Power comes at a price

  • File Jan 24, 2021

With a regular increase in population, economic growth and local demand, it has become imperative for the country to work out a long-term electricity generation plan to avoid a supply gap and keep electricity affordable for the masses. In this context, the National Transmission and Despatch Company (NTDC) has developed an Indicative Generation Capacity Expansion Plan (IGCEP) 2047, covering the period from 2020 to 2047. The plan outlines how the country will meet the projected demand. It speculates growth in electricity demand over the years and suggests the sources it will exploit to generate it. The policy document also counts in the energy requirements to fuel electric vehicles that the country plans to introduce.

As mentioned by the NTDC, the plan’s main focus is on increasing dependence on indigenous sources of electricity production, including the local coal, and making power affordable for the masses. If we look at the IGCEP 2047 document, it talks about adding 148,074 MW of electricity to the national grid by 2047. This includes around 45,929 MW hydro-based electricity, local coal 32,697 MW, re-gasified liquefied natural gas (RLNG) 27,090 MW, solar 26,522 MW, wind 9,241 MW, nuclear 3,300 MW, imported coal 1,620 MW, cross border 1,000 MW, bagasse 655 MW, and natural gas 20 MWs.

However, the latest reports indicate that the National Electrical Power Regulatory Authority (NEPRA) – the country’s power sector regulator – has reviewed and remanded the document to the NDTC and asked it to revise it. Its point is that certain provisions in the document are not in line with the clean energy and affordability considerations of the government. The NTDC is reportedly reviewing the plan.

One of the main objections against the IGCEP 2047 is that the cost of electricity produced under the model proposed by it is on the high side. A study by the US-based Institute of Energy Economics and Financial Analysis (IEEFA) done in collaboration with the Alliance for Climate Justice and Clean Energy (ACGCE), Pakistan, points out that the demand projections made under the plan are too optimistic and may result in excess capacity issues.

The report says the plan assumes that the GDP growth rate will increase from 4 percent in 2020 to 5.5 percent by 2025 and remain at that level through 2047. As the IGCEP forecasting was completed before the Covid-19 caused an economic slowdown in the country, it did not take the economy’s contraction and the expected low economic growth rates in the years to follow into account.

Simon Nicholas, an international energy finance analyst, based in Australia, says excess capacity issues haunt several countries as they have to make capacity payments to power plants working below their capacity or lying idle.

Nicholas points out that other nations, including China, India, Bangladesh, and Indonesia, that have overestimated power demand growth are having to deal declining utilisation rates, increasing capacity payments to idle plants, and rising subsidies and tariffs to cover the cost of excessive, expensive power plants. Pakistan must therefore strive to make accurate estimates so that the consumers do not have to bear the burden of making capacity payments.

Lack of focus on renewable energy in Pakistan has perturbed many, including some power sector experts who say resources like wind and solar must be exploited first.

Secondly, energy sector experts believe that trying to reduce reliance on fossil fuel imports by focusing on expensive domestic coal-fired power is not a good policy. Haroon Akram, a climate reality leader interested in the energy sector, challenges the perception that power production from domestic coal is cheap. He says immense resources are required to divert water to the coal power plant and transmit the electricity produced. “Once we include these allied costs, coal power does not look as feasible as many think.”

He says developed countries of the European Union (EU) are planning to impose a coal tax on imports from countries using coal power. This may have a negative effect on a country like ours. This is something Pakistan must keep in mind while finalizing its generation plans.

Under the IGCEP 2047, the share of local coal in energy production by the completion year is projected to be 36 percent, hydroelectric plants 43 percent, and other renewable resources 15 percent. The share of solar and wind power will be 25 percent in 2030 and decline afterward.

This lack of focus on renewable energy in Pakistan has perturbed many, including some power sector experts who say resources like wind and solar must be exploited first. Haneda Isaac, a research analyst at the Islamabad-based Rural Development Policy Institute (RDPI), says the cost of renewable energy has come down drastically and is likely to come down further in the future. Newer technologies like high storage capacity batteries, she says, have made renewable energy more reliable and mitigated the issue of intermittency.

She says IGCEP 2047 envisages around 27,000 MW of RLNG power as a backup to complement the intermittent nature of renewable energy. This, she says, will be a huge burden on consumers who will be paying the cost in the end. The RLNG power plants, she says, will ultimately become idle and lead to an increase in the capacity payments the government will have to make to the producers. Isaac suggests that setting up hybrid renewable energy plants using sun and wind power can help tackle intermittency. She says, it is quite likely that high storage batteries will become available globally over time, making the backup RLNG plants redundant.

Large dams are often touted for low operating cost but the timelines are often too long to be attractive. The CEP 2047 sets the completion date of the Diamer-Bhasha Dam in 2043 though the government has set it in 2026. The project was officially inaugurated in July 2020, although the foundation stone was laid in 1998.

There are objections from stakeholders that the data used by the NTDC to calculate costs is not reliable, and the source information is not public. Some experts have alleged that in some instances instead of taking an average value, the cost of production of high efficiency power plants is made the basis of calculations/projections.

The original article was published on The News