Syed Marwan Shah

Pakistan needs to draft policies and ensure the right decision-making in transitioning towards renewables to meet the future needs affordably, says an expert. Pakistan is dependent more on fossil fuels to generate electricity compared to other sources. “Pakistan is producing more than 60% of its electricity through fossil fuels which is also the main cause of climate change. In contrast, if we look at our electricity generation through renewable energy (wind and solar), it is a mere 4% despite having enormous potential,” said Tuaha Adil, Research Economist at Policy Research Institute of Market Economy, while talking to WealthPK.

Tuaha Adil said Pakistan should have a unified strategy for producing sustainable energy. However, he said, choosing wisely is a crucial part of switching to renewable energy. For instance, the Quaid-i-Azam Solar Park in Bahawalpur has the installed capacity to produce 1,000MW power, but only produces 400MW owing to a lack of effective handling. The regulatory and pricing policies for large-scale installations that are administratively set, according to Tuaha, need to be examined.

Feed-in pricing policies, such as feed-in tariffs (FITs) and feed-in premiums (FIPs), have been crucial in encouraging renewable energy projects worldwide because they give generators a stable income and help make projects more bankable. The greatest difficulty, though, is finding the ideal tariff or premium level and modifying it as necessary. For instance, an ineffective tariff can lead to prices that are either too high or too low, which might result in windfall profits, possibly expensive consumer tariffs, or a drain on the government’s financial resources.

The impacts of a tariff level that was chosen inefficiently grow if deployment rates are large. Also, tariff plans are vulnerable to the information asymmetry that affects the power sector as a whole. Policymakers and regulators do not have access to the industry data they need to make informed decisions. The Sustainable Development Policy Institute (SDPI) report on the annual state of renewable energy says that in order to achieve the 2030 policy targets and nationally determined contributions (NDC) commitments, there are three takeaways from the report.

To begin with, Pakistan must try to mobilise significant investment. To hasten the switch to renewable energy, investment must be significantly increased. It will cost about $5 billion to generate the 10,000MW solar energy that the government recently announced. The country’s transmission, distribution, and auxiliary infrastructure requires further funding. A total of $101 billion in investment will be needed by 2030, and another $65 billion would be needed by 2040 in order to complete the ongoing renewable energy projects, add more hydropower, upgrade the transmission, and phase out coal in favour of hydropower.

In addition, enhancing renewable energy deployment requires a robust policy framework. It is crucial to extend fiscal support through a robust framework. To ensure that renewable energy deployment gets its due priority, the government may enhance its concessional finance framework with targeted incentives (tax breaks, upfront subsidies, guarantee support, concessional finance, etc.). For sustained deployment, policies must be integrated. Many policies exist in isolation and work well when combined. For instance, the deployment of renewable energy is linked to infrastructure bottlenecks, particularly in the transmission sector, and requires a comprehensive policy approach.

The deployment of heating, cooling, battery storage, and off-grid solar products are other examples. Moreover, Pakistan needs to follow best practices to ensure widespread deployment. Investment in project readiness efforts includes investing in sustained project proposals to convert ideas into technical, financial, and legal feasibility, facilitating the provision of concessional on-lending products, navigating projects through public-private partnership (PPP) regimes, as well as ensuring the viability gap funding and subsidising of off-grid market initiatives.

Credit : Independent News Pakistan-WealthPk