Fostering Renewable Energy Development in Sindh: Identification of Impediments

  • File ACJCE
  • File Jun 26, 2020 - Jun 26, 2020

Summary

‘Thar Coal: Locking Pakistan into Unsustainable Capacity Payments’ by Simon Nicholas, IEEFA Two more Thar coal power projects have reached financial close so far in 2020 as the high capacity payments of such fossil fuel-based plants threaten to become financially unsustainable. Pakistan has now asked China for easier repayment terms on 12GW of CPEC power projects totaling US$30bn of investment, hoping to lower the burden of capacity payments. Meanwhile, the economic downturn caused by COVID-19 is now increasing the risk of Pakistan being burdened by overcapacity which will make the financial issues within the power sector even worse. Overcapacity was an issue in Pakistan even before the pandemic as slow economic growth lowered power demand growth. Pakistan isn’t alone in dealing with overcapacity concerns, Egypt recently shelved plans for a huge 6.6GW China-backed coal fired power plant due to concerns about overcapacity and a preference for renewable energy. A switch of focus towards smaller, modular renewable energy additions, grid improvements and energy efficiency can help reduce the risk of overcapacity whilst avoiding the further burden of capacity payments. In addition to being the cheapest source of new power generation Pakistan, renewable energy also has the advantage of being able to attract a wider range of potential investors to Pakistan who would not want to invest in coal. Sindh province, the location of the Thar coal projects, is Pakistan’s renewable energy leader and demonstrates the nation’s renewable energy potential. IEEFA’s modelling suggests Sindh province could reach more than 50% renewable energy capacity by 2030, leading Pakistan in meeting the national renewables target. As Pakistan shortly begins to emerge from the COVID-19-induced economic downtown, it faces an opportunity to overhaul its power capacity addition plans in favour of renewable energy, thereby avoiding the further financial burden of large, expensive power plants with their unsustainable capacity payments.

‘Fostering Renewable Energy Development in Sindh: Identification of Impediments and the Road Ahead’ by Zeeshan Ashfaq, WWEA Weak Grid Infrastructure: Weak grid infrastructure is the most pressing issue containing the growth of renewable energy in Sindh. Continuous tripping and forced shutdowns are frequent for operational projects. Under constructions projects are being delayed due to insufficient evacuation facilities. Limited Ability of Provincial Government: Power system in Pakistan is centralized where the entities under the federal government have monopoly over power evacuation, offtake and distribution. The provincial government has not been able to develop institutional setup that deals with power purchase and distribution. Lack of Coordination Mechanism: Policy makers at both levels have failed to develop consistent and coherent operating procedures and power procurement plans based on the existing policies. More than 2,500MW of LOIs issued by Sindh government are not included in NTDC’s grid development plan as those LOIs were issued without the involvement of the grid operator. Inconsistent Regulatory and Policy Decisions: Arbitrary decisions by the federal government have significantly slowed the progress of renewable energy in Pakistan. The Cabinet Committee on Energy’s decision in 2017 stopped renewable energy projects including the ones initiated by Sindh under feed-in- tariff framework whereas coal and RLNG based plants were allowed development. The responses from the government officials remain measured and divided. While the officials at the federal level believe a significant progress has been made in terms of renewable energy deployment and bottlenecks are being removed gradually, respondents from the provincial government contend that more renewable energy could have been added if the previous government at the federal level had not made lop-sided policy decisions.