Use of Indigenous Energy Resources -Pakistan

 

Use of Indigenous Energy Resources -Pakistan

Introduction

Utilization of indigenous energy resources is one of the key objectives of energy and power system expansion planning. This is one objective that Pakistan has failed to meet and in some areas has regressed. Use of imported sources of energy , cause balance of payment issues If a country spends its export earnings on import of fuel it cannot invest in capital plant and will therefore either stagnate of have very low economic growth rates.

A.                Coal

Local Fuel Resources

Pakistan took to coal by: installing coal power plants, super critical, based on imported coal at Sahiwal, Port Qasim and Hub Co. site; and on coal power plants based on Thar coal, first two plants are sub critical. After commission of two coal power plants and according permission to the Hub Co. plant the government has announced to cease allowing power plants based on imported fuel (this permission, however, is restricted to power plants meant for the grid, private sector captive plants continue to be based on imported coal) . LNG plants that are at various stages of completion are also based on imported fuel, the government had announced to not allow any mire plants on LNG.

Thar Development

Thar coal mining and power plant construction is going well and is on schedule. The good news is:  mining issues associated with Thar coal have been found incorrect; the issue with slope stability, in open pit mining, also proved unfounded as after the top soil which was sand , the soil below is clay , this makes sense as Thar is the ancient  route of the vanished Hakra or Saraswati River ; it seems that Thar coal after treatment could be transported , Jamshoror power plant has agreements signed for use of (partial) Thar coal . The bad news is that the underground water seams are three instead of two and the third, unlike the top two which are fossil water, is fed from a lake in Indian Thar , and therefore there will be need of continuous dewatering as long as coal mining goes on . The water seams have been successfully tackled.

Keti Bunder Development

The Thar development will face issues with water availability, which is why Sindh Government came up with the concept of moving plants to Keti Bunder and connecting Thar and Badin by means of a 300 km+ railway way line, the Keti Bunder Power plants will utilize sea water. This development needs attention.

Resettlement Issues

Thar coal will have issues with the resettlement of te local population , this is a complicated issue  firstly because the majority of the population does not have documents to property and secondly  Sindh Government is  a share holder in the Thar development and also is the environment and social watch dog , this presents a conflict of interest issue . Outside third party over sight is needed.

Cost of Power from local coal

Sindh Government participation in Thar development and the manner in which mining rights have been issued present an issue. NEPRA wishes to graduate to projects based on competitive bidding and subsequently to a open market structure, the present arrangements will present an obstacle. Already the high ROE allowance and mining structure has resulted in coal power that will be made available to Pakistan higher than similar developments elsewhere.

Domestic Coal share in energy mix

Domestic coal is beset with large problems. In -fact the whole mining sector is very poorly regulated. Mining resulted in high human losses. The cement industry utilizes high quality imported coal. Treatment plants will allow local coal to fulfill this requirement. Increase in domestic coal in total energy has to be carefully planned.

B.                Large Hydro power Projects

Background

One of the biggest water challenges for Pakistan is the fact that none of its freshwater sources originate inside its own boundaries. Pakistan relies on three tributaries of the Indus River, which flows from Tibet and through India before reaching Pakistan. The river already supports a huge mass of people, and populations in the region are growing. Additional water stress arises from increasing demand as these regional economies develop. Climate change poses additional risks as temperatures rise, rainfall patterns become increasingly variable, and floods and droughts become more severe. In 2010, Pakistan experienced floods more severe than ever before, affecting around 20 million people and causing an estimated US$5 billion in damages to the agriculture sector alone. The year 2012 also saw major flooding, affecting another 4.8 million people and destroying over a million acres in crops. Meanwhile in other regions of Pakistan, prolonged droughts continue to jeopardize smallholder agriculture. The Global Climate Risk Index by German watch found that Pakistan was the country most affected by extreme weather in 2012, both in terms of human losses and financial losses. It is, therefore, of vital importance that the country should harness the water for meeting both its future power need and, even more importantly, build large storage dams. These multi-purpose projects hold the key to Pakistan’s energy and water future.

Recent Experience of Hydropower Projects Development

The share of hydropower in the total power generation mix is on the decline. The three high-head HPPs and Tarbela extension project that were recently completed underwent excessive delays in reaching commissioning stage (see Table). In case of the still incomplete[1] 969 MW Neelum Jhelum HPP (recently partly commissioned), the huge time delays are accompanied by an order of magnitude increase in the total project cost.  .  The delays in completion of projects is invariably accompanied by increases in their cost and thus the country suffers in two ways – economic loss due to power from the plant not becoming available and incurring of additional expense above the original cost estimate.  

