Our Gallery

Our Contacts

27 Division St, New York, NY 10002, USA

iRecco@mail.com energy.IRecco@mail.com

+1 (800) 123 456 789
+1 (800) 321 456 746

Common Misconceptions about Renewable Energy in Pakistan

Energy crisis in Pakistan is a serious one. In cities, we face 6-8 hours of load shedding (except parts of Karachi) and in rural areas, typical load shed figure is anywhere between 12-18 hours. According to estimates, our supply numbers have been stagnated at just around average of 11,000MW for the last seven years and our demand has kept soaring and gone past well beyond an average of 18,000MW. Yet in a dire power crisis, we continue to hear misconception on renewable energy generation as compared to current fossil fuel generation status quo.

The first general misconception goes like this: Renewable energy generation is not competitive today and mainly live on governmental subsidies. Let us analyze this argument. The current status quo of thermal generation (Furnace Oil and High Speed Diesel) produces approximately 40% of total electricity generation. Since price of FO and HSD are linked to international oil prices and rupee exchange parity, we have to subsidize the end user price of electricity as Tariff Differential Subsidies (TDS) which is the difference between the actual costs of electricity and what consumers pay. In the last five years alone, the Government of Pakistan has paid TDS of PKR 1,500 billion as a difference between the actual price of electricity and price billed to consumers (since consumers can’t afford to pay for the expensive energy our system produces). This subsidy amount of Rs. 1.5 trillion is a humongous one. With this price tag, almost 30,000 new village infrastructure could have been upgraded, 24 full scale metro projects could have been completed, almost 75,000 new high end schools and hospitals could have been built, approximately 100,000 new libraries could have been constructed from ground up and almost 5,000MW of new renewable energy capacity could have been added to the national grid. Thermal energy is not cheap. And if people think renewable energy is expensive, just remember price tag of Rs. 1.5 trillion as subsidies for thermal generation in the last five years alone.

Second misconception goes like this: Cost of producing electricity from renewable energy exceeds the cost of electricity from thermal generation, hence thermal generation should be preferred. This is again a matter of perspective. Let’s suppose if we would have built our energy system based on small distributive, community driven system rather than large scale, centralized system that we currently operate in, we would not have needed sprawling costs that we incur today on thing such as large scale transmission lines, transformers, distribution grids, cables, meters, people to read meters, planners and headquarters etc. In local parlance, this cost is typically knows as Distribution Margin (DM) and is typically one fifth of the total cost of electricity today. Add to this the cost of line losses that we incur today on our centralized energy systems and power theft, which almost always causes our power system to cripple down and ask for higher subsidies resulting in massive debt problems. Even at large scale now, renewables are competing against thermal and especially coal power generation. The best wind turbine in town today is producing electricity at the same cost as large scale coal generation. Hydel power generation is so cheap that even if we tap 20% of the total hydel potential, we will require no subsidies. What renewables further provide is fuel price hedging since price of solar and wind resources have been bestowed by nature for free. Even if we install renewables at a higher price, we no longer have to worry about fuel price volatility and exploding fiscal deficits in times when price of oil balloons up. Further, the externalities such as environmental cost, health costs of producing renewable energy far outshine the cost of thermal generation.

Third misconception is something like this: Renewable energy is intermittent (only when sun is shining and wind is blowing) and thermal generation is baseload (can run 24 hours). This argument is technically true. Solar energy produces mostly during the day time but we also need most electricity during that time period only. Wind generally blows during the night time and if combined well with solar can give a powerful solution to intermittency. Hydel generation produces maximum electricity during summer time, just when we need most electricity. Technical intermittency remains an issue but we need to re-define intermittency in Pakistan’s context. The question we need to ask is have we received uninterrupted electricity supply on thermal generation? The obvious answer is a resounding no. With 18 hours of load shedding, intermittency is a problem more for thermal based generation rather than renewables. Renewables may encounter engineering or natural intermittency problem. But thermal generation produces far greater financial intermittency problems since our power sector cannot afford high furnace oil and diesel prices. Think of creeping circular debt bailouts time and again, nationwide petrol crisis and large scale black outs because somehow our power sector have not generated enough financial muscle to cater to increasing production levels at higher prices. Intermittency is a major risk for thermal generation and not for renewables.

Third misconception is something like this: Renewable energy is intermittent (only when sun is shining and wind is blowing) and thermal generation is baseload (can run 24 hours). This argument is technically true. Solar energy produces mostly during the day time but we also need most electricity during that time period only. Wind generally blows during the night time and if combined well with solar can give a powerful solution to intermittency. Hydel generation produces maximum electricity during summer time, just when we need most electricity. Technical intermittency remains an issue but we need to re-define intermittency in Pakistan’s context. The question we need to ask is have we received uninterrupted electricity supply on thermal generation? The obvious answer is a resounding no. With 18 hours of load shedding, intermittency is a problem more for thermal based generation rather than renewables. Renewables may encounter engineering or natural intermittency problem. But thermal generation produces far greater financial intermittency problems since our power sector cannot afford high furnace oil and diesel prices. Think of creeping circular debt bailouts time and again, nationwide petrol crisis and large scale black outs because somehow our power sector have not generated enough financial muscle to cater to increasing production levels at higher prices. Intermittency is a major risk for thermal generation and not for renewables.

As consumers of electricity, we have not been given choice over the supply of electricity. Imagine, if someone wants to drive a Honda in this country but is only given an option to drive a Suzuki. We have been told for long enough now that renewables are expensive and therefore not for us. But same analogy does not hold for automotive industry. In the auto industry, people do buy expensive cars, small cars, hybrid cars, eco-friendly cars and at the same time gas guzzlers. But this is not the role of policy makers to decide which car should I purchase. Consumers should be given a broad based choice to pick and choose from newer technologies and efficient technologies. Right now, we have been given only an obsolete option for electricity generation which is expensive and at the same time less efficient. We need to enlarge our menu, open up more choices, benefit from renewable energy prices of today and use current low thermal prices to plan an effective transition from this gigantic, inefficient power sector to a new, efficient one.

 

Financing Renewable Energy in Developing Countries: Business Models and Best Practices

The World Bank has reported that an estimated 1.29 billion people in 2008 lived below $1.25 a day, equivalent to 22 percent of the population of the developing world. Almost over three billion people live on less than $2.50 a day and at least 80% of the world population lives on less than $10 a day. The relationship between income poverty and energy poverty is also ubiquitous. Today, there are 1.4 billion people around the world that lack access to electricity, some 85% of them in rural areas. Without change in current policies, by 2030 the number of people without electricity will drop only by 200 million. Sub-Saharan Africa continues to remain one of most the electricity deprived areas of the world. Further, the number of people relying on the traditional use of biomass is projected to stay same by 2030.

However, traditional finance mechanisms are not applicable in rural areas. Rural populations are spread out often in small pockets with dispersed locations and hence conventional grid is difficult to extend to such areas. As a result of low population density, difficult terrain, and low consumption, rural electricity schemes are costly to implement (Tomkins, 2008, p. 48). Project financing is virtually not possible since project cash flows are not adequate. In addition, low rural incomes can lead to problems of grid affordability and maintenance. Also, long distances mean greater electricity losses and more expensive customer support and equipment maintenance. Thus rural electrification projects have often required subsidies to make them financially viable (Tomkins, 2008).

The resources future publications take a deep dive into one of the most comprehensive studies on financing of renewable energy in developing countries. Download the full publication here and if you are interested in executing small energy projects, feel free to contact Resources Future at info@resourcesfuture.com