Pakistan’s substantial wind power source needs tariff reform

[dropcap]W[/dropcap]ind energy is the fastest growing renewable energy source in the world right now. A continued interest in wind energy development globally has produced steady improvements in technology and performance of wind power plants. New wind power projects have proven that wind energy not only is cost competitive but also provides extra advantage to the economy and the environment. A steady supply of reasonably strong wind is essential requirement for using the power in the wind.

Development of wind energy depends upon a clear understanding of wind resources. Luckily, Pakistan is fortunate to have something many other states do not, high wind speeds near major centers. Near Islamabad, the wind speed is anywhere from 6.2 to 7.4 meters per second. Near Karachi, the range is between 6.2 and 6.9. Pakistan is also fortunate that in neighboring country India, the company Suzlon manufactures wind turbines, thus reducing transportation costs. Its turbines start to turn at a speed of 3 meters per second. Vestas, which is one of the world’s largest wind turbine manufacturers, has wind turbines that start turning at a speed of 4 metres per second.

In addition to Karachi and Islamabad, there are other regions in the country that receive an important amount of wind. In only the Sindh and Balochistan provinces, sufficient wind exists to power every coastal village in Pakistan. There also exists a corridor between Gharo and Keti Bandar that alone could produce between 40,000 and 50,000MW of electricity. Given this surplus potential, Pakistan has much to offer Asia with regards to wind energy.

In present years, the Government of Pakistan has completed many projects to demonstrate that wind energy is viable in Pakistan. In Mirpur Sakro, 85 micro turbines have been installed to power 356 homes. In Kund Malir, 40 turbines have been installed, which power 111 homes. AEDB (Alternative Energy Development Board) has also acquired 18,000 acres for the installation of more wind turbines. In addition to high wind speeds near main centers also the Gharo and Keti Bandar corridor, Pakistan is also very fortunate to have many rivers and lakes.

The present government planned to develop wind energy sources due to problems supplying power to the southern coastal regions of Sindh and Balochistan. It is said that the projects there are undertaken with assistance of the government of China.

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Currently the tariff methodology in the country is undergoing an optimistic shift towards competitive bidding from the former upfront tariff mechanism. NEPRA (National Electric and Power Regulatory Authority) remains steadfast in promoting competition in the energy sector. This can be evidenced by the present order passed by the regulator in revising the prevalent model for wind power tariff.

Departing from the earlier practice of upfront tariff, the latest tariff is a benchmark levelized tariff for the purpose of competitive bidding by reverse based auction mechanism.

The fall in tariffs is warranted because of the reducing worldwide trend in component rates like wind turbines which have been declined to $0.9 million/MW from an earlier price of $1.6 million/MW.

Moreover, due to increased efficiency, a higher capacity factor has been taken at 38 percent at arriving at the benchmark tariff with the regulator pointing out that 35 percent has generally been attained through many energy plants.

Unsurprisingly, there was reluctance by Independent Power Producers (IPPs) but also the Government of Sindh that has also been the case in earlier hearings for renewable tariffs. The parties contended that competitive bidding would put financiers who had already initiated project development at a disadvantage.

Although, a real concern was raised about the absence of a proper framework, which should be simple and follow a standard documentation procedure; AEDB submitted a timeline of 9 to 12 months for development of the required framework. Interestingly the input varied substantially from dissimilar government agencies with the CPPA-G stating the time had come for embracing competitive bidding.

The regulator has also planned to shift the wind risk from the power purchaser to the wind power generation firm. Given the fact that upfront tariffs loaded with sufficient incentive have already been offered to financiers in the past eras, the time has come to open it up to competition. The Ministry of Water and Power in its second submission to the regulator also proposed competitive bidding carried out through AEDB for remaining wind energy projects and any future capacity determined by the Grid Code Review Panel.

CONCLUSION

To sum it up, sufficient wind speed, a high capacity factor coupled with good site locations and situations are also low labor costs, all point to competitive and encouraging market situations in the country.

The reverse based auction mechanism has already resulted in not only steep reductions in tariffs but also market expansion for states like Turkey, India and South Africa. Hopefully, the new competitive bidding tariff regime heralds the same for Pakistan as well.