AEDB director policy says well-designed auctions provide level playing field for local and international investors

ISLAMABAD: Renewables First organised a webinar that featured local and international renewable energy experts including government representatives and subject matter experts from the World Bank, Engro Energy, Wood Mackenzie, and Power Futures Lab, South Africa. The session was also attended by members of the Pakistan Renewable Energy Developers Forum.

The government of Pakistan has decided to move away from “cost-plus” tariff regime to auction based awards for future wind and solar power induction. In this context, Renewables First launched a white paper highlighting the potential of RE auctions as well as their risks if poorly designed.

Ammar Qaseem, a policy analyst at Renewables First, while presenting the white paper, discussed local and global RE tariff trends, national energy context and international best practices. He talked about Pakistan’s national electricity policy objectives in addition to the least cost criteria which must be catered to as large chunks of RE (almost 11 GW) are procured within the next 8 years. He stressed the planned additions were a major opportunity for Pakistan to boost local market, attract foreign investment and ensure maximum socio-economic dispersion of benefits.

Aqeel Hussain Jafri, Director Policy, Alternative Energy Development Board (AEDB), which is the representative agency of the Federal Government on Renewable Energy, acknowledged that auctions were the way forward for Pakistan. He highlighted that well-designed auctions provided a level-playing field for local and international investors. He reiterated that the government was focused on cost reduction and shared AEDB’s plans to initiate the first bidding round by end-June.

The launch of the white paper also coincided with a recent World Bank’s VRE Competitive Bidding study which provides recommendations regarding various auction models, frequency of bidding rounds and best design with regards to the local context.

While highlighting the significance of auctions for RE procurement and World Bank’s recommendations, Oliver Knight, Senior Energy Specialist for South Asia Energy Unit of World Bank appreciated the efforts that went into preparing RE’s study. He mentioned that auctions offered stability and confidence as developers were able to anticipate a pipeline for their projects going forward. He emphasized that Pakistan should adopt sub-station or park-based bidding in the year 2022 to meet its set targets for the term.

Dr Fatima Khushnood of Engro Energy agreed with Oliver on the need for sub-station or park-based bidding. She informed the audience that owing to the major transformations that the RE sector was undergoing, investor confidence needed to be revived.

She added “It is imperative to have consistent policies in place to eliminate uncertainties and ambiguities in the market.”

Dr Wikus Kruger Research Lead at Power Futures Lab at The University of Cape Town who has extensively worked on South African Energy Auctions offered similar thoughts. Taking South Africa’s example he shared that Pakistan should start with a smaller volume in the first bidding round and in terms of frequency there should be consistency to avoid risks. He concluded that “It is encouraging to witness the existing price mechanisms in the country despite the lack of a regulatory framework”.

Sohaib Malik, Principal Analyst at Wood Mackenzie informed that “with respect to Pakistan we need to identify which countries should be considered as a viable comparison as the government of a resource deprived economy faces certain limitations in terms of what it can offer.”

The session was held by Renewables First, a think-tank for energy and environment. Its work addresses critical energy and natural resource issues with the aim to make energy and climate transitions just and inclusive.

Copyright Business Recorder, 2022