution of Pakistan under the 18th Amendment and Article 157, it is imperative that the province sets up a strategic policy of its own to exploit these energy sources without entirely relying on the federal policy alone. Under the liberal and competitive market envisioned for the electricity sector in Pakistan and in line with the Competitive Trading Bilateral Contracts Market (CTBCM) reforms, it is necessary that Pakistan takes clue from the model followed by its neighbor, India, as well as most similar markets. Moving towards decentralized and provincial policies will be in line with international best practices. The Sindh government has already initiated work in this direction, including the establishment of STDC, Sindh Solar Project with the World Bank and facilitation of a 400MW hybrid plant for green hydrogen protection. However, there is more that can be done.
As an example, we may look at the way states in the US have set up tailored policies to tackle this issue. Of the $64 billion renewables market in the US, half of the sector’s growth since 2000 can be attributed to state policies and mandates. One such example is of the Renewable Portfolio Standards (RPS) which mandate that a specified portion of electricity of utility companies must come from renewable sources. States have also implemented their own interconnection standards to ensure smooth and unhampered connection to the grid for these sources, alongside other approaches such as feed-in tariffs, loans, rebates and tax credits. The overall process has resulted in increased clarity and facilitation of growth with regards to solar and wind. In another example, we see individual states (provinces) of India such as Gujarat, Telangana, Rajasthan and Tamil Nadu have all taken initiative to promote renewables in their region by devising customized policies. These policies are set up with the aim to create a facilitative environment and enable prospective local developers to harness these sources. Yet these policies also attempt to make the provinces against each other to provide the best possible market for RE uptake and generation. Resultantly, as of 2018, 95% of installed renewable capacity in India has stemmed from private sources. Moreover, almost half of the staggering 30 GW of renewable energy (mostly solar PV) procured in India has been done through the efforts of state (provincial) governments.
Renewable energy tariffs have seen high competitiveness around the world lately with tariffs going as low as US 3.5 cents per unit in India and Pakistan. The time is ripe to benefit from these changing circumstances in the energy landscape. Dedicated provincial energy policies can not only ensure energy security in a province, but they can also ensure promotion of best and most viable provincial resources in the long-term. Such tailored and targeted long-term policies also have the potential to promote development of remote areas, light up small villages, promote local industry and developers, boost local economy and protect environmental resources, all while making speedy progress towards cheap and clean energy. It is important that provinces recognize this imminent need of such dedicated policies and start working towards them.
(The writer is a Research Associate at the World Wind Energy Association)
Copyright Business Recorder, 2022
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