Daily Times

Energy policies are important instruments that governments use to guide and influence the participation and behaviors of different actors in the energy sector activities to achieve their desired objectives and goals. While efficacy, efficiency, costs, and benefits are important considerations in energy policy formulation, continuity of policies is also a key factor in gaining and sustaining confidence of potential investors. This is critical because energy and power sector investments are capital-intensive, long-lived, and high-risk ventures. Once set into motion, these are difficult as well as very costly to roll back.

Policies, however, are not something set in stone that cannot be altered or changed. Numerous developments in the technology and market can render the existing policies less useful, thus necessitating periodic review and revision to ensure their continued effectiveness and currency.  But governments always prefer to use an incremental and evolutionary approach when introducing reforms in their previous policies in order not to shake the trust and confidence of the stakeholders who are expected to be affected by these revisions or modifications.

Pakistan had introduced a Renewable Energy Policy during 2006 (“RE Policy 2006”) to promote the uptake of renewable energy technologies (RETs) in the country by introducing a number of incentives and safeguards for potential investors.  As a result of this policy initiative, roughly 2,000 MW of renewable energy generation (mostly solar PV and wind power) was added to the national grid during the past 14 years, and a number of additional projects are currently in the pipeline.  Things were moving smoothly until the government had a change of heart and decided to repeal the previous policy and introduce in its place a completely new policy.

Efforts are always made to gradually eliminate a nation’s dependence on foreign technologies and expertise, and promote local industry, knowhow, and employment

The new policy is named Alternative and Renewable Energy Policy 2019 (“ARE Policy 2019”) and its draft is at an advanced stage of approval by the government. This decision has baffled most analysts as the government is yet to offer any sound and cogent reason that has compelled it to scrap the previous, a reasonably well-functioning, policy and introduce in its  place a new one. This is especially perturbing because when one looks into the two policy documents, the previous policy appears much superior and even-handed to the new one that will replace it.

In the ensuing paragraphs, a few of the apparent deficiencies and ambiguities in the new draft policy are highlighted for the attention of our high-ups in the energy sector hoping that they will seriously look into these deficiencies and loopholes and address these before putting the new policy into force in the country.

The draft sets capacity targets of 20 per cent by 2025 and 30 per cent by 2030 without specifying the basis of these targets. This is disturbing for three reasons. First, the RETs’ grid penetration is more meaningful if it’s specified as a proportion of peak demand, and not that of the capacity base of which it will be a part, and thus a variable itself.  Targets must also base on rigorous assessment of energy and power demands in various parts of the country, availability and distribution of resources, presence of hosting infrastructure (T&D systems), and supporting facilities in these areas. Second, the draft disregards the capacity aspect of RETs and justifies their inclusion in the grid entirely for their potential to reduce the basket price of electricity. Fair enough, but then the RETs penetration levels should also be specified as a proportion of energy and not that of the installed capacity. Third, the draft does not specify the share of different RETs within the specified targets or various regions. This lack of clarity will lead to many problems during implementation.

Realizing the full potential of RETs full requires that their development and deployment in the country be sought not just in the power sector but other sectors of the economy as well and in all possible forms in which these technologies can contribute to serve different energy service needs of these sectors. These include, for instance, direct use, production of other energy carriers like bio and synthetic fuels, process heating and cooling, etc., and not just through electricity generation alone.

A fair and objective comparison demands that full avoided costs (generation, transmission, distribution, and delivery) due to ARE deployment in the grid should be considered in serving the consumers demand, and not just their costs at the generation plant terminals. System integrations issues and impacts on the power system (capacity backup, flexibility, additional stress on the system, etc.) and the associated costs that RETs will impose owing to their intermittent and variable nature must also be considered to make an objective and fair cost-benefit assessment.

Uncertainty and variability will be an inherent feature of RETs. As such, external efforts to counter that feature will be needed, and may impose significant costs on the grid. In this regard, storage technologies (utility-scale as well as those behind-the-consumer meters) can play a critical role in promoting ARETs, and thus will require special considerations in the Policy. The current draft lacks this emphasis and related concessions or incentives.

The draft Policy introduces a completely new class of ARE project developers, government to government (G2G), and keeps them out of the competitive bidding loop that is required for the other classes of developers. The Policy and also allows the G2G sponsors a cost-plus tariff for their projects. This is not a good idea and must be avoided. Competitive selection for all projects should be preferred; otherwise it would lead to abuse and complications during selection, development, and execution of ARE projects.

In the draft Policy, references are made about the provinces’ right to develop renewable power generation projects in their jurisdictions, independent of the national grid. This is not a good idea and could lead to confusion and sub-optimal solutions. All ARE-related developments and deployments should be centrally coordinated between the federal and provincial governments, before soliciting bids from potential investors and developers. We recommend working out of a ten year system development plan for this purpose to indicate the requirements of generation (including ARETs), transmission, and distribution facilities and their preferred locations in the country.

The draft Policy bounds the National Transmission and Despatch Company (NTDC) and DISCOs to purchase all the energy generated by the ARE plants. Such mandates, if enforced without assessing their proper technical and financial implications, can be troublesome for these entities. Grid-impact-studies must be carried out to ascertain whether the existing systems have sufficient available capacity to accommodate the new project or it would require augmentation. This obligation should be linked to carrying out “grid impact studies”, that will reveal the technical and economic viability of the project in question. Approvals should not be decided arbitrarily or on discretionary basis.

An important consideration of energy policies worldwide is their impact on local industrial development and employment. Efforts are always made to gradually eliminate a nation’s dependence on foreign technologies and expertise, and promote local industry, knowhow, and employment. No such consideration is seen in the draft Policy at present. Therefore, it’s recommended that the developers of ARE projects be obligated to use a gradually increasing proportion of local components and employing of local labor to promote local manufacturing industry and employment. Such concessions and incentives should also ensure that they do not stifle development of local industry.?

The writer is a freelance consultant, specializing in sustainable energy and power system planning and development