Power generation from renewable sources such as solar and wind offers numerous benefits to society but poses multiple challenges also. In line with the global trend, our government also has set ambitious targets of 20 percent by 2025 and 30 percent by 2030 for their deployment in the country’s power grid. This is arguably a good first step as renewables can power our dreams of economic development in a secure, affordable, and sustainable manner. Turning dreams into reality, however, requires that supportive policy and regulatory frameworks be placed on the ground for embracing renewables. Below we identify some major challenges the country will face in upscaling power generation from renewables and also discuss the policy and regulatory imperatives to confront these challenges.
Renewable power generation technologies, especially those based on solar and wind, are making rapid inroads into the power grids around the world. According to REN21’s just released Renewables 2022 Global Status Report (REN21 GSR 2022), 175 GW of solar photovoltaic (PV) and 102 GW of wind capacities were added in the global power grids during 2021 leading to a total PV capacity of 942 GW and wind capacity of 845 GW in the world. This amounted to roughly 84 percent of the total new generating capacity. Total investment during last year on renewables exceeded USD 366 billion in which 56 percent went to solar PV and 40 percent to wind projects. For the first time ever, solar and wind plants jointly were able to contribute over 10 percent of the electricity generation of the world in 2021.
The Renewable 2021: Analysis and Forecasts 2026 report, released by the International Energy Agency (IEA) in December 2021, emphasizes that the present thrust of power generation from renewables must be maintained, and in fact upscaled as much as three times, in the future to realize the society’s “Net Zero by 2050” goals. BloombergNEF, another global heavyweight in tracking investment trends in the world, also concurs with the IEA’s above assertion in its Energy Transition Investment Trends 2022.
Multiple developments have made renewable generation options top contenders for serving the future electricity demands of the world despite that fossil fuel-based power technologies’ receiving hefty subsidies (estimated to be over USD 5.9 trillion in 2020). The cost of electricity for solar PV has come down by 89 percent since 2010, 67 percent for concentrated solar power (CSP), 64 for onshore wind, and 58 percent for offshore wind. Battery storage technologies, in the meantime, have also seen over 90 percent cost reduction, from USD 1,200 per kWh in 2010 to USD 130 per kWh in 2021. Almost all renewable technologies have also seen remarkable gains both in efficiency and capacity factors as a result of improved technologies, economy of scale, and experience gained in project development and management (REN21 GSR 2022).
Despite the economic slowdown as a result of COVID-19 pandemic, some disruptions in the supply chain, shipping delays, and a general increase in prices of components used in solar and wind systems, renewable energy technologies have kept their thrust intact. Their march now seems unstoppable. Renewable energy technologies can be either adopted actively by a country or allowed to infiltrate in their systems passively. This can make all the difference, however, in reaping either the full range of benefits from these schemes or just contend with a couple and forego the rest.
If blended in the power grid with proper planning, renewable power generation can provide numerous benefits to our country. Just to list a few of such benefits: it can considerably alleviate the country’s dependence on highly-polluting and import-based fossil fuels; it can enable shifting to local, affordable, and environmentally-friendly energy supplies thus improving our security; it can reduce transmission and distribution (T&D) losses; it can defer T&D investment requirements; it can lessen the needs for maintaining excessive reserve capacity in the grid; and it can spur local industrial development, businesses, and employment.
Unguided and unplanned infiltration of renewable power generation in the grid, on the other hand, can impose significant technical and financial penalties and consequently can lead to losing many of their potential benefits. These penalties could include avoidable costs in maintaining excessive reserve capacity in the system, unnecessary duty-cycling of conventional plants and the attended wear and tear, sub-optimal investments in the grid, and undesirable curtailment of much cheaper and renewable electric power production.
We highlight below some critical challenges the country will face in achieving its renewable power generation ambitions and also offer some pointers for effectively dealing with them. To keep the discussion simple, we will assume that the government’s renewable energy targets are for the power grid only and exclude any standalone, behind-the-meter, or off-grid applications. Our focus will remain largely on answering just one question: “to reach these targets, what regulatory, institutional, financial, and technical frameworks and systems must be in place?”
First and foremost, we must realize that renewable generation technologies are inherently different and will require different treatment. Unlike conventional technologies which rely on exhaustible fuel stocks, solar and wind technologies base on natural energy flows. These flows, though ubiquitous, are scattered and diffused; their availability is also uncertain and variable over time. The existing planning, decision-making, financing, and operating frameworks have evolved around large-sized conventional projects in a centralized grid setting and are not amenable for a fair evaluation of small-sized, distributed, and diffuse-resource based power generation schemes. Therefore, we must accord renewables a level playing field for competition with conventional generation options.
