Indigenization of energy investments in Pakistan
Pakistan
still relies very heavily upon imported technology in the energy sector, there
is need to put in place policies and procedures to encourage increase in local
content in energy investments. Pakistan must develop indigenous capability for the planning,
designing, manufacture, installation and commissioning of power plants and
other energy infrastructure .CPEC provides an opportunity; Chinese rising labor
costs have prompted relocation of some industries to other countries, and
Pakistan is an intended target. This opportunity should be used to increase the
local content of capital equipment amongst other industrial activity. Incentives to local industry and
disincentives to imports in the form tariff and non-tariff barriers would have
to be created.
Chinese have played a major role in building
our engineering industry in days when they were not commercialized. However,
they can still be persuaded to rebuild our local engineering industry when tremendous
demand is building up in the sector. Indigenization
has suffered due to the fast tracking dictates of the energy crisis. Now that
the crisis is about to end, some stress and emphasis should revert to it. Local
engineering industry is heavily underutilized and its human resource base is
contracting due to low market demand. Currently we place orders and foreigners
provide it all from EPC and O&M contractors to IPPs. Iran and Turkey have
done otherwise and are reaping the benefits of their policies. They are
increasingly getting active in export markets including Pakistan. India is the
fifth largest manufacturer of wind turbines, China is the third largest
manufacturer of solar panels,, Adani an Indian Group Specializing in
hi-tech solar PV cells and modules using advanced Multi, Mono PERC and Bifacial
cell technology aims to become a fully-integrated solar PV manufacturer with a
capacity of 3 GW by 2020. Spain and Canada have mandated the
incorporation of local content in wind turbine installations .Specific measures
to promote indigenization in energy and power sector installations are:
1.
Indigenization -Key objective of any
energy or power sector policy should be “Development of a domestic
manufacturing base of energy and power technology.” Provision of (say) 15%
preference may be considered in energy and power policies. Competitive bidding
for capacity addition should also provide for such preferences.
2.
PAEC had developed
considerable local capability. Design and Engineering of NPP was initiated in
1980 and a formal Design and Engineering (DED) was set up within CHASNUPP in
1985. Over 100 engineers and were trained in Europe and China. PAEC had
developed non destructive testing (NDT) and Quality Assurance (QA) capability
.National Center for Non Destructive Testing (NCNDT) and Pakistan welding
Institute (PWI) were established .A large number of personnel in both public
and private sector were trained. PAEC had also achieved construction of the
development facilities at CHASNUPP site and civil construction of all plant
buildings /structures was carried out by local industry, Local industry
developed capability to carry out all local civil works with considerable
contributions in installation activities as well Some capability existed in the
public and private sectors for manufacture of thermal power plant boiler
equipment, heat exchangers. . PACE also had developed some capability n
instrumentations and controls. Spare parts for KAHUPP were also manufactured. Out of many phases of building nuclear had
attained self-sufficiency in some stages; Pakistan was preparing as many as 500 instruments used in atomic
reactors with its own resources
3.
Tube wells -Government of Punjab
carried out a tube well conversion to bio mass program with the University of
Agriculture Faisalabad (UAF). This effort used locally manufactured
gasification equipment. Punjab Government will encourage the UAF for
setting up a power plant to generate one megawatt of electricity using solar
and solid waste technologies in a bid to promoting technology in the
country. UAF is to establish model biogas plant from the UAF’s
farm containing 300 animals. A 100 kW
biomass power plant for demonstration purposes has been established at PARS
Campus in collaboration with Guangzhou Institute of Energy Conversion
Technologies, Chinese Academy of Sciences, China. The unit is for
demonstration/research purposes but the electricity produced during operation
will be used to run the turbines for irrigation purposes. UAF will now
establish a hybrid renewable energy system including solar and biogas power
generation for drip irrigation and energy efficiency at training block of
PBI.UAF has also developed : biogas operated tube wells 25 cm and 40 cm
floating drum , Solar drying for fruits, vegetables, medicinal plants and
cereal crops; solar distillation system for the processing of medicinal plants
; solar roasting machines for peanuts and ground nuts ; solar cookers for
community kitchen applications ; stand alone solar PV systems; biomass gasifies for power generation ; biomass boilers for
power generation .
4.
Wind turbines are sophisticated pieces of equipment
and attempts to manufacture these may be not the recommended route, there must,
however, be potential of support and auxiliary equipment locally. M/S China
Three Gorges has established a tower manufacturing facility which will be
upgraded to wind turbine assembly in future. M/S DESCON is also manufacturing
wind turbines towers. In
China Newly installed facilities such as wind turbines must contain 70 percent
content that is manufactured in China. As a result, the Chinese now produce
about 40 percent of wind turbines sold in China and 3 percent of wind turbines
sold globally.
5.
Renewable. To maximize indigenous content and participation in
renewable energy investments requires : custom duly and sales tax exemption
on raw materials, equipment and
machinery used for the manufacture or servicing of RE plants; exemption from
income and withholding taxes on imports
of materials and equipment related to manufacturing of RE plants , repatriation
of equity and dividends for investments
in RE manufacturing facilities ;
facilitation of foreign collaboration in manufacturing and engineering industries
; promotion of local training on manufacture, installation , and maintenance of
RE plants in joint ventures and technology transfer agreements . Six private
companies have established plants for assembly of solar PV panels in different
parts of the country.
