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A tale of two Energy Policies

Can renewable energy bridge Pakistan’s energy shortfall?

By Kunwar Khuldune Shahid

THE aims of the National Power Policy (NPP) of 2013 can be reduced to two major goals: reducing Pakistan’s power shortfall from 4,500 to 5,500 MW to zero by 2017 and enhancing the energy mix by incorporating renewable energy sources. The latter, i.e., capitalizing on the wind, hydropower, biogas, coal, nuclear and solar potential, would help ensure that the former, i.e., reduction in the power shortfall to zero MW isn’t quite as ambitious goal as it would be otherwise. Provided we give it an additional few years to materialize of course.

The power agreements signed as a part of the China-Pakistan Economic Corridor (CPEC) seem to signal the government’s intent vis-à-vis exploration of renewable energy resources. Among other initiatives the CPEC will include the 70 MW Suki Kinari Hydropower Project, Thar Block II 2×330 MW Coal-fired Power Project, Dawood Wind Power project and the Quaid-e-Azam Solar Park, which many are dubbing as the ‘game changer’ with regards to Pakistan’s energy predicament. These projects clearly highlight the government throwing down the gauntlet to the private sector and seeking investments in renewable energy.

Winds of Change

Using wind energy to generate electricity, charge batteries or pump water is the basic form of wind energy technology. Most of these technologies work as stand-alone applications, or are connected to a power grid. They can even be combined with a photovoltaic system. Generally around the world wind turbines are installed together forming a wind farm which provides grid power. Stand-alone turbines are normally used to pump water.

According to the Alternative Energy Development Board’s (AEDB) estimates, 50,000 MW of wind power potential exists in the Keti Bandar-Gharo area alone. The mean wind speed in Gharo is estimated to be 6.86m/s 50 meters above sea level. The annual power density of area is 408.6 W/m2.

The cost associated with wind power generation has minimized investments by both the government and the private sector. This in turn means that investors would need extremely enticing incentives to consider investing in wind energy. And the government’s ‘Policy for Development of Renewable Energy for Power Generation’, updated in 2012 gives them precisely that.

The government is offering an upfront tariff of 14.6628 cents per kWh. It will also facilitate procurement and leasing of land at a very cheap rate of 7 euros annually per acre. The government is also guaranteeing availability of land and electricity purchase, with an attractive tariff – cost plus 15 percent Return on Equity (ROE) – which is indexed to inflation and variation in exchange rate. It has also erased import duties on equipment and given exemptions on income, sales and withholding tax.

While the government is doing its best to lure investors into wind power projects, nuclear physicist and national security analyst Pervez Hoodbhoy believes that considering the focus on CPEC projects, and overwhelming strategic interest for China, Pakistan should enhance Chinese involvement in renewable energy projects as well.

“If Pakistan is going to rely on China to solve its energy problems, then why not import wind turbines and production technology from China?” he asks, adding, “China after all is now designing and building its own windmills. Unlike enormously complex nuclear power plants, wind turbines and solar thermal plants could be manufactured locally, offering an important stimulus for the national economy. Turnkey nuclear plants require that nearly everything, including skilled labor, be imported.”

Hoodbhoy says that “In 2012, China and India generated more power from wind energy than from their nuclear plants. Just last year, India installed 2,500 MW of wind power and has plans for a large expansion. China plans to increase its wind power capacity from 75,000 MW today to a staggering 200,000 MW by 2020. In the United States, which has 100 nuclear power plants, a recent government report found that within four years electricity from wind would be cheaper than nuclear power; 13,000 MW of wind power plants were installed in the United States in 2013 alone, he reveals, adding that the global addition to wind power that year was over 40,000 MW.

Physicist and research scientist Dr. Abdul Hameed Nayyar highlights how wind energy is being embraced around the world. “Every year new wind power plants worth over 50,000 MW are being installed globally. The global capacity has already crossed 320,000 MW. In 2014 alone, China put up wind power plants for 23,000 MW. These are all grid scale plants and the grid management is believed to have been perfected to allow using power from wind plants in the base load.”

“Pakistan is believed to have a total wind power potential of nearly 350,000 MW, but more like a practical total of over 50,000 MW. Some wind charting has been done, the data of which is available to potential investors. Yet the progress is dismal,” he laments.

