Solar power – tread with care

The government is planning in haste to install 10,000 MW solar energy projects. The premise presented is to lower the bill of costly imported fuel. There are no two ways about the point that the focus should be on indigenous and renewables. However, it is better to be done by the private sector. Not by the government. The footprint of the government in energy chain must reduce. The need is to look at the bigger picture and this should be done in a right way.

There are complications and costs involved with connecting big solar projects to the grid, and after incorporating those, big solar projects may not be financially viable. The need is to study the grid and make decisions accordingly. Rushing into such projects can have unintended consequences. The feeling market participants have is that the PM wants to exhibit the proverbial ‘Shehbaz Speed’ in it, and some think that there could be elements of favoring certain businessman close to the ruling family.

Without delving into the conspiracy theories, let us evaluate the pros and cons of having large scale solar projects in a short time. First and foremost point is that solar or wind can never fill the base-load requirements. Solar is only there for displacement during daytime when electricity is being produced. Second element is to evaluate the capacity of the grid system. Rule of thumb is that grids cannot absorb over 10 percent share of solar (although it varies from grid to grid), and simulations should be run to find the exact load any grid can take on solar.

And to increase the load of solar, major investment is required in upgrading the transmission system which could make the project financially unviable. According to a study, Pakistan grid system has a capacity to absorb around 5 percent load of solar.

Solar energy load varies during the day. The production can immediately stop or significantly reduce due to change in the sunlight. If the supply is higher than certain level, such sudden drops could lead the grid to trip. And this could cascade to risk the larger grids transmission system outage. With dropped frequency, other plants synchronized with the system can trip for saving themselves. This could make the overall system fragile and vulnerable. And to avoid this, spin base-load must be kept in pipeline, so it can replace the solar drop within seconds.

Then, solar cannot cater to the summer peak load which is usually from 7PM to 11PM. Solar can only produce in daytime. That is why, bigger size plants in solar are not recommended without massive investment in grids upgradation and even than the presence of spin base-load might be required. The doable options are to have small size solar plants across the country where the system has capacity. There is a potential of small plants cumulatively producing 3,000-4,000MW.

The government intends to do three types of plants. One is very small that is to be installed on the rooftop of government buildings. Super. Just do it. And have a policy for private sector to incentivize on private buildings, including schools, offices, commercial and residential buildings.

The second is to have slightly bigger (yet small) plants next to the feeders. That is good as well. These will be smaller in size and would not have any risk on the grid and can lower the production cost at feeder level. There are around 9,000 feeders in the country and over 2,000 grids. Having 1-2MW at downloaded grids level are good options.

Another option the government could think of having solar plants next to IPPs (independent power plants). Almost all IPPs have vacant land. Then the load of IPPs itself is 5-7 percent. Solar can manage that. Plus, IPPs can easily increase or decrease production, based on the solar supply, without risking the transmission system frequency drop.

However, the problem is in the third type of plants. The plan is to have around 4,000-6,000MW close to load centers – 1,000-1,500 each around the 4 RLNG plants. This whole scheme is tricky. Apart from the investment required on the grid, this is against the spirit of latest IGCEP and not in sync with existing capacity and planned capacity which is to come in the next few years. As someone aptly put, solar deployment targets should not be fed into the IGCEP but rather should come out from it.

Anyhow, these RLNG plants could be partially replaced (due to coming lower in the merit order) once new coal and hydro plants come online. And on top the solar is now being planned in bulk. There is a limit to what a cash-strapped government could spend.

The investment in RLNG plants could become stranded, and on top, the new assets could also be partially stranded. Then when the projects are done in haste, there are mistakes which usually haunt in years to come. For example, the PMLN government in its last regime hastened the three RLNG plants and in process of doing it, the investment in grid infrastructure to transfer the power to 132 KV lines was missed, and the current was sent to 500KV lines which eluded the full potential of these plants at the specific load centers for which they are designed for.

Apart from that, some other mistakes were made for political considerations. For instance, the 4th LNG plant (Trimmu) was uncalled for and despite the resistance by the then Power Secretory, the government went ahead with the project. There are many instances where the RLNG was low in merit order, but due to long-term contract of buying, these are to be evacuated to manage the load in gas pipelines.

And in the process, local gas usage (and production) got compromised. The government didn’t think through on what to do with the existing furnace oil production which is now becoming a pain to manage. Then a goof-up was installing imported coal plant in Sahiwal — far away from the port. The obsession of speed and by not having plants in Sindh is costing the country dearly.

This is our country. The need is to think holistically. There should not be ad-hoc policies. Already, these have done enough damage. Why to have relatively bigger solar plants in the IPP mode with sovereign guarantees? These solar plans can be planned over the next ten years. And these should be done in a competitive mode.

The exclusivity of eight DISCOs is ended and K-Electric is to end in July 23. Here third player can come in to compete in the distribution system, and solar is going to be the top supply by any third party. Here, the sore point is the wheeling charges. The government and regulator (NEPRA) should come up with a doable number which is viable for both Discos and third parties.

In the existing IGCEP, solar is likely to grow by 2026-27, based on the demand and (already committed) supply. Don’t overkill, as this could result in sub-optimal investment. Already, decisions taken in isolation in the past are haunting today.

The focus on solar should be on further streamlining net metering. Inspection and certification processes should be smoothened. SBP (State Bank of Pakistan) should continue (which is stopped lately) the interest rate subsidy. Cost of installing net meters should be subsidized, and local production of meters should be encouraged. Net metering rates should be aligned to the rates Discos are charging.

The question is that since there is no rocket science in evaluating the merits then why is the government speeding up solar production? One is that it can be done quickly and can have the stamp of the ‘Shehbaz Speed’, if the government completes its term. It can be showcased that low marginal cost solar production is being added to the system in a speedy manner, while the grid connectivity and managing loads frequency cost along with stranded costs are to be conveniently ignored. Then some say that the government’s top people have made some commitments to some Turkish folks.

Whatever the case, the government should tread with care, and look at the things holistically and move towards competitive model, reducing government’s footprint in an effective and meaningful manner.

Copyright Business Recorder, 2022