Table : Delays in recent public sector hydropower projects

S.No	Name of Project	Capacity (MW)	Commencement Date*	Targeted Completion Date*	Actual Completion Date**	Commencement to Completion (Months)
1	Khan Khwar	72	July 2003	June 2010	July 2012	108
2	Allai Khwar	121	June 2003	Dec. 2011	March 2013	117
3	Duber Khwar	130	July 2003	Dec. 2011	March 2014	123
4	Jinnah	96	July 2006	June 2011	May 2013	82
5	Neelum Jhelum	969	Dec 2007	Nov. 2015	Under constr.	95

* Source: FODP Report (2010)

** Source: WAPDA annual report 2015-16

Obstacles in Development of Hydropower

 An assessment of the energy sector in Pakistan reveals that since 2009 the self reliance objective has not been achieved and at the way plans are finalized by 2023 there would be little movement towards achieving the objective of reliance related to indigenous energy. One aspect of this is the failure to increase the share of hydropower in the energy mix.

1.      Share of hydropower in energy and power mix. Energy and power data suggest that hydropower share in total mix has stagnated and this trend is likely to continue to 2023 , in fact in 2023 hydropower share will decrease slightly  compared to 2017 .There are several reasons for this . the last many  hydropower plants added to the system  in the public sector have faced inordinate delays ( Golen Gol, Allai Khwar, Khan Khwar, Nelumn Jhelum , Jinnah, Gomal Dam, Punjab and KP Low heads and Tarbela extension ) have also registered significant  cost escalation .Insufficient studies, mismanaged resettlement and land  acquisition,  , indifferent contract management, and funding woes triggered these delays . The unresolved issue of the (‘profits on hydroelectric power generation ‘) royalty also creates indirect hurdles in development of hydropower. Friction between KP and the centre on this issue has starved KPs hydroelectric power potential to be severely underutilized, in evidence the better utilization of AJ&K hydropower potential as compared to KPs potential (KP hydropower potential is generally more economic to AJ&Ks mainly due to superior geology. Large hydro’s take more than 5 years to complete therefore the government which has a mandate for 5 years is not interested in projects that will complete after its tenure completion. There is very little coordination between Provincial/local governments and Federal governments related to execution of hydropower plants. Land acquisition and resettlement issues are poorly tackled. Preconstruction facilities and infrastructure for construction receives insufficient attention, these all emanate from indifferent feasibility studies that are poorly monitored and controlled. HEPO has been weakened, underfunded and its ability to provide guidance in hydropower issues has been compromised. Capacity building has not received much attention. KP has faced issues with transmission lines, there have been instances where   power plants were ready but transmission lines were not. Rules on who has responsibility to construct lines and methodology of resolving transmission issues are not available. KP has now called for building two 500 kV lines for evacuation of power from Chitral. They neither have the financial capability nor the technical capability to perform this task. Small hydropower plants are having issues with approvals, CPPA now wishes to offer: pay what you take basis for contracting capacity; this is the result of faulty planning. Small plants also have trouble getting approval of DISCOs to connect their plant to the distribution system.

Rectification of Hydropower Share in Total mix

Share of hydropower in energy mix has stagnated; this has impacts upon the self reliance target and also on the share of clean energy in the total energy mix. . To rectify this there is need to take the following steps:

1.                  Provincial inputs in policy and plan formulation. The 18 th. Amendment of the constitution has altered the role of Federal and Provincial Governments with respect to energy in general and hydropower in particular. This needs that the decision making process is amended to cater to this changed constitutional provision. It is suggested that a policy and planning committee on power be constituted with representation from the Provinces. There is also need to periodically refer the policy and plan formulations of this committee to the CCI. Hydropower potential in AJ&K has been utilized in a much better and smoother fashion than that in KP. The primary reason for that is that hydropower falls under the AJ&K Council which has declared that hydropower potential above 50 MWs will be dealt with by PPIB whereas the potential below 50 MWs will be dealt by the AJ&K Hydroelectric Board. KP wishes to deal with all hydropower potential except that on Main Rivers for multipurpose use. KP provincial PPC has also not performed well seems there is a message to KP Government in this statement.

