Govt decides to set up renewable energy plants

ISLAMABAD: After failing to attract bids from investors for installing 600 MW solar power plants, the government has decided to set up renewable plants under a government-to-government (GtG) arrangement, top officials of the Energy Ministry told The News.

“The government received no bids for installing its pilot solar power plant of 600 MW at Muzaffargarh even at the tariff of 3.4 cents per unit. The bids were scheduled to open on May 31. Soon after that, the top functionaries of Power Division wrote a letter to Nepra asking for an open-ended tariff or over five cents per unit to ensure the pilot project could be initiated and materialized. The Private Power Infrastructure Board (PPIB) then arranged roadshows aboard to attract investors’ bids and then fixed bids’ date on December 10, then revised the deadline till January 11 but no investors turned up with any bids.”

The top mandarins of the Energy Ministry said the country’s power and oil and gas sector has virtually become unsustainable and no international company is ready to invest in the country knowing the bitter 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 the amount of about $1.5 billion from the government against sale of their electricity to the 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 the government on defaulting on their payments.

However, Energy Minister Muhammad Ali said that the government has abandoned the process of seeking bids from investors under the International Competitive Bidding (ICB) mechanism for setting up renewable power plants of 2,400 MW. Instead, the government has decided to set up renewable power plants such as solar and wind power plants under GtG arrangements as Saudi Arabia and other Middle East countries are interested in investing in renewable energy.

To a question as to what the price discovery mechanism would be if the power plants were set up under the GtG arrangement, the officials said that under the price discovery mechanism, the government would constitute a negotiating committee for GtG commercial agreement and price discovery. However, the finalization of the price discovery mechanism by the transaction advisor is underway to determine the project cost and tariff.