Khalid Masood Khan
The energy industry in Pakistan is currently embroiled in heated debates over excess capacity, rising electricity costs, and allegations of Independent Power Producers (IPPs) taking advantage of the system. Many experts and the public at large are expressing outrage, claiming that IPPs are being paid hefty sums while providing minimal electricity. Amid these concerns, solar power is increasingly being touted as a potential solution. It is seen as clean, renewable, and becoming more affordable. However, before fully embracing solar energy as the ultimate fix, a critical question looms large: Can solar truly resolve our energy challenges? Despite its promise, will it effectively address deeper issues such as overcapacity and high generation costs, or are we merely skimming the surface, turning a blind eye to problems that solar alone cannot solve?
With the aim of understanding the role of solar energy in the energy mix, it is crucial to evaluate the current state of the energy sector. Pakistan boasts an installed capacity of approximately 43,000 MW but experiences fluctuating demand, reaching peak levels of 22,000-23,000 MW in summer and dropping to 13,000-15,000 MW in winter. Despite seemingly sufficient capacity, the real challenge lies in the disparity between installed capacity and dependable capacity – the actual power available for use. Renewable sources like solar and wind exhibit inconsistent production at full capacity, leading to a reduction in actual output.
For instance, a 100 MW solar project with a 20% capacity factor generates an average of only 20 MW of dependable power. This underscores the gap between installed and reliable output. Similar efficiency issues affect other technologies due to factors such as maintenance and resource availability. As a result, dependable capacity stands closer to 32,000 MW, posing a critical problem during peak demand periods.
Pakistan’s energy consumption varies seasonally and daily. In summer, air conditioning drives demand to peak, particularly in the evening when people return home and businesses remain operational. In winter, demand diminishes but experiences peaks in the morning and evening due to heating needs. Daily demand typically rises in the afternoon, peaks in the early evening, and subsides at night, exerting pressure on the grid during peak times when shortages are common.
On the other hand, solar energy follows a distinct pattern. Solar power is only accessible during daylight hours, peaking around midday. Its output increases in the late morning, reaches a peak in the early afternoon, and diminishes as the sun sets. Solar generation is higher in summer when days are longer and lower in winter due to shorter days and cloud cover. This creates a mismatch with electricity demand, especially in the evening when solar energy ceases production but demand remains high.
The primary drawback of heavily relying on solar energy is its inability to meet the evening peak demand when the sun has set. While solar can reduce dependency on fossil fuel-based plants during the day, it cannot suffice for the evening hours when the grid depends on fossil fuels or hydropower. This mismatch emphasizes the need for energy storage or supplementary power sources to cater to nighttime demand.
Data from the Market Operator reveals that various technologies dominate at different times. During the day, hydropower and solar make more significant contributions, but coal, nuclear, and thermal plants take over in the evening and at night. Solar power’s contribution is limited to daylight hours, highlighting its role in substituting other energy sources rather than expanding overall capacity.
In terms of power purchase price (PPP), solar energy has recently become more competitive, with bids as low as PKR 12/kWh, compared to older solar projects at PKR 37.18/kWh, imported coal at PKR 77.66/kWh, and RFO at PKR 63.57/kWh. During daylight hours, solar energy aids in reducing reliance on more expensive fossil fuel plants, thereby cutting fuel costs for the grid. However, when solar generation ceases in the evening, the system still depends on conventional plants, which are more costly to operate.
Another significant issue pertains to capacity charges, which are disbursed to all power plants – whether solar, thermal, or coal – irrespective of their energy production levels. Even if solar diminishes daytime fuel consumption, the grid still bears capacity charges for conventional plants that supply nighttime power. Augmenting solar capacity does not lessen these charges, as conventional plants are still necessary when solar energy cannot generate. In actuality, increasing solar capacity without tending to these charges may exacerbate the financial strain on the energy system.
The issue of overcapacity is not just about an excessive number of power plants but rather about mismatched generation and demand. The real problem lies in the fact that the type of energy being generated does not align with when and how it is being consumed.
Given these challenges, adding solar projects does not augment overall capacity. Solar assists in substituting energy generation during the day, but once the sun sets, the grid encounters the same predicament of requiring reliable power for the evening and night. Hence, the country still necessitates investments in technologies like hydropower, thermal, or wind, which can deliver consistent electricity when solar is unavailable. Merely amplifying solar capacity without addressing nighttime demand will leave the country’s energy needs unaddressed. In fact, while old Power Purchase Agreements (PPAs) remain valid, solar power will contribute to the overcapacity problem.
Expanding hydropower projects emerges as the most feasible long-term solution for the energy sector. At PKR 10.39/kWh, hydropower already stands as one of the most economical sources of electricity. Although initial costs are higher owing to loan repayments (ranging from PKR 25-35/kWh for the initial 10-12 years), prices plunge to PKR 8-12/kWh once loans are repaid. Following the typical 30-year contract period, hydropower costs can plummet as low as PKR 2-5/kWh, establishing it as the most affordable long-term energy source.
The perpetual availability of hydropower assumes vital significance in balancing solar energy. Strategic investment in hydropower and harnessing solar power during daylight hours can pave the way for a more balanced and sustainable energy landscape. This approach could curtail reliance on fossil fuels and ease the financial strain of capacity payments.
Despite its significance in the energy mix, solar energy does not represent a miraculous cure-all for complex energy problems. Policymakers ought to adopt a comprehensive strategy by allocating funding not just to renewable sources such as solar but also to enduring options like hydropower and energy storage systems to ensure a consistent, round-the-clock energy supply. Additionally, it will be imperative to reassess the capacity payment system and explore ways to promote greater efficiency in energy production and consumption to alleviate the financial strain on the energy industry.
Effectively addressing the ongoing energy crisis mandates that policymakers champion a holistic energy strategy prioritizing a balance between immediate requirements and long-term, cost-effective development. This framework should strive to synchronize energy production with consumption habits, diminish reliance on costly fossil fuels, and guarantee a stable energy supply for future generations.
