First hydropower plant paves way for more

May 16, 2016 at 5:09 pm

The energy crisis is a serious one, yet the renewable energy generation receives a low priority in policymaking and investment as compared to questionable current fossil fuel generation.

There is a misconception that renewable energy is not competitive and can survive only on governmental subsidies. Let us analyse this argument along with other wrong perceptions. Current thermal plants [furnace oil (FO) and high speed diesel (HSD) produce 40pc of the total electricity.

Since price of FO and HSD are linked to international oil prices and rupee exchange parity, the end user price of electricity is subsidised. The Tariff Differential Subsidies (TDS) are the difference between the actual costs of electricity and what consumers pay.

In the last five years alone, the government has paid TDS of Rs1.5tr since consumers can’t afford to pay for the expensive energy our system produces.


‘Independent power projects based on local coal are given an internal rate of return of 20pc which puts hydro projects at a disadvantage’


With this subsidy, 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 Rs1.5tr as subsidies for thermal generation in the last five years alone.

Critics say the 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, centralised system that we currently operate in, we would not have needed sprawling costs that we incur today on things 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 known 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 centralised energy systems and power theft, which almost always cripple the power system and ask for higher subsidies and enormous debt problems.

Even at large-scale production now, renewables are competing against thermal and coal power generation. The best wind turbine in town is producing electricity at the same cost as large scale coal generation.

Hydel generation is so cheap that even if we tap 20pc of the total hydro potential, these will require no subsidies. What renewables further provide is fuel price hedging since the 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 and health costs of producing renewable energy far outshine the cost of thermal generation.

No doubt 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. Hydro 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 up to 18 hours of daily 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 the 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 blackouts because somehow the power sector has 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. Consumers should be given a broad based choice to pick and choose from newer and efficient technologies.

Right now, we are left with 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.

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