‘Pakistan needs renewables, with better cost modelling’

KARACHI: Renewables First (RF), an energy and environment think tank, launched an on-grid renewables project development guidebook on Thursday, emphasising that Pakistan needed to acquire better models to incorporate complete costs of power generation expansion.

In presence of renewable energy (RE) developers, RF held a consultative session around Competitive Trading Bilateral Contract Market (CTBCM) to bring their major concerns and suggestions to light.

“The current NTDC [National Transmission and Despatch Company] models do not incorporate complete costs of the generation expansion, whereby the actual investment requirement exceeds by a staggering amount of $21 billion,” said Ammar Qaseem, energy expert from the think tank.

He shared the preliminary findings of the study while identifying some glaring issues in the Indicative Generation Capacity Expansion Plan (IGCEP).

“It was discovered that only 56 percent of the committed projects qualify for development under the least cost criteria,” he added.

According to findings of the study, up to 34 gigawatts of variable renewable energy can be injected into the national grid on a least-cost basis, as opposed to the NTDC projections of less than 21GW.

Energy experts from RF also introduced their national electricity generation model developed on PLEXOS, a modeling tool, and shared their findings on the true least-cost potential of renewable energy in Pakistan along with other associated costs.

Omar Malik of PITCO, said, “Better clarity on marginal cost and its future value, as well as the weather wheeling costs, will remain consistent over time, and is critical to successful financial closure of these projects. This is important for not only investor confidence but also critical to lender due diligence of the bankability of these projects."

The guidebook is intended to act as a single go-to knowledge repository for all renewable energy stakeholders in the country for RE project development from conception to construction. Representatives from the think tank also informed the audience that they had been engaged in conducting an independent study on least-cost potential of renewables in the national electricity grid.

Sohail Zaidi from Bridge Factor, a transaction advisory firm, emphasised the need to safeguard RE developers against the risks of excessive marginal costs and the use of system charges through capping mechanisms.

The new study, however, does not take transmission and prediction limitations of the national grid into account, which remain a major determinant of RE acceleration in the country.

In the last session on CTBCM, Abubakar Ismail, lead manager of Amreli Steels, presented a detailed explanation of how CTBCM works. It was followed by the identification of some key challenges by Shehram Alam from RF and industry leaders who called for more clarity on the opening up of energy markets and competitive trading.

Talal Amjad, chief financial officer of REON Energy, highlighted poor experiences of RE developers in the past concerning wheeling and expressed his reservations regarding the participation of RE developers in the proposed CTBCM model.

He also raised concerns on firm capacity obligations including the methodologies for calculating firm capacity of renewables and the lack of clarity on consumer migration policy from one supplier to another.

Tayyaba Rasheed from Faysal Bank argued that CTBCM would change how banks look at the energy sector and would have to undergo a paradigm shift in their practices to adapt to the new market conditions. As the concessionary scheme for RE by the State Bank of Pakistan remains unavailable, financing RE projects under the CTBCM scheme would remain a challenge.

Usman Hassan from Engro Energy mentioned that while the market conditions were challenging, “Engro is bold and willing enough to enter RE markets.”

The event concluded with hopes for a green and clean energy future.