2.                  Preparation and monitoring of feasibility studies. Feasibility studies need inputs from a set of varied technical disciplines, there is need to: monitor and control the development of feasibility studies by an experts panels that is fully empowered; assess risk mitigation and identify the residual risk that needs to be controlled during the construction stage, like tunnel geological risk in the feasibility study.

3.                  Capacity Building. There is currently little attention paid to capacity building in the hydropower sector. ; organization engaged in development of hydropower ( HEPO/WAPDA, PEDO, AJ&K Electricity Board; Provincial Energy departments and organizations , and GB Energy departments) do not have in place a human resource enhancement program related to hydropower . Presently the Centre for Excellence in Water Resources (CoEWR) carries out a MSc. program in hydropower; there is also a hydropower training center in Mangla Dam. It is proposed that: short courses related to various aspects of hydropower (like hydrology, geology, seismicity; economics; mechanical, electrical, mechanical, turbines, financial, resettlement, environmental etc.) should regularly be arranged through the CoEWR and other institutions; funding should be provided to send candidates to the MSc. Course in the CoEWR.

4.                  EPC Contracts.  The organizations involved in hydropower sector development are not familiar with the working of the EPC contracts. There is need to provide capacity building opportunities to professional engaged in contract management of EPC contracts. EPC contracts in the IPP mode also present an issue. Sponsors engage EPC contractors that are very closely related to the main sponsor , the EPPC bidding is not transparent and is questionable, it is proposed that a third part evaluation of cost must be carried out to verify the lowest EPC bid veracity and authenticity ..

5.                  ToRs of Feasibility Studies. ToRs (terms of Reference) of feasibility studies need to be amended to reflect the concerns with identification of preconstruction activities. Delays in completion of hydropower plants partly result due to inadequate provision for pre construction facilities.

6.                  Resettlement and Environmental Issues.-Pakistani agencies have struggled with resettlement land acquisition issues. Land acquisition costs have risen sharply in areas where large infrastructure projects have been or are implemented.

7.                  BASHA, KALABAGH-Construction of Bhasha dam. Kalabagh dam could not be built due to internal political differences and Bhasha dam could not be built because of external factors. We should go on our own. This should be initiated without any further delay. Dasu has been stalled, in any case Dasu would only provide electricity, and water scarcity has become an equally important factor if not the most important factor in our development priority. Construction of Kalabgah Dam could be initiated at the earliest possible as it would be acceptable to both WB and ADB, we however need to achieve consensus amongst ourselves.

8.                  Transmission interconnection-WAPDA has complained that NTDC have not been able to add evacuation lines in time and have sought control over NTDC, this has correctly been disallowed by the government. The issue, however, needs to be resolved. In recent times NTDC have failed to add transmission lines associated with both public and private power plants in time. It is proposed that the penalty that is imposed upon IPPs for completion after due date should have also compensation for NTDC, provided, however, the transmission lines have been completed. WAPDA under construction hydropower plants also need their PPA’s altered to include to include penalty to be paid by WAPDA in case of delayed completion of power plant and a provision in this is to be made for compensation to NRDC for non-utilization of completed transmission lines   and penalty to be paid by NTDC to WAPDA in case of delayed completion of transmission lines associated with the project .

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Future Prospects

The progress on development of large-scale hydropower projects is extremely slow. No major headway is seen on large reservoir-based hydropower projects as, for example the arrangements for the highest priority Diamer-Bhasha HPP are yet to materialize. It’s important that clarity is reached at the earliest on the time-line and planned financing arrangements for this mega-project as it is vital for Pakistan. The long-term power sector planning needs to, more than ever, take into consideration the risk posed due to impending greater shortages of water in the country. The major water storage dams that are planned to be built in the coming years are facing delays due mainly to a lack of financing arrangements for them (Table). As a consequence, dependence on imported fuels for power generation will continue and, in parallel, the water shortages are expected to continue rising at an accelerating rate of growth.

Table-8: WAPDA’s List of Major Water Storage Dams in Coming Years

Project	River	Location	Capacity (MW)	Storage (MAF) Gross/Live
Diamer-Bhasha	Indus	GB	4500	8.1/6.4
Munda	Swat	FATA/KP	740	1.3/0.7
Dasu	Indus	KP	4320	1.15/?