In the US, electricity from solar panels and wind turbines is expected to become as cheap as standard grid electricity by next year. In India, according to a report released this month by Deutsche Bank, solar will provide 25 percent of India’s power capacity by 2022. China added a world record of 23 GW of new wind power capacity in 2014, of which 84 percent has already been connected to the grid. In 2013, Denmark’s wind turbines provided a third of the country’s energy supply and Spain’s a fifth. Solar is expected to be the dominant source of energy worldwide within the next 15 years, generating $5 trillion in revenue. Although its intermittent nature necessitates supplements, new energy storage mechanisms have made much progress.

Pervez Hoodbhoy Nuclear Physicist and National Security Analyst

Nayyar continues on to say, “Total wind power installation has not gone beyond 200 MW in over 10 years. The country depends heavily on imported plants, and has made no move at all to acquire windmill manufacturing capacity.” He highlights how local entrepreneurs have already joined hands with foreign investors. “Local investors have joined hands with external investors in putting up imported plants. It is common knowledge that wind turbines and blades are prone to frequent breakdowns. Dependence on imported plants would mean long outages from plants. “A country like China that is putting up new wind power plants worth 20,000 MW each year must have an exceptionally strong base for manufacturing windmills. Pakistan should buy this manufacturing technology from China, perhaps under a joint production plan, and aim at putting up locally manufactured new wind power plants of several megawatts a year. Failing to do that would be shameful and an unpardonable lapse.”

Going Green

Wind Energy is a Mature Technology

REON Energy Solutions, CEO Inam Ur Rahman says that globally wind energy is a mature technology while solar energy solutions are still in the development phase. The conversion rate of solar energy is 17 to 18 percent as compared to wind energy of 35 percent. Thus, within renewables, wind energy presents a more effective choice today if this is the only variable considered. However, heavy investments in research and development of solar equipment have resulted in conversion rates’ increase to 19 percent from 13 percent in just the last five years. This trend is expected to continue and pilot level success has been achieved at 40 percent conversion. Globally, the prices of solar energy solutions have come down to one-thirds of levels just 5 years ago and this downward trend continues. It is forecast that by the year 2050 cost of generation from solar will be reduced to only 2 US cents per KwH. This will be much cheaper than any fossil fuel generation. Solar solutions have the added advantage of flexibility and can be placed anywhere and in all kinds of sizes. This makes it the future energy solution for the world. In Pakistan’s perspective, the Punjab Government has established a 100 MW Quaid-e-Azam Solar Park with conversion rate of 17 percent. However this project was set up in less than a year while conventional energy generation projects take minimum of three years for completion. Wind energy projects take 15 to 18 months, whilst large Hydropower projects take 7 to 10 years. So an energy deficit country needs a quick induction of energy in the system to reduce the shortfall. In this scenario the solar power park seems to be one of the main viable options. One can argue that because of its flexibility, the implementation of solar energy can benefit a much larger number of people if applied in a distributed generation setup. As an example, more than one million people could be provided basic electricity for their lifetime in the same investment that has been made in the 100 MW solar project. This would bring energy to those who have no access to electricity yet and to areas where it will be too expensive to ever expand the national grid. This would also immensely change lives, health, and educational conditions for thousands of families. Another big opportunity in distributed generation is the concept of net-metering that is waiting for its opportunity in urban Pakistan. The right policy can turn every rooftop in to a small generation facility and add significant energy to the local grids. The main wind corridor in Pakistan is a sparsely populated area with minimal local demand and hence all the energy has to be pumped into the national grid. This is one major limitation to its rapid growth in Pakistan. The solution is to install larger wind energy projects – of around 200 MW each to make investment in grid connectivity more feasible. Like other renewables, the initial cost of energy may appear high but it becomes very cheap once the debt of the projects is paid back. One common misconception in Pakistan is that a lot of base load plants are required to support renewable energy projects of both solar and wind. However, it has been proven in countries like Germany and Denmark that with experience and proper forecasting and mathematical modelling, renewable resources can overcome any such constraint. In Germany, there has been an instance where half of the entire country was running on Solar and Wind for a few hours – and we have much better solar irradiation in Pakistan, concludes Rahman.

