Pakistan’s journey with wind power, once seen as a key element in the country’s renewable energy landscape, has faced significant setbacks in recent years. Despite the potential and initial enthusiasm, a series of strategic missteps and policy inconsistencies have caused a promising sector to falter.
During a conversation, energy sector expert and CEO Renewable First Zeeshan Ashfaq highlighted the alarming trend of wind energy curtailment, which has discouraged further investment in the renewable energy market.
“Despite its must-run status, the share of electricity generated by wind fell by 11% in FY 2022-23 compared to a year ago,” he noted.
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This decline is a significant concern, as investor confidence, painstakingly built over the years, can quickly erode due to a few strategic missteps. Excessive curtailment has left wind power projects (WPPs) struggling to fulfill debt obligations and sustain viability. The financial instability of WPPs, many of which rely on foreign financial backing, poses a high threat of default.
WPPs worried about continuous power curtailment
WPPs are eligible for Non-Project-Missed-Volume as per the signed Energy Purchase Agreements (EPAs), but this compensation is insufficient to cover the heavy revenue losses due to curtailment.
The uncertain financial position of WPPs threatens not only their individual operations but also the broader renewable energy landscape in Pakistan. Proposed measures such as potential reductions in net metering buyback rates and high Use of System Charges in the Competitive Trading Bilateral Contract Market (CTBCM) paint a bleak picture for the sector, making it increasingly risky and unpredictable for investors.
In Pakistan’s wind energy industry, the technology or turbine share is evenly distributed between Western and Chinese Original Equipment Manufacturers (OEMs). This unique characteristic, as Zeeshan Ashfaq pointed out, is uncommon in such a small industry. Local players initially spearheaded the sector, followed by the entry of international and Chinese investors.
Over less than a decade, the levelised tariff of wind energy projects has reduced by more than 70%, making wind, along with solar, the cheapest form of new electricity generation in Pakistan.
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Ashfaq emphasises the importance of wind energy in meeting future renewable energy targets: “Wind generation profile matches our demand profile, especially during evening peaks and at night. Wind energy’s role is equally important, if not more, compared to solar.”
As of now, a total of 56 wind projects have filed tariff petitions with NEPRA, with 36 projects already commissioned and operational, boasting a combined installed capacity of 1,845.47 MW. Looking ahead, the recent Integrated Generation Capacity Expansion Plan (IGCEP) for 2024-2034 reveals a plan to further harness wind energy, with a target of 1,942 MW of wind power capacity planned for commissioning by the year 2034.
Another energy sector expert Qurrat-ul-ain, a researcher at the Policy Research Institute for Equitable Development (PRIED), which is a think tank dedicated to working for climate justice and clean energy in Pakistan, provides a historical perspective on Pakistan’s initial push for wind power. Efforts to utilise wind energy began in the 1980s, with small-scale installations in Sindh and Balochistan.
The real momentum came during the fiscal year 2005-06, as the Government of Pakistan increased its focus on the renewable energy sector. Policies such as the Policy for Development of Renewable Energy for Power Generation (2006) and the Alternative and Renewable Energy Policy (2011) laid the groundwork for wind energy development.
The 2006 policy was a significant breakthrough, offering attractive fiscal incentives, including exemptions from import duties, taxes, and income taxes. By 2008, although there were no grid-connected wind farms, steps were being taken to develop them. The 2011 policy further empowered the Alternative Energy Development Board (AEDB) to coordinate renewable energy initiatives and set ambitious targets for wind energy contribution to the national grid.
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Despite the potential, Pakistan has missed several opportunities to harness wind power fully. China leads the world with nearly 442,000 megawatts of installed wind energy capacity in 2023, while Pakistan’s installed capacity stands at a mere 1,838 megawatts. The potential for wind power in Pakistan is estimated at 50,000 megawatts, but the actual utilization is far below this figure.
The main challenges facing wind power projects in Pakistan include inadequate transmission infrastructure, financial constraints, policy and regulatory uncertainty, and political instability.
Addressing these issues requires stable, long-term policies, financial incentives such as subsidies and tax breaks, and improved grid infrastructure. Encouraging public-private partnerships and leveraging climate finance can significantly enhance Pakistan’s wind energy potential.
Wind power can contribute to Pakistan’s energy security by reducing reliance on imported fuels. Replacing thermal power plants with wind power plants can lower operational costs and mitigate the financial burden of fuel imports. Wind energy projects also offer numerous economic benefits, including job creation, land lease payments, local tax revenue, and lower electricity rates.
The future of wind power in Pakistan depends on strategic policy reforms and investments in infrastructure. Indigenizing the production and assembly of wind power components can reduce costs and enhance local expertise. Investing in technical capacity building and fostering international collaboration for technical assistance can further bolster the sector.
While Pakistan’s wind power sector has faced significant challenges, there is still immense potential for growth. By addressing policy and infrastructure issues, Pakistan can revive its wind energy ambitions and contribute to a more sustainable and secure energy future.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is a Reporter at Business Recorder (Digital)
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