Source: FODP Report on Water Sector (2012)

There is a strong need for developing a framework that will facilitate building institutional knowledge and relationships between water and energy infrastructure. Knowledge gained from shared systems understanding can be used to promote energy and water efficiency innovations by strategically identifying technology development needs and forming a basis for targeted investments in R&D. For this, logistical barriers to institutional collaboration between entities in the water and energy sectors should be addressed. Universities can play an important role in conducting research and providing education regarding the water-energy nexus. University researchers can perform research to build understanding of the behavior of the coupled water-energy system.

C.                 Renewable Energy

Background

Modern renewable energy (wind, solar and bagasse) projects have been inducted in the system during the last three years. The pace of development is much slower than being seen in rest of the world, and even in the region. At present, hydropower generation from large hydropower projects and renewable energy contribute about 25% and 4% of the total electricity generation, respectively. In terms of consumption, RE is meeting less than 3% of the total electricity consumption. In line with the Sustainable Development Goals (SDG) and Pakistan’s commitment to reduce its carbon footprint, the new Electricity Policy[2] lays strong emphasis on promoting the use of RE and deployment of large-scale hydropower projects. Accordingly, the share of RE is slated to increase to 10% in 2023 and 20% in 2030. The share of large hydropower generation will also be increased from 25 % to 35%. To achieve these objectives, following are the key provisions that are being made in the new Policy:

      i.          There will be no cap on the quantum of intermittent electricity to be absorbed by the NTDC/DISCOs up to 2030.

    ii.          New RE Zones will be identified on or near major grid nodes and points of interconnection and it will be mandatory for government to provide connectivity within RE Zones and/or within a certain radius of network.

  iii.          Distributed Solar Power projects – both stand-alone type and those based on Off-Grid applications – will be promoted.

  iv.          Planning and construction of Large Hydro Power Plants will get priority over the fossil fuel based thermal plants.

    v.          Substitution of subsidized electricity in agriculture and domestic sector with consumption below 300 KWh per month, supplied through grid, with solar based electricity generation schemes on concessional terms.

  vi.          Innovative financing schemes for upscaling use of RE in industry (e.g. through wheeling) and agriculture (e.g. solar tube-wells) etc. will be prepared.

vii.          Wind resource assessment will be carried out for new prospective sites and collection of data for bankable projects will be done through appropriate agencies.

viii.          A database will be set up for all the new possible avenues and of the operating renewable energy projects freely accessible to general public, researchers, academia, project developers and financiers to promote evolution of new RE projects.

Steps for conversion of tube-wells to solar power (in Baluchistan), conversion to biomass (in Sindh and Punjab) and solar roof-top installations hold the key to a clean energy sector and should, therefore, receive adequate focus in future plans.

Inadequate exploration of oil and gas and off Shore oil and gas potential of Pakistan

THE upstream oil and gas exploration sector in Pakistan is significantly off the radar for oil majors. Oil majors are not playing any significant role in the country despite its impressive geology and prospectively. In fact, over the decades,   companies such as Exxon and BP selling off assets and pulling out of Pakistan.

Considering the nature of hydrocarbon exploration, and the mettle of oil and gas executives worldwide, the argument that companies are leaving Pakistan because of the security situation does not make sense, given that oil majors continue to operate in countries like Nigeria (Boko Haram), Iraq (ISIS), Mexico (drug cartels) and central Asian states.

If it were so, one also would not see oil majors making a beeline for frontier oil provinces such as Papua New Guinea and much smaller West African states. Frontier provinces, volatile security and political environments have not tended to deter oil and gas majors from pursuing hydrocarbon reservoirs and riches. However, the bitter truth is that despite amazing geology, Pakistan has pretty much failed to market its upstream sector and is seriously short of both oil and gas while seeking imported oil, natural gas and LNG to satisfy domestic demand.

