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“The true voyage of discovery lies not in seeking new landscapes, but in having new eyes.” (Marcel Proust)

Our power sector is in dire straits already. Decades of ill-conceived policies, political expediencies, mismanagement, and vested interests have brought this vital sector of the economy to the brink. Among all the evils that plague our country, the power sector circular-debt, clearly stands out. It has crossed PKR 2.54 trillion already and is defying our government’s every effort to tame it. To save it from the financial ruin, our government will need to correct the fundamentals of this sector using solutions that can provide it a breathing space to eliminate the gross incompetence and mismanagement that pervades this monolithic enterprise.

An option that holds a high promise for this purpose but has not received any serious attention in the country beyond academic curiosity is developing of large and long-duration energy storage facilities. Two such options are pumped hydroelectric storage (PHES) and compressed-air energy storage (CAES). Both can help in managing the circular debt and will also enable our government to deal with any adverse impacts of the high shares of renewable power it’s planning to add by 2030.

According to NEPRA’s State of Industry Report 2022, the gross inefficiencies and mismanagement in the power sector have been leading to huge financial losses which exceeded PKR 536 billion in FY2022 (almost 30% of this sector’s revenue base). The main culprits behind this humongous loss were high T%D losses and lack of full revenue recovery (64%). However, collective share of other factors (36%) that included sub-optimal use of efficient generation due to market and system constraints and penalties paid to IPPs for various contractual violations were no less significant. No business can even think of surviving with such a heavy loss, let alone remain profitable.

Our successive governments’ inability to address the above issues head-on and their reluctance to carry out systemic overhaul of this sector have not only contributed to these evils but have allowed them to gain a firm footing in the system. Relying only on quick-fixes, band-aids, and ad hoc actions such as early closing of markets, media campaigns to motivate consumers to conserve electricity, and regularly raising tariffs to bridge the yawning gap between cost and revenue have proven futile against the cancer that inflicts this sector.

Notwithstanding that these are no substitute for good governance, this article offers a technical solution that can alleviate the serious issue of spiraling up capacity payments and the other penalties being paid to IPPs that some experts blame on the consumer demand that has not evolved as was predicted when long-term contracts were signed with the IPPs. But before we get into further details, let’s digress for a moment and have a glance at the basic philosophy that governs the power supply and delivery business.

Most of the complexity (and cost) in the electric system is due to consumer demand which varies randomly over time. Every day, it rises from a minimum to a crest and then returns to the minimum. The value of the minimum demand, maximum demand, and the way it rises and falls can vary from day to day, season to season, year to year, and system to system, but the pattern remains largely similar. The demand is often classified into three major categories: base load that remains on the system round the clock, peak load that comes on only for a few hours in the year, and intermediate load that falls in between.

Electricity has some unique constraints. A major one is that it must be produced and delivered the moment it’s demanded. Its storage in any significant amount, if not impossible, has been both difficult and expensive. An electric utility therefore must have resources available and ready to match demand, from next moment to next couple of decades. Recent developments in the battery storage technologies have started to ease this constraint but we are there as yet.

A variety of technologies have evolved over time to enable the utilities to serve demand on their systems reliably and at minimum cost. We have high upfront but low fuel cost plants like coal and nuclear on one hand used primarily to serve base load. On the other extreme, we have low upfront but high fuel cost plants like combustion oil and gas turbines and diesel generators to serve the peak load. And there’s a host of other technologies in between to serve the intermediate loads.

Multiple considerations go into a utility’s working out an optimal set of plants to serve consumer demand, on a time scale that extends from the next moment to a couple of next decades. Though cost act as a common denominator behind many of these considerations, it isn’t the only one. The major ones include: (a) its service function and operational flexibility; (b) its capital cost, lead time, and life; (c) fuel costs; (d) maturity; (e) dependability; (f) its environmental impacts; (g) its impact on local employment; and (h) its contribution to self-reliance.

