Cheap oil, which is no longer an expensive concern for electricity producers, is unlikely to derail Pakistan’s effort to increase share of alternative power in its fossil fuel-heavy energy mix, an industry official said.
Non-existent just a couple of years back, wind farms in southern Sindh province now contribute 200 megawatts (MW) to the electricity grid, under strain due to the huge gap between demand and supply.
Double this capacity will be added to the system as wind turbines become operational over the next year.
But a steep slide in price of oil that has made it affordable in many countries like Pakistan have raised concerns that the government might shift its focus away from alternate energy as its high returns become unjustified.
“There could be some fallout in the medium term,” said Inamur Rahman, CEO at Reon Energy Solutions, one of the companies constructing the wind farm.
“But the fact is that budgets of most oil producers are not balancing and sooner or later oil is going to rebound.”
Reon, which is part of the fertiliser-to-software conglomerate Dawood Group, has banked on the government’s desire to bring down the cost of electricity, most of which is generated using oil and gas.
“It would be a myopic view of those thinking to back off now especially considering the focus on adding more megawatts to the system as quickly as possible.”
Forty to fifty turbines of 1MW each could be completed within a period of 15 months after financial close of the project, he says. “Oil and gas based projects take much more time.”
Work on wind power
The four projects, which have started generating wind power, include two of the Fauji group, a Turkish company’s Zorlu Energy and Three Gorges, a Chinese investment.
It took Pakistan many years, since the Alternative Energy Development Board (AEDB) was created in 2003, to promote wind and solar energy project and actually see something on the ground.
Zorlu Energy built its first turbine in 2008 but regulatory and procedural issues delayed production for a few years. But now, Rahman says, those problems have been ironed out and an investor-friendly tariff regime is encouraging.
Yet, eyebrows are raised on feasibility of the alternative energy idea.
“Expectation is an issue. Installed capacity could be much higher than what is actually produced. Capacity utilisation is 33% to 35%. We cannot control wind and same goes for sunlight,” he said.
Contribution of wind power in the overall electricity mix is under 1%. It has somewhat improved to 0.8% in July 2015 from 0.25% last year.
Rahman expects around 1,300MW of wind projects springing up in the coming years. “Realistically, this could go up to 5,000MW.”
What could really increase power supply from wind turbines is capacity enhancement as newer technology improves capacity utilisation of turbines, he said. A major impetus to wind power projects has been the ease of finding foreign lenders like the IFC. In Pakistan, all but one, are backed by foreign lenders.
Reon is also active in nascent solar power industry where it provides Engineering, Procurement and Construction (EPC) service to other firms wished to cut cost by harnessing solar power.
Earlier this year, a government-financed 100-MW solar park was inaugurated in Punjab.
Published in The Express Tribune, September 16th, 2015.
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