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Challenges for existing energy plans and future options

Challenges for existing energy plans and future options

The space for Pakistan’s energy options is undergoing a squeeze due to a combination of external and internal factors. This winter we have been once again reminded that our domestic gas reserves will largely deplete in a matter of a few years.

It has also emerged that the imported LNG (liquefied natural gas), which was seen as a substitute for domestic gas, cannot be taken for granted. This is mainly because the rich importing countries are able to elbow out financially weak countries like Pakistan when the international LNG prices shoot up, as happened in 2021. 

Being domestic consumers, we are affected by the gas shortages at a more personal level, losing sight of the fact that the outputs of two productive areas of the economy — electricity and fertiliser — are also highly dependent on a reliable supply of gas.  

The power generation scene in the next decade should hover around large-scale hydropower plants, nuclear-based thermal plants, wind and solar and battery-based storage solutions

Let us now come to the case of domestic coal production (from Thar coalfields), which was expected to help in reducing our reliance on imported fuels. The National Transmission & Despatch Company (NTDC) has plans to increase the domestic-coal-based generation from 660MW in 2021 to 3,630 MW in 2030. Thus far we have relied mainly on the multilateral donor banks) and the China-Pakistan Economic Corridor for building new coal-based power plants. 

There’s now a major roadblock staring us as both of these financing avenues appear to be closing due to international climate change concerns. Especially, China’s decision to no longer fund coal plants in foreign countries has come as a rude shock to our power system plans. What this development will do for the continued exploitation of our proven coal reserves is anybody’s guess. Coal-gasification or other innovative methods can take many years from the idea-to-fruition stage, given that we are not known to adopt new technologies so easily.

The above-mentioned setbacks leave us with limited choices in building our future power generating capacity that is reliable and sustainable. It also implies that the mix of different generation technologies which is given in the recently approved Power Plan will need to undergo a change.

For renewable energy, we will rely on large hydropower plants, some of which are under construction, and to a lesser extent on wind and solar facilities. When it comes to thermal plants, nuclear power should gain prominence as is also being seen in many other countries that are taking a fresh look at it after a long gap since the Fukushima accident. 

The NTDC’s present plan makes a provision to increase nuclear output from 2,500MW in 2021 to 3,600MW in 2025 with no further addition until 2030. Nuclear output will need to be increased to make up for the “no-longer-likely” domestic coal plant additions. It may be noted that nearly 3,000MW additions based on domestic coal have been planned between 2021 and 2030.

The government has ambitious plans to add renewable energy on a large scale over the next ten years. No doubt that wind and solar energy are clean and sustainable and are becoming more and more affordable, however, where they are installed and their modes of investment can vary. By necessity, wind plants have to be installed in the already identified wind corridors that are mainly in Sindh. 

Furthermore, these will need to be large-scale types of projects that are led by the governments and rely on private investments, mostly foreign-based. As to solar power, there are two choices although they are not mutually exclusive. One is to build large solar plants similar to the Quaid-e-Azam solar park in Bahawalpur. The second way is to set up small-scale solar plants throughout the country under a distributed energy resources (DER) expansion program with the involvement of domestic, industrial and commercial consumers. 

The net-metering program (NMP) has been ongoing for several years now but the results are dismal as only around 300MW has been added to the system so far. (The statistics of solar-based captive plants are lacking.) 

Some of the big advantages of the NMP are: (i) The production is close to the demand and hence results in lower technical losses at the same time forecloses the need for transmission lines; (ii) It is an attractive investment avenue for the general public as it provides them return on their investment in the form of reduced electricity bills; (iii) It mobilises private funds which would otherwise have to be either expended by the government or in the form of sovereign guarantees or capacity charges to be paid to .independent power producers; (iv) If made mandatory on all government buildings, it will enable the governments to avoid huge payments in the form of energy bills. 

Large-size utility-scale solar plants must be supplemented with an active DER program to ease the burden on the government’s resources. It is to be noted that the American state of California has so far installed more than 10,000MW of roof-top solar generation. Pakistan can install at least half of that capacity within the next few years provided that the DISCOs are assigned annual targets of achievements which will also instil a sense of competition among them. 

The setting of targets for DISCOS can also lead to innovative financing instruments and new business ventures that can act as integrators of several roof-top facilities. The government can use its funds to develop large battery storage projects that smoothen out the variation of output from wind and solar plants.

To summarise, the power generation scene in the next decade should hover around large-scale hydropower plants, nuclear-based thermal plants, wind and solar — the latter using more and more distributed generation — and battery-based storage solutions. This combination will prove to be sustainable, less costly and clean, at the same time help to avoid the import of fuels that can undergo price increases unexpectedly at the cost of the country’s foreign exchange reserves. 

The writer is a former Group Director of Energy at the Islamic Development Bank and currently works as a consultant on sustainable energy-related matters

Published in Dawn, The Business and Finance Weekly, January 24th, 2022

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