THE falling solar energy installation cost is making it competitive to other sources of energy. In the first week of May, a solar developer company bid for Dubai Electricity for as little as 2.99 cents a kilowatt per hour to develop 800MW of solar power projects. This price is almost 50pc less than quoted in 2015.
If successful, the electricity generated from solar panels will be cheaper than that of the coal plant commissioned in Dubai last October.
In Pakistan, electricity demand is rapidly increasing at 8-10pc per annum. Solar energy is greatly unutilised in Pakistan, though the country has an abundant source of sunlight. With more than 3,500 hours of sunshine a year, the total solar energy per unit area in Pakistan is nearly three times higher than Germany, which has an installed capacity of 40,000MW.
With such a wealth of solar resource, Pakistan’s government has recently dedicated land to establish a 1000MW solar park. However, foreign response to this investment opportunity has not yet been forthcoming, in spite of being offered the highest tariff (14-15 cent / KWh till 2015) in the region with tax incentives, and the government’s guarantee to purchase electricity.
The question here is why are investors not willing to invest? While Pakistan’s credit rating has improved and its risk spread has reduced from 1011 basis points in 2013 to 461 basis points in 2015; it still has a higher financing cost compared to other places like Dubai. Cost of financing in Dubai is minimal with no land lease charges, which substantially reduces the overall project development cost. On the contrary, the tariff offered in Pakistan offsets both financing and project development costs.
To address this power deficiency, solar power is believed to be the best off-grid generation solution, primarily for rural areas
An investor who is interested in setting up a solar power plant has to deal with multiple regulatory bodies. The investors have to work with provincial governments as well as the Alternate Energy Development Board (AEDB) to carry out a grid interconnection study and seek approval from the National Transmission and Dispatch Company (NTDC) or the distribution company. They need to carry out environmental studies, develop feasibility reports, apply for tariff and finalise the power purchase agreement with the buyer.
This entire process is cumbersome and time-consuming. With so many time-consuming stages a project turns unattractive by the time the approvals are obtained; or the project may never even be approved. To avoid such delays and to facilitate investments in renewable energy, investor-friendly policies need to be implemented. To save time and cost, the whole process can be structured to become a one-window operation.
To expedite things, one-window operation is needed to hold a bidding round for different sizes of power plants and offer different sites with solar data to investors. The entire specifications particular to a block should be provided before the bidding process. Investors could then make a bid based on the unit rate of electricity. Matters like dealing with NTDC, power purchaser and other stakeholders, the acquisition of land and security issues, should be dealt by the government. Multiple bidding rounds would ensure healthy competition and offer the lowest tariff for that area. This methodology would reduce time and ensure transparency in getting the best deal.
It is estimated that one in three Pakistani households do not have access to electricity. To address this power deficiency, solar power is believed to be the best off-grid generation solution, primarily for rural areas.
Setting up transmission grids over thousands of kilomettres in remote areas is difficult, time consuming and costly. In order to address the energy crisis the government should invite solar developers to set up a model solar village. Solar energy in these areas can also be used in the form of solar geysers for heating purposes. Other utilities include solar water pumps to operate tube-wells and solar street lights.
The global energy landscape is changing and Pakistan is lucky to be blessed with ample sunlight. Hydrocarbon makes two-thirds of Pakistan’s energy mix in comparison to less than 1pc of renewable energy (excluding hydel). It is indeed important for a country with over 200m of population to have more renewable energy.