KARACHI: Pakistan’s tough political-economic circumstances and constrained transmission network present challenges for an early coal phase-out, but some LNG or diesel power plants can be more suited to an energy transition mechanism (ETM) facility.
An assessment by the Institute for Energy Economics and Financial Analysis (IEEFA) shows that medium-sized, middle-aged thermal plants are potentially viable candidates for an ETM in the near future.
It said the country’s young coal fleet could also deliver significant environmental benefits from early decommissioning but was more suited to a phase-out after the completion of its debt servicing period.
The report said that three medium-sized, middle-aged thermal plants could offer a good balance of incentives to the government, plant owners, and prospective investors while reducing carbon dioxide emissions.
The report was based on an assessment of Pakistan’s participation in an Energy Transition Mechanism (ETM) being brokered by the ADB. The ETM aims to help developing countries with high carbon lock-in to switch to renewable energy sources by providing concessional financing and private-sector capital.
It said carbon-intensive power plants in Pakistan can be retired early in a financially prudent way. Middle-aged liquefied natural gas or diesel plants should be the immediate priority, with a later focus on phasing out coal.
Pakistan’s mid-life thermal power fleet provides prime candidates for working toward an energy transition that will make economic sense to all stakeholders and serve public interest.
“Through the ETM, Pakistan has an opportunity to stay ahead of the curve if it is prepared to phase out certain fossil fuel assets which are an economic burden on the country,” says Energy Finance Analyst Haneea Isaad, who co-authored the research report with Grant Hauber, Strategic Energy Finance Advisor, Asia.
Hauber adds: “While conceptually strong, the ETM has run into challenges across countries to identify willing participants.”
“Nevertheless, there is a balance Pakistan can strike among asset owners, ETM investors and lenders, and government to reach a more sustainable, cleaner, cost-effective future.”
Copyright Business Recorder, 2023