Pakistan asked to abandon coal

World Bank urges adding 24,000MW wind, solar power to reduce generation cost

ISLAMABAD:

Pakistan’s reliance on coal to generate power is economically unviable and it needs to swiftly move towards adding about 24,000 megawatts of wind and solar-fired power in the next 10 years to reduce the cost of power generation, says a new study of the World Bank.

The Variable Renewable Energy Planning and Integration study suggests that Pakistan should quickly implement a major scale-up of solar and wind generation, which could result in savings of up to a billion dollars per annum.

The World Bank said that Pakistan’s use of imported and local Thar coal to produce electricity was economically unviable.

The additional electricity capacity from domestic and imported coal is not competitive with variable renewable energy, even before considering the environmental impact, said Karsten Schmit, lead author of the report.

He advised that Pakistan should reduce the share of coal-based power from current 29% to 13% of the total energy mix by 2030. As a result, the share of renewable energy should be increased from under 5% to 13% in 10 years, he added.

The World Bank’s advice came amid the government’s review of second unit of 660 megawatts of Jamshoro power plant. The government is considering whether to shelve the unit due to slow progress on it.

Pakistan needs to avoid repeating the cycle of load-shedding followed by emergency procurement and oversupply as it has been doing in the past, according to the report.

This implies that it continues the planning for new capacity from wind and solar sources even when the country is in a position of supply surplus, recognising that the new capacity will take several years to come on stream, said the World Bank.

However, Pakistan currently faces the huge issue of paying about Rs850 billion annually as capacity payments. But the World Bank said that the capacity payments would not be lowered despite inclusion of new energy resources due to contractual obligations of the government.

The study underlined that achieving a least-cost electricity mix in Pakistan would require a rapid expansion of variable renewable energy, reaching at least 20% of installed capacity by 2025, and at least 30% by 2030.

At least 6,700MW of wind and 17,500MW of solar photovoltaics (PV) should be added by 2030 to achieve government targets in a least cost way, it added.

The study noted that adding renewable energy to the system would result in considerable fuel savings (mainly of imported RLNG) and savings in other variable costs of operation of thermal power plants. For example, some $380 million would be saved in one year (2022) if 7,300MW were added to the base case.

The energy demand in Pakistan has steadily grown in the past 50 years but growth rates have been shrinking since the 1980s when consumption doubled every six years. “Today, it takes 15 years and more” to double the energy demand, according to the report.

The report stated that the electricity demand in Pakistan was suppressed due to insufficient power supply or transmission capacity, and low recoveries.

Despite current surplus electricity, Pakistan should plan more investment in energy resources, said World Bank Country Director for Pakistan Najy Benhassine.

To a question, the World Bank said variable renewable energy would help to reduce the cost beyond these capacity payments - mainly operational costs for fuel but to some extent also variable O&M and in the long term also possible delay of capital investments.

The variable renewable energy does reduce overall system costs and this will also mitigate the overall cost burden. Net benefits will be substantial: the cost savings are more than the additional costs for variable renewable energy and for its integration into the system.

A large and sustained expansion of solar photovoltaic and wind power, alongside hydropower and substantial investments in the grid, is both achievable and desirable, said Najy.

More than 10,000MW of thermal capacity is going to be retired within the next 15 years. An optimum expansion would see a mixture of solar and wind and hydropower fill the gap up to 2032, according to the World Bank.

“Domestic coal is not economical when external costs of GHG emissions are considered. Other risks, such as water scarcity and security of supply due to concentration in one area, may further reduce the feasibility of domestic coal.”

Published in The Express Tribune, November 11^th, 2020.

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