IGCEP Revises Renewable Energy Costs

While the new Indicative Generation Capacity Expansion Plan (IGCEP) has invited wide-scale criticism, a major overlooked dimension of this plan is its

While the new Indicative Generation Capacity Expansion Plan (IGCEP) has invited wide-scale criticism, a major overlooked dimension of this plan is its reduced ambition for variable renewable energy (VRE).

IGCEP 2021-30has revised down the share of solar and wind in the energy mix to 12 per cent — compared to 30pc in the previous version which interfaced with the government’s policies and commitment of 30pc non-hydro renewable energy by 2030.This is a big reversal. And while IGCEP claims that Pakistan has promising solar and wind potential which also have become the cheapest sources for power procurement — yet due to the associated intermittency challenges and need for additional reserve requirements as backup generation their targets have been revised down.

This argument of ‘additional reserve requirements’ — is not only marred by misconceptions and misinformation but also contradicts the findings of the recent World Bank study (2020) which while using the same Plexos modelling claimed that achieving the least-cost electricity mix in Pakistan would require a rapid expansion of VRE.

VRE has become currently the fastest-growing source of electricity globally best captured by innovative and cost-efficient integration strategies. Pakistan already has some ideal pro-VRE features which could maximise its net benefits. In dynamic power systems with growing electricity demand such as in the case of Pakistan, wind power and solar photovoltaic (PV) are ideal to meet incremental demand while facilitating system transformation without any economic stress on incumbents. In the case of solar, its output profile coincides with electricity demand, making Pakistan naturally flexible for its integration.

Solar PV generation could be both conveniently integrated and displace fuel-based thermal plants production — contributing to enormous variable cost savings. Based on a thorough assessment of flexibility options carried out in the World Commissioned study VRE Integration and planning Study (2020), it visualizes how VRE generation could cover essential parts of the peak load supply both during summers and winters.

The IGCEP 2021-30 has revised down the share of solar and wind in the energy mix to 12pc compared to 30pc in the previous version

Further, while Pakistan has an ambitious hydro-expansion plan, the abundant availability of hydropower is uniquely placed to provide system-wide flexibility to the grid and buffer intermittent renewable generation.

Pakistan is also moving toward a competitive electricity market. This market will ensure additionally ancillary services through wholesale market-based transactions. It is also important to note here that where the argument on reserve costs have been sufficiently assumed by the recent World Bank study (also carried out for a much higher volume of VRE scenario at the time), it affirms that “transitioning to a system based on hydropower and VRE could substantially lower costs, improve energy security, and reduce greenhouse gas emissions — decreasing overall costs by more than $5 billion”.

It is the interaction of VRE and other system components that determine the additional costs for its deployment. If solar and wind uptake is planned optimally from the very start, a flexible system can be built, and the cost of transforming the system could be reduced substantially.

In a nutshell, Pakistan could have sufficient flexible generation to balance adequately higher shares of VRE without building additional reserves. The new paradigm for power sectors, therefore, is to prudently plan VRE expansion, and system-wide transformation to harness flexibility. All that is needed is a coordinated transformation of the system as a whole.

Also based on the unique pro-VRE characteristics that Pakistan enjoys, the net economic benefits for the country could be substantially higher than other regions. Importantly, new alternatives solutions are emerging such as green hydrogen and cost-effective storage, which over time will enable 100pc renewable energy (RE) transition. We need to steer the power sector in the right direction from now, so as to reap maximum benefits of these ongoing developments.

There are also certain other gaps in the plan that needs to be addressed. Where on one hand the assumptions on hydropower build-out are quite optimistic, IGCEP does not hint at any potential delays/risks of committed plants. The plan needs to be very realistic about implementation periods or doing at least additional scenarios to account for the stated risks.

An ideal scenario in the context therefore would be to revise back the VRE targets upward since the integration of VRE-hydropower will enable an economically robust dispatch, while also accommodating for any unanticipated delays/ lags in hydropower uptake via “insured” VRE induction.

Further, Distributed Generation (DG) is not explicitly accounted for in the plan. Based on its growth trend, DG crossed 160 MW of installed capacity in March 2020 and is speedily increasing. IGCEP should consider this growth trend line in their analysis ie, load forecast, and generation capacity expansion. DG solar in Pakistan has promising potential in terms of solar radiation, architectural landscape, suitable demographic and socio-economic conditions in terms of a large population in need of power grid backup on a daily basis.

It is very important to understand here that for Pakistan, DG offers a major opportunity to devolve capacity payment to end-users and reduce the financial liability of RE expansion — a much-overlooked discourse and important dimension in the wake of the country’s ballooning capacity payment.

Last but not least, IGCEP plans the induction of around 8.5GW of coal-based power plants by 2030. In the run-up to carbon neutrality, the international community is setting an extensive set of guidelines designed to accelerate decarbonisation efforts across countries. Under business as usual, the coal-fired capacity would need to be stranded after 2030 to meet decarbonisation targets. Overlooking these aspects while planning power sector expansion hence entails potential economic implications.

As IGCEP observes “Pakistan is at a crossroads at the moment and in fact faces a defining moment in its history”. The country has a clear opportunity to set the tone for adopting RE by following up on its Alternate and Renewable Policy 2019 pledge and committing to an ambitious 60pc of the power mix by 2030 which targets an end to the fuel’s use for power generation as early as possible.

With the economics pointing towards this being feasible before the end of this decade, we should seriously consider embracing this chance to move to the forefront of global action in tackling the climate crisis. An urgent realignment of Pakistan’s power system with greater VRE penetration is the need of the hour.

Originally Published By Dawn