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April 19, 2015

Harnessing the sun

Opinion

April 19, 2015

It is no secret that the inadequacy in Pakistan’s existing energy infrastructure has consistently been encumbering the national economy and is the basic root cause for the slow rate of economic growth in the country. The current power shortfall is hovering around 4500MW to 6000MW and is estimated to cost the economy more than two percent of GDP each year whereas the power demand is growing at about eight percent per annum. The antagonistic effect of the energy crisis is that approximately four million jobs and employment opportunities, which roughly amount to 7.5 percent of the workforce, stand lost since 2008.
In 2006 the Ministry of Water and Power formulated the Renewable Energy Policy for mainstreaming the renewable energy sector in the development plans of the country; however, no serious implementation took place until the PML-N government came into power in 2013.
As a first step, the PML-N government introduced Investment Policy 2013 to enable a business-friendly environment by overhauling business regulations along liberal lines and removing most barriers in relation to the flow of capital and direct international investment in Pakistan. By virtue of the 2013 policy, foreign investors will not face any restrictions on the inflow of capital and investment of up to 100 percent of equity participation is allowed in most sectors. Unlimited remittance of profits, dividends, service fees or capital is now the rule. It can be said without doubt that the liberal nature of the 2013 policy is to attract investment in large and diverse resources and untapped potential for trade in Pakistan.
Since the introduction of the business-friendly 2013 policy, the PML-N government is leaving no stone unturned to counter the loss of credibility of the energy sector in the country. The efforts of the government to attract foreign investment in the energy sector, and especially in renewable energy, can be witnessed from the fact that power projects (and income

thereof) have been exempted from income tax, turnover tax as well as withholding tax on imports. Furthermore, no customs duties have been imposed on the import of renewable energy equipment.
While implementing the 2006 Renewable Energy Policy, the government is unceasingly devising strategies and methodologies to explore various energy sources including but not limited to renewable energy sources. Fortuitously, Pakistan is placed in a region that is considered one of the best solar zones of the world. In Punjab alone, the average daily irradiation amounts to 1900-2300 kWh/m2 which is statistically much better than the average daily irradiation in Germany – 1000-1200 kWh/m2. Another positive aspect is that Pakistan receives approximately 3000 hours of sunshine annually.
In this backdrop, the government of Punjab decided to launch a 1000MW solar park in southern Punjab. For this purpose, the government of Punjab dedicated 6500 acres of desert waste-land near the Cholistan desert, Bahawalpur and named the area the Quaid-e-Azam Solar Park. In order to develop the pilot phase of a 100MW solar power plant in the park, the Punjab government established the Quaid-e-Azam Solar Power Company (QA Solar) in September 2013 with 75 percent of funding coming from the Bank of Punjab and the remaining 25 percent equity from the government of Punjab.
After establishment, QA Solar procured the services of the best available, legal (HaiderMotaBNR), financial (Grant Thornton) and technical (ILF Beratende Ingenieure GmbH, Germany) consultants from local and international markets. Through their respective expertise, comprehensive analytical skills and up-to-date research these consultants strengthened the in-house knowledge of QA Solar in order to ensure seamless and efficient running of the project.
For the construction, operation and maintenance of the project, QA Solar procured the services of TBEA Xinjiang SunOasis Co Ltd, the world’s second largest engineering, procurement and construction contractor. For this procurement, the company utilised the internationally recognised criteria of levelised cost of energy – the ratio of the total cost to be incurred during the life of the project to the total energy to be produced during the entire life of the project. The contractor will be maintaining and operating the project for 25 years.
Being the first ever utility scale photovoltaic power project in the country, state of the art and highest quality Chinese equipment including photovoltaic panels, inverters, transformers and ground mounted structures were imported under the supervision of international consultants. The ground breaking for the construction of the project was performed in May 2014 by Prime Minister Nawaz Sharif. The contractor initiated work on the project in June 2014.
The construction phase of the project completed in February 2015 and as of current the project is in the pre-commissioning testing phase. During the pre-commissioning period, the project has already started evacuating electricity to the National Grid.
In January 2015, NEPRA determined the upfront tariff for solar power projects at US Cent 14.1516 per kWh. This upfront tariff, levelized upon LIBOR, has been adopted by QA Solar. As per the NEPRA determination of the upfront tariff, QA Solar is required to evacuate a minimum of 153 GWh energy to the National Grid annually, however, the pilot project is expected to evacuate much more electricity than the minimum requirement set-out by NEPRA in its upfront tariff determination.
The Company will be selling the electricity evacuated from the 100 MW Solar Power Plant in accordance with the levelized upfront tariff to the National Transmission and Dispatch Company Limited (NTDC). In this regard, the Government of Pakistan will guarantee the payment obligation of NTDC to the Company through an implementation agreement for the electricity evacuated through the 100 MW Solar Power Plant for the project life.
Indubitably the success of the pilot project has started Pakistan on the journey to further explore opportunities for the generation of electricity through solar power and other renewable sources. According to the ‘Special Report on Renewable Energy Sources and Climate Change Mitigation’ by the International Panel on Climate Change, global warming emissions associated with renewable energy including manufacturing, installation, operation and maintenance, and dismantling and decommissioning, are minimal in solar power generation.
Furthermore, solar PV energy uses virtually no water for operations. Therefore, it does not pollute water resources or strain supply by competing with agriculture, drinking water systems, or other important water needs. This means that Pakistan will have a cleaner and greener future as solar power is non-polluting, clean, and a reliable renewable source.
Another positive aspect of the renewable energy is that it is more labour-intensive, meaning thereby that more jobs are created for each unit of electricity generated from renewable energy sources. For example, in the solar energy sector employment can be found in a variety of capacities, such as manufacturing, project development, construction and installation, operations and maintenance, transportation and logistics, and financial, legal, and consulting services.
In addition to the jobs directly created in the renewable energy sector, growth in the renewable energy sector can also create a positive economic ‘ripple’ effect. In 2009, the Union of Concerned Scientists conducted an analysis of the economic benefits of the usage of renewable energy by 2025 and found that reliance on renewable energy can create more than three times as many jobs as may be created from any other source. Considering the abysmal situation currently prevailing in Pakistan, creation of job opportunities can serve to transform the negativity in society to growth and well-being.
Exploring renewable energy sources for generation of electricity may seem like a small step but it is unquestionably a step in the right direction and will bring Pakistan out of the twilight that has engulfed it for decades.
The writer is an advocate of the high court based in Lahore and a political analyst.
Email: [email protected]

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