6.
HMC. Heavy Mechanical Complex
(HMC) ,during the sixth plan period
Have Invested Rupees 20.0
million. This was in additional plant and machinery for producing Power
boilers. HMC also entered into technical
agreement with Deutche Babcock (DBW) of Germany. HMC secured orders for power
boilers for Bin Qasim Units 3 and 4. Share was about 26% of the works including
some high value items like convention tube bank, super heater re-heaters, and
economizer coils, headers etc. The job was competed to the entire satisfaction
of the customer and the foreign partners, thereby developing capability to
partially manufacture boilers up to 200 psi. Capacity building in shape of
training at the partners’ works in Germany was a part of the package. About 31
engineers for a total 176 days were provided with in job training. Equipment
was also added .HMC also secured order for Bin Qasim 3 and 4.
7.
Oil and Gas Projects. Taxila had also entered into manufacture of
oil and gas producing equipment which was mostly installed at the well head .
HMC manufactured a sulphur recovery plant for the Meyal oil field. In 1985 HMC
secured order for turn-key contract with OGDC for the supply of complete
installation of Dhakini oil and gas field
including , gas dehydration plant , sweetening plant, sulphur recovery
plant, LPG/NGL recovery plant and crude
stabilizing plant
8.
Mini Hydros. HFF Taxila acquired technology for
manufacture of mini hydel power pants , capability to manufacture Pelton
machines was acquired
Technology options for energy sector
·
Medium to long
term following technological options for energy sector are essential:
1.
Technology for exploration
and exploitation of shale gas and tight Gas
2.
Offshore oil and
exploration
3.
Lignite coal
development keeping in view that local coal which has high moisture and sulphur content.
4.
Development of
Coal bed methane
5.
R&D on Gas
hydrates (long term)
6.
LNG and imported
natural gas: These projects will require intensive technological and
infrastructure development in the country
7.
Wind Power
Development: Manufacturing Base
8.
Co-Generation in
sugar industry
9.
Energy efficiency
and energy conservation in energy generation to end use level
10.
Use of Efficient Appliances.
11.
Solar PV and solar thermal
12.
Development of
Geothermal Resources
13.
Energy generation
from Biomass including municipal waste, biogas
14.
Bio-fuels (only from non-edible oil crops) keeping in view food
security.
15.
Technologies for
optimum utilization of energy resources
Pakistan Council for Renewable Energy Technology (PCRET)
Initiatives’
1. Establishment of lab
facilities to produce high efficiency silicon solar cells and PV modules.
2. Establishment of micro
hydro power, biogas and wind energy research labs with workshop facilities.
3. Vertical Axis
type concepts offer a large area of further R&D for improvements. These
turbines have the unique characteristic of remaining independent of the
directional changes of the wind, as they catch wind from all directions. They
are therefore simpler to build and operate. Further, their generators are
fitted on the ground, permitting much easier maintenance and trouble shooting.
PCRET desires to design and test some
of these concepts during the year 2015-18, and install models in the PCRET head
office and the regional office. Also the capability to produce more
conventional Horizontal Axis wind turbines, their generators and other
associated components will be acquired through R&D at PCRET.
4.
The Pakistan Council of Renewable Energy Technologies (PCRET) is
working on micro hydropower (MHP) technology in Pakistan. It’s the national
focal point for the development and dissemination of renewable energy
technologies in Pakistan, especially in the field of development and promotion
of mini/micro hydropower plants in isolated/neglected areas of the country. The
PCRET has been demonstrating and disseminating MHP Technology after
indigenization, on micro level in the far-flung, inaccessible and remote hilly
areas of the Khyber Pakhtunkhwa (KP), Gilgit–Baltistan, Fata and AJK since
1976. In pursuance of rural electrification program of the federal government
the major objective of the MHP program has therefore been rural electrification
of the areas which are away from the national grid, and where restoration of
ecological balance along with protection of environment is imperative. The
council has so far successfully installed 538 decentralized MHP plants with
consolidated installed power generation capacity of 8 MW. Out of 538 MHP
plants, 152 plants have been installed through launching various Public Sector
Development Program (PSDP) schemes in the off-grid, far-flung and remote areas
while 280 MHP plants have been installed in collaboration with
individuals/communities. 106 plants have
been installed in collaboration with various government organizations,
Non-Government Organizations, Volunteer-Based Organizations providing technical
assistance and post-installation supervision.
5.
