This narrative is a rejoinder to Akhtar Ali's article titled, "Recent increase in power tariff: Towards wind power auctions" published in Business Recorder on May 22, 2013. Ali has "mined" the Internet and presented an array of data with reference websites to make the case that the current batch of wind projects in Pakistan involve "grotesque cost padding" and an excessive tariff.
While this writer is not in a position to make a judgement on the price of wind turbines offered to the Pakistan market, one should note that foreign equipment suppliers take into account risks and uncertainties as a cost element when doing business in Pakistan. Although the wind industry is mature in many countries of the world, it is still at an embryonic stage in this country.
With regard to the excessive tariff claim, it is pity that Ali did not report on countries where the tariff offered was higher or close to the rate offered by NEPRA. There are 'country specific' reasons why wind turbine prices, cost of projects and tariffs offered differ in various regions of the world. Using global prices and tariffs when presenting policy arguments in Pakistan is 'off the mark'.
While auctioning wind project sites to developers would have made sense under a different set of circumstances, the path followed in Pakistan has been long and course reversal at this stage is not be a prudent option. Ali should have studied the past 7 years of wind project development activity in Pakistan before presenting his views. There are over 20 projects currently in the development pipeline with one 50 MW project on the verge of commercially operating and three 50 MW projects under construction.
The development path on these projects has been tedious and uncertain. As per the projection for wind power capacity additions in Pakistan presented by the AEDB in 2006 (Pakistan Oil Gas & Energy Exhibition - May 19, 2006) there should have been over 2,000 MW of wind power plant in commercial operation today. Unfortunately the actual figure is a paltry 6 MW.
The major reasons for the delay in implementing these projects are; a) reluctance of wind turbine suppliers to enter Pakistan market, b) lack of financing, c) lethargic response from the power sector bureaucracy and d) lack of construction contractors and heavy lift cranes. Past tariff petitions submitted by wind project developers date back to year 2006.
Expressions of concern about the growing electric power demand supply gap and objections to excessive tariffs for wind projects (ranging from $0.07/kWh in 2006 to $0.115/kWh in 2007) were prevalent at that time as well.
A Nepra official who did not favour wind power argued in 2007 that the pressing problem of inadequate generating capacity to meet peak demand has to be met through sources providing firm generating capability. This official should have noted that the wind season of the abundant resources available at close proximity to major cities such as Karachi and Hyderabad matches the peak electricity demand in the summer. While wind power plants cannot be considered as capacity, the summer phenomenon of wind energy abundance in Sindh should be recognised as a unique benefit.
Ali's comment that projects would not be approved by the Ministry of Finance may be wishful thinking. Wind project developers have followed the regulatory path as per the stipulated guidelines set by state institutions. International lenders such as ADB, IFC and OPIC and local banks are making arrangements to provide financing. Is Ali suggesting that this activity is destined to meet an insurmountable hurdle?
Let us hope that the initial batch of wind projects in the development path attain their commercial operation milestones as soon as possible. Once the wind industry attains a firm foothold in Pakistan and the positive benefits of the projects recognised, updated policies can be set in place for expanding the wind power capacity penetration to the national grid. This has been the pattern followed by nearly all nations that embarked on harnessing utility scale wind power as a means of diversifying the energy sources fuelling power plants. Where the resource is available and transmission to load centers is economic, wind power will always occupy a niche in the energy portfolio due to the assurance of "zero fuel price risk".
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