ISLAMABAD: Ministry of Planning, Development and Special Initiatives (M/o PD&SI) has proposed increase in benchmark competitive tariff of solar IPPs to Cents 5/kWh from Cents 3.4108/kWh determined by Nepra to replace costlier thermal power through large scale solar IPPs, well informed sources told Business Recorder.
According to M/o PD&SI, power generation capacity of Pakistan has significantly increased in the last decade. As of June 2022, the total installed capacity was around 43,775MW and power generation was 153,874 GWh. Two-thirds of the net dispatched energy is generated through import based costlier thermal fuels like RFO, RLNG, and imported coal.
M/o PD&SI, in its draft summary for the Cabinet Committee on Energy (CCoE) explained that supply shocks after Covid-19 and Russia-Ukraine war led to surge in fuel prices which resulted in increase in electricity generation costs around the globe, including in Pakistan. The average Power Purchase Price (PPP) for imported fuels, mainly RFO, increased from Rs15.32 per kwh in July 2021 to Rs33.59 per Kwh in June 2022.
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Resultantly, consumer end tariff increased from Rs6.7 per Kwh to Rs15.8 per kwh. Moreover, as per Nepra’s recently determined reference PPP tariff, average price for imported fuels based power generation are expected to rise up to Rs 44.15 per kwh during FY 2023-24.
This unaffordable and expensive electricity has not only resulted in lower economic growth but also warrants speedy exploration of alternative and affordable resources.
Assessing the gravity of the situation, Planning Commission under its initiative Integrated Energy Planning (IEP) for Sustainable Development, as a part of its ongoing process of long-term energy planning and policy development, undertook an analytical research on introduction of large-scale solar IPPs.
The Ministry further stated that the study has been finalised in consultation with key stakeholders, inter-alia, Power Division (M/o Energy), NEPRA, NTDC, CPPA-G, PPIB, and AEDB, US-Department of Energy as well as USAID-Pakistan Power Sector Improvement Activity (PSIA).
The study developed a reasoning for introducing large-scale solar IPPs in the country by analyzing the energy purchase price comparison of solar power plants with expensive thermal sources and proposed a set of recommendations for enhancing the solar PV penetration.
Meanwhile, the Government also approved the Framework Guidelines for Fast Track Solar Initiatives 2022, which aims to reduce reliance on thermal power generation over the next 10 years by adding 8,996 MWp of solar power, 3,330 MW of net metering capacity, and 4,927 MW of wind power by 2031.
The study carried out by the Energy Planning & Resource Centre, Planning Commission reveals that solar power capacity expansion will replace up to 16,746 Gwh of thermal power annually. Subsequently, an overall financial benefit of Rs 244 billion is expected to be achieved by 2031.
According to Ministry of Planning, Development and Special Initiatives, sensitivity analysis with reference to projected energy prices for 2023-24 reveals that financial benefit is expected to be high in future.
The Ministry argued that the planned deployment of solar IPPs and net metering with the cumulative capacity of 12,326 MWp will potentially meet the projected system maximum demand as a base load during winter 2031.
It is also simulated that an additional capacity of over 10,700 MWp would be required by 2031 to meet the projected maximum summer demand and would likely replace equivalent amount of fossil fuel based power.
The study has also criticality assessed recently determined benchmark tariff of Cents 3.4108/Kwh by Nepra and subsequent lack of interest shown by investors vis-a-vis AEDB/PPIB invited tender for 600 MWp project at Muzaffargarh.
A sensitivity analysis in the report reveals that competitive tariff up to Cents 5/kwh can still be viable compared to costlier thermal plants.
The report submitted the following main recommendations: (i) concrete efforts are needed to fast track the implementation process to achieve the targets of 8,996 MWp for solar IPPs and net metering of 3,330 MWp to attain economic benefits.
For this purpose, a monitoring/facilitation cell be established at AEDB/PPIB; (ii) benchmark competitive tariff can be increased up to US Cents 5/Kwh which can still be viable compared to costlier thermal plants; (iii) Government may explore prospective G2G arrangements to expeditiously achieve the RE targets; and (iv) provision of all possible financial incentives to the solar industry as described in the ARE policy to achieve the targets set in the policy.
Copyright Business Recorder, 2024