Renewable energy in shambles

Pakistan’s Renewable Energy (RE) Policy 2006 that yielded almost 1,950 megawatts of commercially-operated wind, solar and biomass plants connected to the national grid can definitely be regarded as a success story. The only safeguard that this policy required was to follow a consistent and periodic review to allow the policy to evolve naturally in line with changing circumstances.

On the contrary, it was given an unprecedented and premature expiry tag through the Economic Coordination Committee decision on 8th March 2013, restricting its validity up to March 2018. That was the first dent in the process of a smooth RE policy evolution.

In consequence of the above, the second and more formidable mistake was the decision to repeal the RE Policy 2006 abruptly and open the Pandora box of framing a new policy. This was unnecessary because there was nothing that the RE Policy 2006 did not offer. It is unlikely that the new policy, as appears from its draft form, will achieve anything beyond the agenda of the previous policy.

Presently, due only to the non-existence of any policy vehicle for over a year, a void has been created in which neither the previous policy exists nor the new one has been finalised, thus discouraging investments.

There is nothing wrong in considering competitive bidding as a fundamental priority in the realm of renewable energy. However, this provision was already contained in the original policy therefore there was no need to get embroiled in the cumbersome process of formulating a new one.

It is unlikely that the new policy will achieve anything beyond the agenda of the previous one

The RE Policy 2006 is a comprehensive document, equipped with an assortment of available options such as on-grid, off-grid, net-metering, wheeling and banking of energy with little or no change in the role of stakeholders as well as incentives offered to investors. Thus, in the face of the consensus-based policy paraphernalia already in place, the question for a new policy does not arise.

Despite renewable energy projects currently having the lowest tariffs as determined by the National Electric Power Regulatory Authority (Nepra), the RE projects are consistently being sacrificed under the pretext of either competitive bidding or the new RE Policy.

But why is the same exclusivity of competitive bidding not applied to thermal projects with considerably higher tariff and higher risks?

The RE Policy 200f, formulated in consonance with the Nepra Act, incorporates three modes of awarding tariffs: i) competitive bidding (solicited proposals), ii) negotiation (cost plus tariff for unsolicited proposals and iii) up-front tariffs.

However, in the draft of the new policy, all tariff award options are blocked for general investors except competitive bidding. This is a potentially risky strategy since it puts all the eggs in one basket. Furthermore, despite its benefits, this model has never reached fruition in the country’s energy history.

In a country like Pakistan, which has already been a hotbed of debates between the federal and provincial governments in the realm of energy, the consensus-based RE policy 2006 was nothing less than a blessing.

On the other hand, the new policy still has to get approved from the Council of Common Interests (CCI), and that is not going to be a piece of cake, especially since the role of the provincial governments has been eroded in the draft.

The draft also introduces an oddity in the form of a government-to-government (G2G) arrangement, whereby dealings with foreign governments are supposed to be executed through the preferential cost-plus mode instead of undergoing competitive bidding.

If modes of tariff award other than competitive bidding are deemed inappropriate, then why are such models available for G2G arrangements under the new draft RE policy? This discrimination will ultimately result in the loss of credibility and fractured confidence of market players.

As things stand, many critical queries are being shoved under the rug. For example, the 30 per cent share of RE being targeted in the draft policy is unlikely to be achieved without a convincing road map.

There is a lack of clarity on how the target will be divided amongst various RE technologies as well as how the proportionate share of provinces will be determined, especially since each province has a distinct resource advantage.

It is yet to be ascertained whether future energy demand will be estimated based on historic numbers or anticipated economic growth. Moreover, the time it takes to finalise the competitive bidding arrangements, and the scheme and broad parameters of bidding in the wind and solar sectors have not been decided upon as well.

Lastly, no firm date of connecting the first unit of RE to the national grid under the new policy has been given. With a lack of tangible answers, the fate of renewable energy sources is in shambles. 

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