LAHORE: The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has suggested the government to ensure payments for renewable energy generation in Pak rupees with a view to control the oil import bill in future, as power production through wind and solar energy do not involve the imported fuel like thermal power or coal-based power generations, which are totally dependent on imported oil or coal.
FPCCI former president and BMP Chairman Mian Anjum Nisar recommended the government to promote renewable energy and local fuel-based power projects in a bid to reduce the impact of rupee devaluation on energy prices in Pakistan by reducing dependence on imported fuels.
“Additional steps can also be taken like offering rupee-based returns on equity for power projects instead of US dollar based returns and pursuing policies to incentivize equipment and technology suppliers to increase the localization of their maintenance services. He said that certain challenges still remain, as the long-term take-or-pay power purchase agreements overprotect power projects, especially towards their end-of-life phase when they are more likely to face technology obsolescence. In a competitive market, at such a stage projects would have been retired. Wind and solar power projects are particularly facing the fallout from this problem as their technology has undergone rapid evolution over this decade leading to a slowdown in new project approvals.
Mian Anjum Nisar said that a reduction in energy import bill is a must to narrow down the unsustainable trade deficit and current account deficit, as a share of energy spiked to a record high at 29% ($23.32 billion) in the overall imports worth $80 billion in FY22 compared to 20% ($11.38 billion) in total imports at $56.38 billion in FY21.
So, we need to cut the current account deficit projected at $15 billion for FY23 by about $7 billion, mainly through cuts in fuel imports. The renewable energy would bring multiple benefits to the economy as it would reduce cost of doing business, promote industrialization, encourage investment, create plenty of new jobs and enhance exports. The expected reduction in oil price would help reduce the energy import bill by $2.5 billion in FY23.
The country’s import bill doubled to $23.32 billion in FY22, compared to $11.38 billion in FY21, mainly due to jump in oil prices in world markets. He said that China has emerged as the world leader in renewable energy in terms of investment, installed capacity and manufacturing and export of products and Pakistan has good opportunity to learn from China for enhancing the share of renewable energy in its energy mix. He said India has already developed 28GW of wind power and has set a target of 100GW solar energy by 2023 and emphasized that Pakistan should also pay more attention to this vital source of energy.
The country’s high dependence on imported fuels has exposed it to energy insecurity, including price shocks and supply disruptions, and sustained exorbitantly high energy costs. We are heavily dependent on fossil fuels, which make up 86% of Pakistan’s primary commercial energy supply.
Energy efficiency and conservation have been neglected in Pakistan for decades. In the World Bank’s Regulatory Indicators for Sustainable Energy ranking last year, Pakistan scored 28 out of 100 in energy efficiency.
Our policies, regulations and financing mechanisms lag far behind other countries. It is a bad reflection on our policy making as despite possessing immense potential of indigenous conventional and alternative energy resources, Pakistan so far remained an energy deficient country. Instead of exploiting indigenous cheap energy resources, it has been meeting its energy needs predominantly through imported fossil fuel which always proved a cumbersome burden on the national economy.
He said the installed capacity of solar and wind power across the world have witnessed over 5000 percent and over 650 percent increase respectively, but in Pakistan due attention has not been paid to this important source of energy as yet despite the fact that our economy has suffered huge losses due to energy shortage. He said that many European countries were working to replace coal and nuclear power plants with renewable while Germany and Denmark have already achieved the capability of meeting peak-load demand from renewable energy under the right weather conditions.
He said even Gulf countries with abundant oil and gas reserves were making big investments in renewable and Saudi Arabia has planned to setup solar and wind energy projects of 9.5 GW by 2023. Similarly, Kazakhstan with plenty of oil and gas reserves was working to produce 50 percent energy from renewable in future.
He said Pakistan is endowed with immense cheap indigenous energy resources including hydel and renewable energy like wind and solar, waste, bio diesel etc. which need commitment to exploit them. According to data, only wind has the potential to generate 350,000MW energy. He called upon the government to develop an indigenous base of renewable technologies in Pakistan for tapping these energy resources so that country could meet its growing energy needs comfortably.
Copyright Business Recorder, 2022
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