Renewables have emerged as a possible substitute for Pakistan’s energy sector based on imported fuels.
So far, we have failed to utilize this abundant native resource. The main planning document in the energy sector, the Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30, has identified nearly 11 GW projects based on wind and solar systems. These will be ordered through auction over the next eight years.
Pakistan is new to energy project auctions. A recent report by the International Renewable Energy Agency (IRENA) estimates that between 2017 and 2018, 55 countries deployed auctions to source electricity from renewable resources. A third of these countries had no prior auction experience.
Internationally, auctions have proven to be a reliable method of procuring electricity at low prices. However, their strength is not limited to obtaining lower rates.
Auctions can also help governments achieve their socio-economic goals. They also help to foster local support, stimulate the national renewable energy industry, provide employment opportunities, encourage the participation of small and new players in the energy mix, engage communities and contribute to subnational development. and national.
Auctions can help Pakistan lay the foundation for a sustainable national renewable energy market, industry and supply chain.
Ammar Qaseem, policy analyst at Renewables First, says that in addition to the least cost criteria, “we also need to keep in mind other power sector policy objectives as we move towards massive purchases by through auctions”.
He believes that to strengthen local markets, Pakistan should have started working on these additions. He says foreign investment and investors can be attracted by the dispersion of benefits, adding that seeking an auction design beyond cost would involve prioritizing energy policy objectives unrelated to cost and global best practices.
So far, we have failed to utilize this abundant native resource. The Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30 has identified nearly 11 GW renewable energy projects to be launched through auctions over the next eight years.
According to Qaseem, this involves allowing national markets to grow, streamlining the bidding process to ensure greater participation and competition, reducing barriers to entry, fostering social acceptability, avoiding the concentration of projects and, above all, inclusive and participatory development.
Aqeel Hussain Jafri, director of the Policy Alternative Energy Development Board, says auctions are the way forward for Pakistan. He says “well-designed auctions provide a level playing field and attract local and international investors.”
He points out that auctions offer a flexible and goal-oriented method of procuring energy capacity. However, until these are actually designed and implemented, there is no guarantee that a bidding regime will drive the desired results.
Jafri says the government is focused on cutting costs. He shares AEDB’s plans to launch the first tender by the end of June. The launch of the white paper coincided with a recent World Bank bidding study that provides recommendations for various bidding models, frequency of bidding rounds, and choosing the best design for the context. local.
Oliver Knight, senior energy specialist for the World Bank’s South Asia Energy Unit, said Pakistan should adopt both substation-based tendering systems and parks to use the additional capacity available in the network.
Dr. Fatima Khushnood of Engro Energy says that due to the major transformations that continue to occur in the renewable energy sector, investor confidence needs to be revived.
Sohaib Malik, senior analyst at Wood Mackenzie, suggests that for Pakistan, we need to carefully identify the best countries to consider as a viable comparison, because governing a resourceless economy faces certain limitations in terms of what it can can offer.
Dr. Wikus Kruger, research director at the Power Futures Lab at the University of Cape Town, who has worked extensively on South African energy auctions, says Pakistan can learn a lot from the South African experience and should maintain consistency in the volume it offers to bid over the years to establish reliable market signals and reduce risk.
The writer is a journalist at The News International. He can be reached at [email protected]