Setting of renewable power generation targets is a commendable decision of the government, but it must be supported by the enabling conditions imperative for achieving these targets. The following five are the minimum that we will need: (i) a legal umbrella (a set of laws, policies, and regulations) to provide a level-playing field to renewables for competition with conventional generation; (ii) a decision-support, planning, and operational framework that enables a fair accounting of the costs and benefits of renewables against conventional options; (iii) a lean, interlinked, and responsive institutional setup; (iv) a renewable-friendly financial framework to cater to the small-scale and distributed nature of these technologies which can deter potential investors; and (v) an R&D setup aimed at promoting renewables’ adoption.
The government should provide an overarching legal framework specifically aimed at embracing renewables in the power grid. NEPRA Act and its implementing regulations should guide and steer the power sector towards a renewable-rich future by specifying the planning basis and criteria to be followed for evaluating various generation and T&D options for serving forecast demand. The relevant network codes should incorporate requisite changes to facilitate renewables’ smooth connection with and operation in the grid. The market rules and codes should also be revised to make them resource and technology neutral. The national electricity policy should adequately reflect the nation’s ambition for renewable transition and the national electricity plan should define concrete and actionable strategies and defined milestones.
Adding renewable capacity in the grid in any significant levels poses both planning and operational challenges. Planners face three key issues in developing long-term resource plans for their systems with high shares of renewables. First, how much firm capacity the renewable plants will contribute to their systems to ensure serving the forecast demand reliably? Second, how much energy they will contribute to their systems? Third, what support from the system, if any, they will need to cover the uncertain and variable nature of the renewables? These factors contribute to capital and operating costs and any miscalculation can lead to allocative and productive inefficiencies for which the economy and consumers have to pay dearly.
The present decision-making frameworks, planning practices and tools, and operational protocols are all remnants from a bygone era of “the bigger, the better, and cheaper too” mindset. It has served its purpose quite well for over a century but is not cut for dealing with small-scale, distributed, and site and local weather specific renewables. They demand paying careful attention to local resource availability and its temporal distribution, operating environment, and consumer demand to decide on the best renewable resource, technology, size, and deployment scheme. Planners will need to be trained, skilled, and properly equipped to deal with the issues, attributes, and demands of such data-intensive and analytically-demanding renewable power generation options.
System operation and control setup and protocols, will also require revamping as the share of renewables in the power grid increases. The system operators will need greater visibility into the dynamic conditions in the grid, availability and expected output from renewable plants, as close as possible to the real-time as well as during actual operation. A state-of-the-art supervisory control and data acquisition (SCADA) system embedded in an equally-sophisticated energy management system (EMS) and supported with an ensemble of renewable generation forecasts will provide the foundation for a stable, secure, and economic operation of the grid with higher shares of renewable power in it.
In sharp contrast to conventional plants, renewable plants require large tracts of land some of which may fall into protected, environmentally-fragile, or politically-sensitive regions. Developers may be required to secure permits and authorizations from government agencies which often involve satisfying cumbersome procedures and considerable time. Such sites, and in particular those rich in wind sources, may be located far away from existing T&D networks. Also, road access to such sites may not be available or adequate. It’s always useful for the government to do some advanced homework about such issues and develop a proper mechanism to provide as much comfort to prospective developers as possible.
Financial markets and instruments also exist primarily to serve large-sized conventional power generation projects. Developers of renewable power projects may find it difficult to secure financing for their smaller, dispersed, and high-upfront cost projects due to the perceived higher risks and uncertain rewards associated with such projects. It’s also not unusual for potential sponsors of such projects to demand relatively higher returns on their investment backed up by long-term contracts and guarantees. As most of the investment for renewable power projects is to come from the private sector, our government will need to establish a renewable investor-friendly environment and a consistent and stable policy on the ground.
The need for establishing a supportive R&D setup for upscaling renewable power generation in the country cannot be overstated. There are numerous issues involved with higher shares of renewables in the power grid. Only a few are raised above. International experiences cannot be adopted blindly in Pakistan. Renewable power generation can be pursued via multiple pathways, each with its own pros and cons. It’s critical to follow a route that holds the greatest potential value for our nation. This will be possible only if the efforts to upscale renewable power generation in the country are informed and guided by the results of rigorous research studies at every step along the way.
The writer is a freelance consultant specializing in sustainable energy and power system planning and development. He can be reached via email at: [email protected]