Transmission sector: World Bank urges govt to mull leveraging private sector investments

ISLAMABAD: The World Bank (WB) is said to have advised the government to consider leveraging private sector investments in the transmission sector and focus on Category-III Renewable Energy (ER) projects after “disinterest” of investors in 600-MW wind project.

In a letter to Secretary Power, Rashid Mehmood Langrial, World Bank’s Operations Manager, Pakistan, Gailius Draugelis appreciated Power Division for continued engagement with the World Bank team to address key sector challenges and opportunities to move forward with an ambitious reform agenda in renewable energy.

According to the World Bank, subsequent to meetings with key stakeholders in the week of June 12, 2023, the Bank learned that response to the Request for Proposal (RFP) for 600MW of the solar generation has been unfavourable.

To this end, the Bank is of the view that expanding RE energy in the country remains critical for lowering generation costs over the medium term, adding that as such the initiation of these projects needs to take place at the earliest.

“As attracting foreign investors for large 600-MW investments may be challenging in the current environment and result in significant cost premiums, we note that Category-III projects provide a good interim solution. These can be facilitated faster given their advantages. They are smaller in size (50MW) thus relatively easier to secure financing: most of them have land allocation; are close to inter-connector points; and are part of the IGCEP,” wrote Draugelis.

The Bank, in its letter, further maintained that the government’s commitment in its Renewable Energy Policy of 2019 to follow competitive processes for any RE bidding is consistent with international best practice. It was also one of the key prior actions agreed in the World Bank-supported Resilient Institutions for Sustainable Economy (RISE-1) Development Policy Financing (DPF).

Awarding contracts without competitive bidding would undermine the RE Policy, create market uncertainty on the country’s approach to RE, and may risk setting tariffs that may not reflect what the market is willing to offer on a competitive basis.

“We strongly urge consideration of first using the competitive approach,” the letter added.

The Bank maintains that teams remain available to explore the lessons from the unfavourable outcome of the initial bidding process and encourage outreach to the market for the next round of competitive bidding.

The letter further contended that with respect to expansion of the RE a strong and reliable transmission network is required. The letter notes that the Bank understands there is substantial curtailment of wind power which is a strong indication that the transmission system is not sufficiently developed to integrate RE capacity.

Earlier this year, Alternative Energy Development Board (AEDB) had decided to go for competitive bidding plan for 13 category-III projects as per directions of Cabinet Committee on Energy (CCoE). The AEDB Board had also discussed/ finalised the Interconnection Ready Zones (IRZs) provided by NTDC for competitive bidding of category-III wind and solar projects.

World Bank further stated that several international financial institutions are engaged with the National Transmission and Despatch Company’s (NTDC) transmission development program, but unresolved technical challenges and lack of prioritization of investments for RE grid integration could undermine the government’s commitments and efforts to increase the share of RE.

“We would like to encourage the government to consider leveraging private sector investments in the transmission sector, given the significant financing needs of the sector as highlighted in the government’s Transmission System Expansion Plan (TSEP),” Draugelis concluded.

Copyright Business Recorder, 2023