Jawwad Rizvi

Massive bio potential

Biomass energy in Pakistan is dominated by crop residue, like wheat and rice straw, corn stovers and cotton sticks. The residue also includes crop waste that comes from processing industries, for example bagasse and rice husk. In addition to crop residue, plants without timber value are the largest biomass energy sources. They can be used to produce gas or as fuel as well.

According to estimates, 50 million tons of annual waste is produced from major crops in Punjab. Around 7 million of that comes from sugarcane bagasse, which is being used by the sugar industry to produce electricity. This leaves 43 million tons of residue available for power generation in the province Punjab. Furthermore, it is estimated that around 11 million tons of resource potential of the four main crops (wheat, rice, cotton and corn) is available in the province.

According to power sector expert Mohsin Syed, “200 MW electricity could be generated from the 5,000 tons of daily municipal waste in Lahore.” He estimates that “if the solid municipal waste from other big cities of the province is utilised, the electricity generation process could reach 600 to 1,000 MW.” The Nishat Group is utilizing municipal waste from Lahore to heat material in its cement plant. The heat is produced through “municipal waste bricks which can also be used for power generation.”

According to a report, rice husk is being used in Indian Punjab to generate 5 MW of electricity. A study undertaken by the All Pakistan Textile Mills Association (aptma) states that Pakistan can generate up to 1,000 MW per year from rice husk. In a recent conference titled ‘Coal and Alternative Energy Resources’ held at the Lahore Chamber of Commerce and Industry (LCCI). LCCI Vice President Syed Mahmood Ghaznavi said, “Pakistan would have to promote alternate energy resources as reliance on conventional resources is one of the biggest reasons of energy crisis.” Bioenergy is a versatile source that can be used to overcome energy challenge besides making a considerable contribution to counter the negative impact of climate change phenomenon, he added. “Biomass energy has the potential to be a substitute for diminishing global oil supplies,” he claimed.

Going Green

Solar power is highly competitive

QUAID-e-Azam Solar Power Private Ltd (QASP), CEO Najam Shah, considers the cost of solar power project and generation as highly competitive when compared to any other energy generation project in Pakistan. “The solar power tariff could be further reduced if the project financing is reduced,” he asserts. “The tariff of solar power generation is higher in the beginning with $17 cents per unit, which after repayment of debt (of debt-repayment period) comes down to $7 cents per unit. The total project cost is $150 million, of which $131 million is project assets and $19 million is of non-project cost, i.e., feasibility, consultancy, so on and so forth. The most important aspect of power purchase agreement of solar is that no capacity charges will be levied on buyer. It means the payment will be made only against the power transmitted to the national grid- pay as you go. This is not the case in terms of thermal power plants and public pays even for idle capacity. Besides, this project will help alleviate poverty in remote desert wasteland, creating employment. This will also reduce our import bill. With low operation and maintenance cost of only 2 percent of the total project cost and no reliance on external imports of fossil fuel, the installation of solar project is quick and easy. Who knows what would be the impact on the cost of energy production in Pakistan based on the price increment of fossil fuels in the future? Other than this, if relations with international gas and oil suppliers get disturbed for any reason, it could adversely affect the overall economy and country due to Pakistan’s dependence on imported fossil fuels,” Shah adds. However, there is no concern of depletion for indigenous natural resource like solar irradiance in solar power generation.

Commenting on the difference between the wind and solar power generation, Shah says that solar is the best available resource in Pakistan.

Solar production curve matches the demand curve for industry and economy of Pakistan – daytime usage. On the other hand, wind energy is more unpredictable and does not match with the demand curve. “Sunlight pattern is available around the year but wind pattern is unpredictable,” he adds. Commenting on the quality of photovoltaic panels, he claims that the quality of the solar modules had been tested at site and at the factory by the German third-party inspectors.
The plant is installed under the supervision of another German consultant as Owner’s Engineer for quality control and reliability. Besides, the Engineering, Procurement and Construction (EPC) agreement has also been locked as Operations and Maintenance Operator for next 25 years life of the plant with guaranteed production and penalties for any shortfall.

— Jawwad Rizvi

Nuclear Question

There’s no government study which shows nuclear reactors being the best or the most cost-effective solution to Pakistan’s energy predicament. “The Pakistan Atomic Energy Commission, which is the sole body authorized to install and operate nuclear reactors, would have us believe otherwise,” says Hoodbhoy.

