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Pakistan Reader# 186, 26 August 2021

Tapping into Pakistan’s solar energy market



Despite having the potential, Pakistan is yet to explore its solar energy sector

Despite having the potential, Pakistan is yet to explore its solar energy sector which currently contributes 1.07 per cent to the electricity generation

Apoorva Sudhakar
Project Associate, School of Conflict and Security Studies, NIAS

As of May 2021, the share of renewable energy in Pakistan’s power generation stands at four per cent; this includes solar, wind and bagasse-based energy. As of June 2021, solar energy contributed to 1.07 per cent of electricity generation in Pakistan, with an installed capacity of 400 MW. This is in contrast to the country’s solar energy potential; given the geographical and climatic conditions of Pakistan which records around eight to eight and a half hours of sunlight duration per day, its solar energy potential is estimated around 2,900,000 MW, says a news report in Business Recorder.

In July, the Chief Executive Officer of the Alternative Development Board (AEDB) announced that Pakistan’s renewable energy production would soon be increased to seven per cent of the country’s total electricity generation. This is an ambitious target given the renewable energy contribution to the total energy mix, which according to the AEDB CEO, produces 2,000 MW of clean electricity together.

In August 2020, the government revealed the Alternative and Renewable Energy (ARE) Policy 2020 to create a favourable renewable energy market. The policy also targeted to increase the ARE contribution in power supply from the current figure to 20 per cent and 30 per cent by 2025 and 2030 respectively. Similarly, the National Transmission and Despatch Company (NTDC) released the Indicative Generation Capacity Expansion Plan (IGCEP) 2047, outlining a plan to increase the renewable energy contribution over the coming 27 years. The IGCEP aims for a nine per cent solar energy contribution by 2030 and eight per cent by 2047.

Capacity of solar energy projects in Pakistan
There are six operational solar power plants with a 430 MW capacity, according to the AEDB. These are located in Punjab, with four of them in the Quaid e Azam Solar Park in Bahawalpur with a 100 MW capacity each, and two in Sahiwal and Pind Dadan Khan with 18 MW and 12 MW capacity respectively. The AEDB also lists 12 solar PV projects lined up for bidding; these have a cumulative capacity of 419 MW; of these, seven are located in Sindh’s Nooriabad, Dadu and Thatta, and five in Punjab’s Rahim Yar Khan, Muzaffargarh, Bahawalnagar, Chakwal and Attock. Further, four IPPs of a total 41.80 MW capacity, located in Punjab are expected to achieve financial closing soon.

Apart from this, in 2015, the National Electric Power Regulatory Authority (NEPRA) introduced the net-metering system, which allows solar power users to sell excess power to the national grid; 6,709 net-metering licenses have been approved so far, with a total 116.2 MW capacity.

Investment and infrastructure
China has been a key player in Pakistan's developing solar energy sector. Pakistan’s first solar panel plant inaugurated in 2015, the Quaid-e-Azam Solar Plant, was built by the Chinese firm, Tebian Electric Apparatus Stock Co Ltd (TBEA). Similarly, in 2019, a Reuters news report suggested that nearly 95 per cent of Pakistan’s solar panels, along with other ARE equipment, are imported from China. The following year, in 2020, the federal Information Minister announced that Pakistan would engage with China on solar panel technology, as a top priority.

Meanwhile, the Karachi Electronics Dealers Association Vice President said that sales of solar power systems increased by 80 per cent in two years. The demand for the systems are usually from the rural area for operating water pumps and other installations. 

Four challenges of using solar energy in Pakistan
Despite the huge potential, progress in exploring solar energy options has been slow. This could be because of the following reasons.

First, the bureaucratic hassle. Though agencies like the AEDB have pushed for a shift to ARE, approvals from the respective ministries are impacted by red tapes. For example, in January 2021, the Pakistan Foreign Investors Forum complained that despite the NEPRA clearance of their generation tariff, the Ministry of Energy failed to release a notification on the same for almost 10 months.

Second, manufacturers also complain that there is an unfavourable system in place discouraging local markets, outlining that there are no import duties on these finished products, but tax was imposed on buying local products.

Third, despite prices of solar equipment coming down and 1kW and 2kW systems costing PKR 100,000 and PKR 200,000 respectively, individual households are slow in adopting it; The buyers of solar installations are usually office, residential and educational buildings in the urban areas who can invest in larger plants costing PKR 500,000 to PKR one million.

Fourth, the generation-consumption gap due to lack of a storage solution also hinders the use of solar energy. Solar power generation increases at around the mid-day, in contrast to the peak power demand in the mornings and evening, thereby creating a mismatch.

References
Installed capacity to generate 37,261 MW power,” The News International, 11 June 2021
Wind, solar projects soon to account for 7pc of electricity generation,” The Daily Times, 20 July 2021
Khaleeq Kiani, “Alternative energy policy unveiled,” Dawn, 13 August 2020
Current Status of Solar PV Power Projects,” Alternative Energy Development Board
Anam Zehra, “Pakistan opens first solar power plant, built with Chinese investment,” Reuters, 5 May 2015
Hamid Waleed, “Government fails to promote renewable energy,” Business Recorder, 11 July 2020
Pakistan intends to work with China on solar panel technology in next three months: Ch Fawad,” Business Recorder, 17 December 2020
Khaleeq Kiani, “PM’s help sought for approval of wind, solar energy projects,” Dawn, 4 January 2021
Speakers call for favourable tax regime for solar sector,” Dawn, 1 May 2021
Nasir Jamal, “Solar power to the rescue?,”  Dawn, 8 November 2020
Aamir Shafaat Khan, "Increasing demand for solar power takes toll on generator sales," Dawn, 1 June 2021

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