Key reason for lack of adequate exploration is the fact that half of the natural gas production in Pakistan is undertaken by the two large public sector corporations, OGDCL (Oil & Gas Development Corporation Limited) and PPL (Pakistan Petroleum Limited). These two companies also hold the majority of the exploration leases. Unfortunately, neither OGDCL nor PPL has the project management and technology expertise to rapidly exploit and develop its leases. In this regard, the government should advertise the sale of 26 percent of PPL’s equity to an overseas company boasting the management expertise and technological know-how to explore and rapidly develop Pakistan’s tight and shale gas and oil resources. A strategic investor with 26 percent shareholding in, and management control over, PPL would have the incentive to rapidly increase PPL’s hydrocarbon production. PPL is a “compact” company originally owned by the multinational Burmah group of the United Kingdom, and for this reason it is easier to take over in a privatization move. If the divestment experience of PPL is successful, then the government should consider a similar strategic divestment of the larger public sector company, OGDCL,

Exploration Issues

Reasons for decrease in production of oil and gas

1.      Absence if large discoveries

2.      97BCF  average discoveries between 1992 to 2014

3.      Only 12 discoveries of larger than 1 TCF

4.      Crude average 3,4 MMBBL

5.      5 reservoirs of 10 MMBBL or more

6.      Higher finding and developing cost per barrel of oil , these have grown approximately 74% in 2010-14 against 2005-09 due to decline in average discovery size

7.      Concentration of exploration in Potwar and Lower / Middle Sindh. KP and Baluchistan are ignored due to security concerns

8.       inappropriate wellhead pricing structure of indigenous gas

9.      Law and order situation hampering the exploration activities

10.  Shortage of drilling rigs Causing low exploration and development possibilities  and prospect generation,  whereas lack of economies of scale make the international bidder non-competitive

11.  Non-development of dormant gas reserves  because of slow evaluation and appraisal process, litigation , low BTU gas of marginal reserves

12.  Lack of proper monitoring system to review the progress on blocks already awarded for exploration

13.  Highly volatile process if the international market

14.  Inefficient and obsolete refining operation and sub standard oil products

15.  Slow exploration activates in off-shore areas due to high cost , present  off shore density is one well per 1000 sq. km compared to world, average of 9.5 wells per 1000 sq km 

Offshore hydrocarbon prospectively  

Sedimentary basins cover 827, 000km2 including both onshore and offshore, which to date remain under-explored, especially the offshore basins. According to Pakistan Basin Study of 2009, the country has six onshore and two offshore basins; offshore basins being the Indus basin and the Makran basin.  Almost the entire land mass and the offshore areas can possibly have high potential hydrocarbon plays, especially the Abyssal Fan system of the Indus offshore basin.

Abyssal or submarine fan systems constitute underwater structures having huge sedimentary deposition systems over geologic time and are a result of sediment transportation and deposition from continental shelf down on to continental slopes. They are also referred to as turbidity currents and their effects can be amplified through tectonic activity. Abyssal fans are the largest systems through which organic matter, rocks, minerals gets transported from land to sea and possess huge potential for hydrocarbon and gold exploration. Given this context, the Indus offshore basin, primarily a rift basin, is the second largest submarine fan system in the world after the Bay of Bengal and ought to contain various high probability hydrocarbon plays based on analogues. Tthe oil producing Mississippi fan (Gulf of Mexico), Amazon fan (offshore Brazil), Niger fan (offshore West Africa), Congo fan (offshore Angola) among others are prolific producers and analogous to offshore Pakistan being primarily Abyssal or Submarine fan systems, though much smaller in size.

The total recoverable reserves of natural gas as per brochure on Ministry of Petroleum website are given at 53.354TCF (trillion cubic feet), while remaining reserves are stated as 23.18TCF. The Economic Survey 2013-14 and Economic Survey 2014-15 state current gas reserves at 492bn cubic meters translating in to gas reserves of 17.3TCF (excluding shale).

As a contrast, the potential of submarine fan systems can be gauged from the fact that in place resource at the deepwater block in Bengal fan that contains the Dhirubhai discoveries initially stood at 25 TCF, essentially indicating that one find in the largest submarine fan in the world (Bengal) has a resource base greater than all remaining conventional gas reserves of Pakistan. This should get some bells ringing both at regulatory and commercial levels. The potential for hydrocarbon exploration and discoveries in the Indus offshore basin is huge, however, given the huge size of the basin itself, this will require intensive evaluation and commitment of capital. The 12 or so odd wells that have been drilled so far in Indus basin do not do justice to the hydrocarbon potential within this frontier basin. From a technical perspective, we should also be open to encountering high pressure, high temperature formations.

The Makran Offshore basin has a different geology than the Indus with both separated by the Murray ridge. Makran offshore is an oceanic and continental crust subduction zone with deepwater trenches and volcanic activity. The basin comprises oceanic crust and periodic emergence of temporary mud islands along the coast is strong evidence of huge hydrocarbon deposits. These temporary islands may imply improper sealing mechanisms but do ask for exploration laterally and of adjacent areas.