“Since Pakistan is forbidden from purchasing reactors from the open market, this leaves China as its sole supplier. With billions of dollars at stake, Chinese government and commercial interests are actively at work to promote these reactor sales. Concerns of nuclear safety are being put on the backburner,” he adds. The government’s inauguration of the Karachi nuclear power plants KANUPP-II and KANUPP-III have also been received with skepticism, with safety of the most densely populated part of Pakistan coming under jeopardy. Hoodbhoy explains, “Until last year, the plan was to install two 1,100 MW reactors of the ACP-1,000 type but a later news report said these would be of the Hualong-1 design. One now hears that the ACC-1,000 is being considered. The authorities said the ACP-1,000 is based on a Chinese adaptation of a long-established nuclear reactor type but with added safety features. Whichever reactor finally gets installed, from what we know it is still in the process of design.”

It is expected that the reactor will work safely but would this first-of-a-kind reactor actually behave as it should?

“Sensible people would not even buy a used car without driving it to see if everything works, and no airline would consider buying a new jetliner without extensive flight testing. Nuclear reactors have systems far more intricate than those inside the most complex passenger aircraft. This is for good reason; the consequences of a reactor failure could be immeasurably worse than an airplane crash,” Hoodbhoy claims. A troubling precedent suggests the need for caution. “In the 1990s, China designed and built a prototype nuclear reactor at Qinshan.

An accident in 1998 due to a design flaw shut it down for a year. Initially, the Chinese nuclear designers and operators could not understand or fix the problem, and had to contract a US company for the repair work. One part of the reactor had to be redesigned. After this, China did not build any more reactors of the Qinshan design for itself but happily sold this type of reactor to Pakistan; four such reactors will eventually operate at Chashma. Pakistan was lucky that the reactor accident happened before the first Chashma plant went on line. There was enough time for it to be redesigned to avoid the problem that led to the breakdown at Qinshan. Pakistan’s luck may not always hold,” Hoodbhoy warns. Untested reactor designs are by no means the only reason to worry about reactor safety in Pakistan.

“There are spent fuel ponds, which will be adjacent to the reactors and contains tons of radioactive materials after a few years. How well will these be protected? One should worry about attacks on these as well as reactors. Officials discount the possibility but the fact is that terrorists have carried out successful attacks on many of Pakistan’s highly-guarded military institutions including the general headquarters of the army, the PNS Mehran, and the Kamra air force base. There is no reason to believe that nuclear reactors would be invulnerable to attack.” Operator error is also a worrying possibility. Hoodbhoy says, “At a nuclear power plant, there is simply no way for people outside the plant to know about bad practices within it. Indeed, the Chernobyl disaster was the result of imprudent actions on the part of reactor operators, and it underscored the vulnerability of nuclear power plants to poor judgment. These problems could be exacerbated at a Chinese-designed, Pakistani-operated reactor because operators will lack the intimate knowledge of design and software issues that they might have at an indigenous reactor.”

Ray of Hope

In May this year Prime Minister Nawaz Sharif inaugurated Pakistan’s first solar power plant, the Quaid-e-Azam Solar Park in Bahawalpur. It will produce 100 MW of power this year. The park, which is spread over 500 acres, has been built by Chinese company Tebian Electric Apparatus Stock Co Ltd. At a construction cost of $190 million, the Quaid-e-Azam Solar Park is being dubbed a game changer.

Nayyar believes going for grid scale solar photovoltaic plants is a positive step. “Going for grid scale solar photovoltaic plants is a welcome step, but not something at which to stop, or even to replicate it as such. The PV cell panels have been purchased from abroad (China), and they will be maintained by replacing broken down panels again from outside. It will give us electricity, all right, but it will increase dependence on external markets. The principle should be to acquire technology to manufacture solar cell panels on a mass scale, perhaps in a partnership with Chinese corporations, which will eventually give us autarky in the expansion of this technology,” he says.

Nayyar adds that we should also be watchful of new developments in solar photovoltaic. New non-silicon systems are emerging which have substantially higher conversion efficiency and cost much less. We must invest in research and development around methyl ammonium lead iodide perovskite cells.