The practice remains largely the same whether the whole system is managed by a single entity or when some of these functions are outsourced (like generation to IPPs). The only difference is that unlike the past, the utility now must agree on the terms & conditions in a formal contract with non-utility parties. Huge risks exist upstream and downstream of these producers, therefore, sponsors of such projects seek guarantees to protect their investment.

The above situation changes when variable renewable energy (VRE) plants are added to the system. In addition to the random variation in demand and system conditions, a new source of uncertainty surfaces. It’s the intermittency and variability of the primary energy resource, solar radiation or wind speed, at the plant site. As their share in the grid rises such issues must be considered to avoid heavy penalties.

Two key issues the planners face in developing optimal plans are: how much firm capacity a candidate renewable power plant will contribute to ensure reliability; and how much energy it will contribute to the system? These issues do not go away even if the planners succeed in coming up with an optimal generation portfolio by making some realistic assumptions; they just shift shoulders—from those of system planners to those of system operators (SO).

Regardless of who manages it, grid operation is governed by a standard set of rules in a “scheduling and dispatch” process. It consists of five sub-processes: (i) arranging the generators in an ascending order of operating costs called “merit order”; (ii) selecting a subset from the merit order list the plants to be operated next day or week called “unit commitment”; (iii) scheduling their loading order and production levels; (iv) their actual dispatch; and (v) monitor the system operation and intervene, if necessary, to maintain supply-demand balance..

Economic considerations are paramount, but a few additional factors also influence SO’s scheduling and dispatch process: (i) having adequate firm generating capacity to maintain system reliability with requisite technical characteristics; (ii) the ability of these resources to cater to momentary fluctuation in demand (called “regulation”); (iii) ramping up/down of dispatched resources to follow the demand as it rises and falls (called “load-following”); iv) to assist the SO in handling any contingency in the system (called “operating reserve”); and (v) help the SO in restoring from blackouts (called “Black Start Capability”). The first three are mandatory and agreed in the contracts while the last two can be either mandatory or optional.

For most part of its history, the electric grid had generators that operated in synchronism with each other. at a nominal frequency (50/60 Hertz) that is maintained throughout the system. However, different parts of the system are allowed to operate at different voltages to suit the end-use. A disturbance (normal or abnormal) anywhere in the grid can disturb the entire system and must be corrected automatically or via SO’s intervention to return it back to normal.

In contrast, renewable plants are non-synchronous and connect with the grid via power electronic interfaces. They cannot provide the system many of the services that conventional generators provide. These plants are therefore considered non-dispatchable which simply means that the SO cannot use or control them on command.

The simplest way to make these plants dispatchable is to add on-site storage with each. The only issue is that it adds to plant’s cost, sometimes, as much as 100%. Other techniques can also serve this purpose, for instance, by building extra quick-start and fast-response conventional plants, by building additional flexibility in the grid, by dispersing these plants over wider areas to spread the risk of unavailability, by seeking regional integration of autonomous grids, and by influencing electricity demand to align it with the timings of VRE plants’ availability.

The quest to cost-effectively deal with these challenges has rekindled interest in energy storage technologies. The breakthrough in efficiency and cost of Lithium-ion battery packs for Electric Vehicles, spurred many electric utilities also to seek similar developments for utility-scale battery systems especially to cover the uncertainty and variability in the VRE plants. They were not disappointed as there has been similar decline in the prices of these battery systems also.

That prompted utilities, regulators, and R&D organizations to explore the role and scope of energy storage to deal with the constraints that have frustrated their struggle to keep a balance in demand and supply in the grid. Lo and behold! They discovered that deployment of these technologies can help them a great deal in countering many constraints that have prevailed throughout this industry’s history. Many countries are ambitiously pursuing development and deployment of battery-storage technologies in their power grids.

