Setback as no bids received for 600MW solar power project

ISLAMABAD: In a shocking development, the government failed to receive any bids for the first pilot project of solar power plant of 600MW to be installed at Muzaffargarh even at an attractive power tariff of 3.4 Cents per unit. “The government has received no bids for installing 600MW pilot solar power plant at Muzaffargarh even at the tariff of 3.4 Cents per unit. The bids were scheduled to open on May 31, 2023. Though some 12 companies had managed to get hold of bid documents, no company turned up with any bid,” a senior official at the Energy Ministry told The News. “Now the top functionaries of Power Division have written a letter to Nepra asking either for an open-ended tariff or over five Cents per unit to ensure bids from investors so that the project could be materialised,” the official said. Prime Minister Shehbaz Sharif, on September 29, 2022, had approved the plan to develop 10,000 MWs solar electricity across the country to reduce the price of electricity by closing down load-based power plants that run on imported fuel during daytime. Under this decision, the first pilot project of 600MW had been initiated. The whole planning got scuttled when on May 31 no investors came up with any bid. When contacted, the spokesman of Power Division confirmed this development arguing Pakistan is a high-risk country.

That is why the government received no bids even at 3.4 Cents per unit. He further said the Power Division has asked Nepra to increase solar tariff by 1.5 to 2 Cents to 5.4 Cents per unit from 3.4 Cent to attract investors. The official sources said in a country like India, solar power plants tariff stands at 1.5 Cents. Here, the regulatory authority has extended the tariff to 3.4 Cents per unit, which is still on the higher side. Top mandarins of the Energy Ministry say the country’s power and oil and gas sector has virtually become unsustainable, and no international company is ready to invest, knowing the fact the government is unable to pay against the electricity it will buy. Chinese IPPs, installed under the umbrella of CPEC, are still unable to get $1 billion from the government against the sale of their electricity to Central Power Purchase Agency (CPPA) in the wake of circular debt that has risen to Rs2.7 trillion.

In addition to CPEC power plants, other IPPs are also issuing notices for invoking sovereign guarantees to government for defaulting on their payments. Political instability with appalling economic situation mired with circular debt of over Rs4 trillion (both in power sector of Rs2.7 billion and oil and gas sectors of Rs1.7 trillion) and the inability of the government to pay back the amount against purchase of electricity from IPPs have factually kept the investors away from participating in the bid in 600MW solar power plant. However, independent energy experts are of the view capacity to generate electricity hovers at around 45,000 MWs but maximum electricity generated is at 26,000-27,000 MWs during peak in summer. This means the country has an additional capacity of 19,000 MWs, which remains idle.

This capacity increases during winter up to 35,000 MWs, while demand decreases up to 10,000 MWs only. The consumers, however, pay the capacity charges in tariff which will increase in 2023-24 up to Rs1.6 trillion. During the ongoing fiscal, the consumers will pay Rs900 billion as capacity charges. If the government wants to make the tariff affordable, it should run power plants based on indigenous fuel such as Thar Coal, hydropower plant and nuclear power plants. The imported coal’s cost has also come down to $100 per ton from $400. Same is the case with LNG cost, as it has also tumbled to $9-10 per MMBTU in the international market. But the import of RLNG causes more evaporation of US dollars, which are now below $4 billion. Experts are of the view the government should rely on maximum electricity generation based on ingenious fuel to avoid imported furnace oil and go for 3-4 hours loadshedding to keep electricity bills at an affordable level. “And the government should suspend solar power and other power plants till economic stability is achieved and circular debt, which has virtually eroded the paying capacity of CPPA to IPPs, is overcome.”