The
polycrystalline silicon solar cell technology is yet to be established in the
country. At present PCRET is working on research and development of 2nd,
3rd and 4th generation of solar cells and have
successfully fabricated the 2nd and 3rd generation of
solar cells. Research work for fabrication of 4th generation solar
cells is in progress by involving 06 PhD students from different universities
of the country. During next 03 years PCRET plans to execute the followings in
the field of PV Technologies:
i)Fabrication of 4th generation solar
cells.
ii) Present research collaborations will be enhanced
with different universities of the country by involving greater numbers of PhD
students.
iii) Power conversion efficiency of indigenously
fabricated silicon solar cells will be enhanced from the current range of
nearly 13.5% to 16% through PSDP Projects.
iv) Fully
equipped mechanical workshop will be establishment under the ongoing extension
project.
v) Trainings will be provided in the field of
silicon solar cell fabrication and PV module fabrication.
i) The PV products testing lab will be upgraded to
enhance the purpose of certification for private sector importers to ensure
quality of the imported PV panels.
vii) Installation of 200 kW solar PV systems at
PCRET is planned, under PSDP project to acquire partial self sufficiency in
power consumption.
RE Plant Manufacture
Various aspects are
discussed as follows:
1. Blades for the wind turbines
constitute 60 percent to 70 percent of the total facility (project) therefore
the margin for local manufacture is limited.
2. It makes little sense concentrating
energy and resources on the manufacture of silicon wafers in a country with no
economies of scale or agglomeration.
3. The recent decline in solar PV technology
prices and the manufacturing glut experienced in the global wind turbines
market has made the implementation of local content requirements a big
challenge for foreign contractors.
4.
A stable and sizable home market is a prerequisite for luring
leading foreign manufacturer to establish local manufacturing facilities, to
develop local joint ventures partnerships. A stable local market signals to
both local manufacturers and to foreign forms that they have the long term
planning horizon necessary to allow them to reasonably invest in the market
.Companies facing unstable or small markets on the other hand will be less
willing to spend money on R&D, product development, and local manufacturing
facilities.
Taxes withdrawn: Jan., 30, 2019: The federal
government has proposed to eliminate taxes associated with manufacturing of
solar and wind energy equipment in the country. The proposed tax reduction
should boost that by encouraging greater local manufacturing of equipment
needed for renewable power expansion, but manufacturers said the tax breaks would
not be sufficient to spur expansion of local renewable energy industries but
Pakistani manufacturers would still struggle to compete with tax-free, low priced
imports of foreign-built solar panels and other renewable energy equipment.
Local manufacturers should work with the government to determine which components should be manufactured
locally and which imported to ensure that costs of locally made wind and solar
systems were competitive. Cheap imports of renewable energy systems from
China remained the main barrier to building more such systems in Pakistan.
The local industry is facing pricing issues because of low quality solar energy
appliances being imported that are very cheap as compared to the local market,`
That might be resolved in part by the
government starting a certification
system for renewable energy products to grade them according to quality
Recommended changes in Text of Power Policy
Indigenization, Research & Development:
While the indigenization spans across all the sectors of the
electricity business, R&D over-arches all the principles established under
this policy framework for the envisaged vision, The Federal Government will
take all measures to ensure promotion, of Transfer of Technology and R&D
across the value chain. Federal government will consider offering
preferences for local technology in competitive bidding /reverse auction of
potential power plants in the interim period ( single buyer plus period) and
offering tax rebates on use of local technology in the post interim period (
Open Access period) .
5. Conclusions
Failure to promote indigenization of energy and power investments
further delay investments and hamper Pakistan’s economic growth. Energy sector investments
need to be made with the long term objectives in view. Small steps that will
encourage local manufacture of energy and power equipment and plants will
deliver significant benefits in the future.
Key objectives of Pakistan’s energy policy must include: “Development
of domestic manufacturing base of renewable energy technology along with rapid
market inception through private investments”. The objective will
ensure that Pakistan becomes an active participant in the energy market in the
future rather than be a passive recipient of technology.
:Indigitization : June,30,2019:
India has placed special emphasis on harnessing the abundant Solar energy the
country receives and producing power through it. With the government of India’s
focused efforts in democratising the use of Solar energy, the International
Renewable Energy Agency (IRENA) survey in its research found out that India is the world’s cheapest producer
of Solar power.
Owing to low-cost panel imports from China, abundant land and
low wage labour, the cost of building large-scale solar installations in India
fell by 27 per cent in 2018, Year-on-Year. The cost of large-scale
installations in Canada is highest amongst the countries involved in producing
power using Solar energy, almost thrice that of India’s cost.
More than 50 per cent of the total cost in building a solar
installation in India involves costs related to hardware, racking and mounting,
while the remaining cost is divvied up between soft costs such as system
designing and financing. Considerably cheap labor and lower service
expenses have also aided in the steep fall in the finance needed to establish
large-scale solar power-generating projects. The setup cost in India fell by
about 80 per cent between 2010 to 2018,
the most remarkable reduction observed in any of the other countries.
ARE policy: Aug., 24, 2019: Local
participation in Alternate Renewable Energy policy review also proposed incentives to encourage localization
of cost factors like concrete poles, transformers, motors and generators etc to
bring back manufacturers who had left the market or promote local job creation
and least cost energy sources. Under the existing arrangement, the foreign
investors would be utilizing indigenous resources like wind, solar, land, steel
poles, batteries etc and taking out foreign exchange in profits.