Though the world seems infatuated with the charm of battery storage technologies, and admittedly their glamour is hard to resist, this writer believes that large and long-duration energy storage schemes like PHES and CAES as explained below will serve Pakistan better than the battery storage. Both are mature, commercially demonstrated, rely on natural resources, and other than initial investment, will rely on local expertise and materials. Both offer more features in managing the grid than the battery systems. Therefore, they hold better prospects for eliminating the penalties the country presently is paying to IPPs, cover the uncertainties and variabilities of VRE plants, and in helping the country’s transition to a clean and sustainable energy future.

Pumped Hydroelectric Storage (PHES): PHES uses earth’s gravity to generate electricity just like a regular hydroelectric plant. They use two separate water reservoirs one located at a higher elevation from the other. Water is pumped from the lower reservoir to the higher for storage when cheaper and is kept there. When required, it’s allowed to flow back to the lower reservoir to produce electricity. PHES schemes have been around for almost a century and constitute over 97% of the global energy storage. There round-trip-efficiency is 75 to 85%. Their storage capacity can be large (100 MW and more) as well as long-duration (weeks to months or even seasons).

Compressed Air Energy Storage (CAES): In CAES schemes, air is pumped into an underground cavern, mostly a salt cavern or an emptied oil or gas field using electricity (but could be other sources) when it’s convenient and cheaper. When energy is needed, the air from the cavern or field is released back up into the facility, where its expansion turns an electricity generator. CAES is also an established technology and multiple configurations exist to suit the input/output requirements. These are also categorized as large and long-duration energy storage schemes. Their round-trip efficiency is generally 40 and 60% but with some special designs can approach 70%.

The beauty of PHES and CAES schemes is that these can act as generator or load as per the need of the grid. They can cost-effectively and efficiently provide capacity and energy to the system like any other source of supply and reduce these like any other large load. Through these services, they can enable the grid managers and operators keeping a next-to-perfect balance in their systems, and thus can obviate the huge penalties being paid to IPPs (conventional or VRE).

Some of the important services both PHES and CAES can provide include: (i) Energy Time Shift (buying electricity when its price is low and selling it back when it’s high); (ii) Cover VRE plants’ capacity and output variation: (using storage to mitigate changes in their availability and output; (iii) Peak shaving: (leveling of peak demand by reducing demand); (iv) Operating Reserve: (providing support to the system when it suffers an abnormality. Spinning reserve is part of this reserve; (v) Black Start: (using stored energy storage to restore the system from blackout, independent of the grid supply); and (vi) Seasonal Storage: (storing energy for several months);

As we noted at the start, energy storage is an option little explored in our country. NEPRA Act and the National Electricity Policy are completely mum about it. ARE Policy 2019 only lists it as a technology under alternative energy technologies. The recently issued National Electricity Plan 2023-27 also makes just a passing reference to develop Hydrogen production and local manufacturing of storage batteries. Much more is needed in terms of policy support, legal coverage, and regulatory support, and pricing frameworks to stimulate and encourage development of viable energy storage schemes in the country including PHES and CAES.

A lot of background material on the above aspects is available from prominent global organizations. Our Ministry of Energy (Power Division), AEDB, and NEPRA should join hands to commission a scoping or pre-feasibility study to further explore the potential and prospects of PHES and CAES schemes in the Country. Our Balochistan province has a rich potential for developing these schemes. Their development either stand-alone or as hybrid with VREs and link with the VREs, present and future, in the wind corridor in Sindh will be an ideal combination which when linked with the national grid will alleviate the penalties being suffered by the country. Not to miss also the much-needed complementary support required to cover the uncertainty and variability of the VRE plants.

The IPPs and the agreements signed with them is a reality and no amount of whining will reverse the past decisions. Renewable power generation, whether at utility-scale or distributed, is also a new market force that is poised to grow. We must accept our present realities, learn from our past mistakes, and look into the future with hope and optimism and for solutions to our problems. One such solution is suggested above and there may be many more only if we carefully look out for them. “Your diamonds are not in far distant mountains or in yonder seas; they are in your own backyard, if you but dig for them.” (Russell H. Conwell in his “Acres of Diamonds”)

The writer is an independent consultant specializing in sustainable energy and power system planning and development. He can be reached via email at: