Solar energy — a partial fix

There are intense discussions in the energy industry about excess capacity, increasing electricity costs, and allegations of Independent Power Producers (IPPs) taking advantage of the system. A lot of experts and public at large are enraged, alleging that IPPs are being paid large amounts while providing very little electricity. In the midst of these worries, solar power is being increasingly recognized as a possible answer. It’s clean, renewable, and becoming cheaper—what’s not to love?

However, before embracing solar energy as the ultimate fix, a critical question remains: Is solar really the solution to our energy problems? While it sounds promising, will it address deeper issues such as overcapacity and high generation costs? Or are we just scratching the surface and overlooking problems that solar alone can’t resolve?

It’s essential to examine the current state of the energy sector to understand solar energy’s role in the energy mix. The country has an installed capacity of around 43,000 MW, yet demand fluctuates—peaking at 22,000-23,000 MW in summer and falling to 13,000-15,000 MW in winter. Despite what seems like sufficient capacity, the real challenge lies in the gap between installed capacity and dependable capacity—the power actually available for use. Renewable sources, like solar and wind, do not consistently produce at full capacity, reducing real output.

For instance, a 100 MW solar project with a 20% capacity factor generates only 20 MW of dependable power on average. This highlights the gap between installed and reliable output. Similar efficiency issues affect other technologies due to factors like maintenance and resource availability. As a result, dependable capacity stands closer to 32,000MW—creating a critical problem during peak demand periods.

Pakistan’s energy consumption varies both seasonally and daily. In summer, air conditioning causes demand to surge, peaking in the evening when people return home and businesses are still running. In winter, demand is lower but peaks in the morning and evening due to heating needs. Daily demand usually rises in the afternoon, peaks in the early evening, and declines at night, putting pressure on the grid during peak times when shortages are common.

In contrast, solar energy follows a different pattern. Solar power is only available during daylight, peaking around midday. Its output increases in the late morning, peaks in the early afternoon, and tapers off as the sun sets. Solar generation is higher in summer when days are longer and lower in winter due to shorter days and cloud cover. This creates a mismatch with electricity demand, especially in the evening when solar energy stops being produced but demand remains high.

The main issue with relying heavily on solar energy is its inability to meet peak demand in the evening when the sun has already set. While solar can reduce reliance on fuel-based plants during the day, it cannot cover the evening hours when the grid relies on fossil fuels or hydropower. This mismatch highlights the need for energy storage or complementary power sources to cover night-time demand.

Generation data from the Market Operator shows that different technologies dominate at different times. During the day, hydropower and solar contribute more, but coal, nuclear, and thermal plants take over in the evening and night. Solar power’s contribution is limited to daylight hours, underscoring its role in substituting other energy sources rather than expanding overall capacity.

Regarding power purchase price (PPP), solar energy has recently become more competitive, with bids as low as PKR 12/kWh, compared to older solar projects at PKR 37.18/kWh, imported coal at PKR 77.66/kWh, and RFO at PKR 63.57/kWh. During daylight, solar energy helps reduce reliance on more expensive fossil fuel plants, saving fuel costs for the grid. However, when solar generation ceases in the evening, the system still relies on conventional plants, which are more expensive to operate.

Another significant issue is capacity charges, which are paid to all power plants—whether solar, thermal, or coal—regardless of how much energy they produce. Even if solar reduces daytime fuel consumption, the grid still pays capacity charges for conventional plants that provide night-time power. Adding more solar capacity does not reduce these charges, as conventional plants are still needed when solar cannot generate. In fact, increasing solar capacity without addressing these charges may worsen financial pressure on the energy system.

Over capacity isn’t just about too many power plants—it’s about mismatched generation and demand. The real problem is that the type of energy being generated doesn’t align with when and how it’s being consumed.

Given these challenges, adding solar projects doesn’t increase overall capacity. Solar helps substitute energy generation during the day, but once the sun sets, the grid faces the same issues of needing reliable power for the evening and night. Therefore, the country still requires investment in technologies like hydropower, thermal, or wind, which can provide consistent electricity when solar is unavailable. Simply adding more solar capacity without addressing night-time demand will leave the country’s energy needs unmet. In fact, while old PPAs are still valid, solar power will add to the overcapacity problem.

Expanding hydropower projects is the most viable long-term solution for the energy sector. At PKR 10.39/kWh, hydropower is already one of the cheapest sources of electricity. While initial costs are higher due to loan repayments (ranging from PKR 25-35/kWh for the first 10-12 years), prices drop to PKR 8-12/kWh once loans are repaid. After the typical 30-year contract period, hydropower costs can fall as low as PKR 2-5/kWh, making it the most affordable long-term energy source.

The constant availability of hydropower is crucial for balancing solar energy. Strategically investing in hydropower and utilizing solar power during daylight hours can lead to a more balanced and sustainable energy future. This could decrease dependence on fossil fuels and lower the financial strain of capacity payments.

Despite its importance in the energy mix, solar energy is not a magical solution for tackling intricate energy problems. Policymakers should adopt a comprehensive strategy by funding not just renewable sources such as solar, but also long-lasting options like hydropower and energy storage systems in order to guarantee a consistent, 24/7 energy provision.

Additionally, it will be important to review the capacity payment system and find ways to encourage greater efficiency in energy production and usage in order to alleviate the financial strain on the energy industry.

In order to effectively tackle the ongoing energy crisis, policymakers must promote a comprehensive energy strategy that prioritizes a balance between immediate requirements and long-term, affordable development. This approach should aim to synchronize energy production with consumption habits, decrease dependence on costly fossil fuels, and ensure a stable energy supply for future generations.

Copyright Business Recorder, 2024