He continues: “We must not ignore solar thermal power plants as another possibility, and set up institutions to carry forward research and development.”

Hoodbhoy highlights the need to expand the energy resource base. “One hopes that Quaid-e-Azam Solar Park’s success will lead to similar projects. Pakistan will need to rely on a broad range of energy sources to meet its future needs, ranging from fossil fuels to renewable sources such as hydropower, solar and wind. I am glad we are following the general trend,” he says.

“India, which has over 2,000 MW of solar power, announced in February 2014 a plan to build a 4,000 MW solar plant in the Rajasthan Desert to make electricity. This is equivalent to four large nuclear reactors. The plant is to be built within seven years at an expected cost of $4.4 billion. The cost of electricity from solar power in India has fallen by more than half in just the past three years and it is expected to become even cheaper,” he adds.

Hoodbhoy further adds that the price to generate power through solar panels will come down in the near future. “In the US, electricity from solar panels and wind turbines is expected to become as cheap as standard grid electricity by next year. In India, according to a report released this month by Deutsche Bank, solar will provide 25 percent of India’s power capacity by 2022. China added a world record of 23 GW of new wind power capacity in 2014, of which 84 percent has already been connected to the grid.

In 2013, Hoodbhoy says, Denmark’s wind turbines provided a third of the country’s energy supply and Spain’s a fifth.”

Solar is expected to be the dominant source of energy worldwide within the next 15 years and generate $5 trillion in revenue. Although its intermittent nature necessitates supplements, new energy storage mechanisms have made much progress.

All-round Efficiency

“Let’s also remember that Pakistan’s installed electric capacity of 22.7 GW is adequate in principle to meet the daily average power demand of around 17 GW, a mere 14.3 GW, on average, are actually generated,” Hoodbhoy claims.

“That is, about 30 percent of existing capacity is not used because of a financial management problem known as “circular debt”. Worse, Pakistan’s distribution system is both leaky and subject to widespread theft, and these problems can eat up a staggering 25 to 30 percent of total production,” he adds.

He continues, “On top of the transmission and distribution losses is the fact that the machines and appliances in common use in Pakistani factories, offices and homes are not energy efficient and so consume more energy than they should. The NPP 2013 claims, “A conservation program based upon energy saver lighting is already underway with a potential of saving 1,000 MW if all 50 million consumers were to be converted to florescent bulbs. This says, in effect, that simply by switching the country to more efficient light bulbs, enough electricity could be saved to do without one of the new Karachi nuclear reactors.”

Nayyar agrees. “If adequate electricity needs of all the sectors are to be met, the current installed capacity ought to have been about 30 GW instead of the existing 23 GW, and should be increasing by at least 5 percent annually to reach the target of 50 GW in 2030,” he says.

“Out of the installed 23 GW, the available capacity cannot be more than 14 GW due to some very old and inefficient power production units,” he adds.

He further says: “The combined impact of mismanagement of fuel supply to power plants and the seemingly unresolved problem of circular debt renders the availability of power to hover around 12 GW, which is about half of the installed production

Bottom line

The government’s energy sector plans highlight the need for a diverse energy mix. As things stand, over 65 percent of the power generation load is on oil and gas, 25 percent on hydroelectricity and the remaining on coal and nuclear. The contribution of renewable energy resources to the national energy mix is close to zero.

For Pakistan to bridge its power shortfall it would have to enhance the share of renewable energy in the mix. With the Quaid-e-Azam Solar Park and CPEC’s wind projects, power will be added to the national grid albeit at an initial price that would be relatively expensive. With the work on technological advancements and the incentives for private sector investment the cost, and hence the price for the consumer, would both come down.

“In many industrially advanced countries of the world, the mix is getting heavily tilted towards renewable energy resources.

Although because of their intermittent nature, the renewable enegry sources cannot be relied upon for the base load, but they are proving extremely useful as supplementary systems. Many believe that a smart combination of several renewable enegry systems can even sustain a large chunk, if not all, of the base load,” Nayyar says. “There is a large private sector in the electricity production business in Pakistan, and more is willing to come provided it is not handicapped by unfavorable conditions.”

Kunwar Khuldune Shahid is a journalist who has covered energy for various publications.