Tapping renewable potential

Tapping renewable potential In the 1970’s there was a country that was facing similar challenges to what Pakistan has went through multiple times. Depleting foreign exchange reserves coupled with large amounts of foreign debt and a messy current account deficit. That country was Denmark and it is now almost entirely self-sufficient in meeting its energy requirements through renewable energy.

When oil prices shot up in 1973, the Danish realised the need to cut their reliance on imported fuel to power their economy. That led to a journey that would ultimately make the country one of the pioneers in wind technology around the globe. Even though it was quite expensive in the initial stages, the costs gradually came down.

Yet, Pakistan has continued to face a large fuel import bill out of which a major chunk goes towards power generation. This despite repeated realizations for the need to move towards more sustainable means of energy. The problem mainly lies in the problematic short-term mindset which has prioritized furnace oil based generation over the years dominated by the Independent Power Producers (IPP’s).

Even though the energy mix is now seeing a reduction in the FO on the back of increased LNG and coal generation, the share of renewables remains paltry at around 5 percent. Consensus amongst most stakeholders in the sector believes the share could be easily increased to 25 percent.

And why not? There was time that renewable tariffs were vilified for being too high and the capacity factors too low. But the tide has turned. Solar tariffs have dropped almost 60 percent over the previous five year period while wind tariffs have witnessed a similar reduction.

The approved levelized tariffs for solar power plants range from USc5.2622/kWh to 5.6073/kWh over applicable over a period of 25 years. Solar tariffs in Pakistan were around USc14/KWh a couple of years back as the market was still in a nascent phase. Similarly, wind tariffs have come down from Rs12.6/kWh in the initial years to a low of Rs4.956/kWh in recent wind tariff determinations.

On the other hand, the capacity utilisation factor has increased from 17 percent back in 2015 to almost 22 percent in recent solar reference tariff determinations. Wind capacity factors now range from 40 to 44 percent which goes to highlight the increased efficiency of the wind based energy power plants.

Nepra has clearly highlighted the negative role played by the National Transmission and Dispatch Company (NTDC) and the Alternative Development Energy Board (AEDB) in failing to facilitate the induction of renewables in the energy mix. The competitive bidding framework for renewables which the AEDB was supposed to provide still remains in thin air despite a lapse of almost two years. While the NTDC has failed to provide evacuation arrangements to a number of wind power plants which has led to lengthy delays in commissioning of the projects.

With a new government that is keen on promoting a green and “naya” Pakistan using projects such as the billion tree tsunami, it would help if it also nudges the bureaucracy in the right direction when it comes to bringing more renewable energy in overall energy mix. It will also serve to greatly reduce the dependence on imported fuel which helps alleviate the current account pressures in times of inflationary global energy cycles.