Makran basin is also a frontier basin with negligible exploration activity, though, a few wells have been drilled which encountered high pressure formations and a blowout in 1956. Analogs to Makran offshore include Cook Inlet, Alaska with a billion barrel oil equivalent reserve profile.

Hydrocarbon exploration has always been a high risk venture, however, given the geology that underlies offshore Pakistan, there is reason to believe in the prospectivity of the region. Based on analogous evidence, one can assume that offshore Pakistan is probably sitting on huge hydrocarbon deposits.

In view of the above discussion, and fiscal regime issues, it is imperative that Pakistani NOCs aggressively, and with an entrepreneurial spirit, start exploring for hydrocarbons in the Indus and Makran basins.

The National Oil Companies (NOCs) will have to take the lead and a strategic stake in offshore Pakistan, before any global oil major shows interest, given the particular business dynamics of the region and opening up of Iranian upstream sector to international market.

 LNG IMPORTS AND THE OIL and GAS POTENTAIL OF PAKISTAN

PAKISTAN has emerged on the international scene as a significant importer of liquefied natural gas (LNG). As of 2017, Pakistan was the sixth largest LNG market in Asia with imports of 4.6 million tonnes accounting for 1.6 per cent of global imports. Moreover, Pakistan added one out of five re-gasification terminals commissioned internationally by adding a floating storage re-gasification unit (FSRU) to its supply chain. The nation has opted for imported LNG to plug energy gaps despite being host to the second largest submarine basin in the world with potentially huge but undiscovered oil and gas reservoirs. It makes sense to gain some perspective on the LNG industry to enable optimized decision-making locally. The details of the off shore potential are discussed above.  Over the last couple of decades, three main markets for LNG have emerged: Asia Pacific, Europe and North America/Atlantic. Asia Pacific is the largest LNG market with Japan, China and South Korea among the largest importers. Proper commercial structuring, at both export and import stages, is extremely critical and underpins the success of any LNG project over the long term. To put things in perspective, approximate costs of Chevron`s Gorgon project and Inpex`s Ichthys project are $54 billion and $35bn, respectively. Over the years, three basic commercial structures have evolved in LNG trade with hybrids in between.These main structures are integrated, tolling and merchant structures and apply to both liquefaction and re-gasification facilities. As Pakistan has opted for LNG imports to meet energy shortages exacerbated due to a lack of timely action on our part, it would make sense to see what resource potential Pakistan has in a region that consti-tutes the largest LNG market in the world (73pc global share). Natural gas constitutes approximately 25pc of global primary energy demand and is growing as the world moves towards cleaner fuels. Moreover, Pakistan has the second largest submarine fan system in the world (Indus basin) with up to 10 kilometers of sediment accumulation. Such accumulations are recognized for huge offshore oil and gas reservoirs worldwide. Pakistan is also blessed with the Makran offshore basin, which is an oceanic and continental crust subduction zone with deep water trenches and volcanic activity. Therefore, we can assume with a high degree of probability that Pakistan potentially has huge offshore oil and gas deposits waiting to be discovered. We are also closer to main LNG markets than Qatar, which happens to be the largest LNG exporter in the world with 27pc market share.  Perhaps the LNG imports could be stop gap measures and in the breathing sace provided by these imports we put our house in order and attempt o discover oil and gas indicated in the off shore potential indicated above.  However, this is a long-term endeavor, potentially spread over the next 20 years or so, fraught with financial and commercial risks, requiring new thought paradigms and a changed risk perspective. But big oil and gas was never a business for the risk averse. A small first step towards realizing this vision could be revisiting the fiscal and regulatory regime for the upstream exploration and production sector in view of changing energy markets.    NEW OIL AND GAS FINDS AROUND THE CORNER   ExxonMobil has indicated that it is close to hitting huge oil reserves near the Pak-Iran border, which could be even bigger than the Kuwaiti reserves. Addressing business leaders at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the minister said that ExxonMobil — an American multinational oil and gas company — has so far drilled up to 5,000 meters close to the Iranian border and is optimistic about the oil find.

Facilitiating renewable energy projects

The cost of wind based power projects on upfront tariff basis, which was USD 14.7 cents in 2011, now stands at USD 6.75 cents per kWh.) For solar projects the QAU plant that was commissioned in 2015 was priced at USD 14.15 cents/kwh but for the more recent plants, e.g. Harappa Solar, the tariff is USD 11.53 cents/kwh. In comparison, cost of fossil fuels based power generation is high and volatile and hence unpredictable. In addition, fuel supply and cooling infrastructure has to be built in support of them at a huge capital cost whereas wind/solar do not need such auxiliary equipment. In spite of their attractive prices, renewable energy projects did not take-off largely due to system stability concerns and need for transmission system connections. To address these concerns, a study was carried out by USAID in 2015 which reached the following conclusions:

·         Up to 2,200 MW of wind and solar projects can be integrated into the national system by FY 2017.  The actual projects commissioned by end of FY 2018 amount to less than 1,200 MW.

·         By adding new transmission infrastructure, a total of 4,060 MW of wind and solar projects can be integrated by end of FY 2020.

·         By FY 2022, up to 9,400 MW wind and solar projects can be integrated into the national grid but it would require major reinforcement in the grid involving the addition of new EHV (500, 220 and 132 kV) transmission lines and up gradation of grid stations.

Based on this confirmation, the WASP run carried out as part of the Electricity Plan (under preparation) confirms the addition of corresponding amounts of new wind and solar based power by 2030 on a “must take” basis.  

Zoning of RE projects

As part of integrated planning process and due to the need to build transmission infrastructure and other arrangements, the zoning of renewable energy projects should be undertaken. For large scale projects to be built in wind corridors viz. Gharo/Jhimpir and solar parks viz. Cholistan desert, EHV transmission lines need to be developed on a priority basis. DISCOs should define their own zones in which projects will be set up. The zoning plans should make provisions for land and other facilities which will be the shared responsibility of federal and provincial governments. The creation of jobs in these zones will lead to economic activity and result in building of roads and other civic facilities for the local population.

Distributed RE

To bring about a fast-pace growth in distributed renewable energy generation and mini/micro grids, an enabling environment for private sector’s entry into this business will need to be created. Vocational training programs to improve the technical skills of workers should be launched under a joint program of federal and provincial governments. The weaknesses in existing regulation for wheeling of electricity should be removed to facilitate free trade/exchange of electricity, which is also in harmony with the efforts being made towards developing Wholesale electricity market.

Net Metering

NEPRA approved the Distributed Generation and Net Metering Regulations in 2015 to put into effect net-metering. Subsequently, amendments in the regulations were made in December 2017. Recently, the term of agreement between consumer and DISCO was increased from three years to seven years. The license issuance period by NEPRA has been reduced to seven days and determined tariff would remain valid for term of the Agreement/License. While these are needed steps for promoting roof-top solar installation, there is still a huge room for improvement in the regulatory and promotion regime for the development of RE. Especially, given that the  rules for net-metering and distributed generation are not resulting in the realization of their full potential (until June 2018, less than 5 MW of Net-Metering connections were given and those too in two DISCOs only), a fresh review of the bottlenecks in the growth of net-metering is urgently required.

The major reason for slow off-take of Net-Metering program is the high up-front cost that is involved which acts as a barrier for a vast majority of customers. There is  insufficient knowledge among customers to enable them to make choices about the equipment specifications nor is there an understanding about the investment potential of solar systems. These barriers can be overcome through a wide-scale customer education, especially by disseminating information about successful case studies. To increase awareness regarding Net-Metering among the communities, focused seminars/workshops may be held at the professional level. For general public, the importance of renewable energy option should be an integral part of academic curricula starting from secondary schools up to university level, across genders covering all strata of the civil society.

Net-Metering should be adopted as a national level goal as it would reduce the power shortages, cut down on transmission/distribution losses and reduce dependence on imported fuel based generation. To up-scale the installation of solar panels as a business idea, companies who want to come up with corporate based models to integrate several roof-tops and collectively provide net metered electricity besides meeting customers’ own needs will have to be encouraged.  There is a need to devise new, innovative financing schemes with active participation of the banking sector and international financiers to enable the companies and individual customers to address the issue of high front-end costs. The channeling of international clean energy funds as a source of financing of such projects could give a boost to investors’ appetite to make a venture into this line of business.

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[1] As of June 2018, two out of four turbines of NJHP Project have been commissioned

[2] The draft of new Power Policy is presently under review by the Government of Pakistan