Evaluation of Assumptions

Load Forecasting:

Base case scenario in IGCEP is developed on the basis of Normal GDP projections (5.5% per annum) as estimated by Ministry of Planning, Development and Reforms. Demand forecast has been compiled by separately analysing the demand patterns of Domestic, Commercial, Industrial and Agriculture sectors. In order to forecast the annual consumption of electricity up to 2047, a multiple regression model is used.

The approach used to calculate load forecast is standard, however it ignores one important aspect regarding vision of federal government. Pakistan approved an ambitious National Electric Vehicles Policy (NEVP) in November, with targets and incentives aimed at seeing electric vehicles capture 30% of all the passenger vehicle and heavy-duty truck sales by 2030, and 90% by 2040. It sets even more ambitious goals for two- and three-wheelers and buses; 50% of new sales by 2030 and 90% by 2040.

No discussion about this has been seen in the IGCEP and probably planners missed this part of electricity demand spike in relevant years.

Renewable Energy Projects:

Draft Alternative Renewable Energy Policy 2019 (ARE 2019) has set target for renewable energy mix in total system as 25% by year 2025 and 30% by year 2030. All RE plants (Wind, Solar and Bagasse) enlisted in Category I & II of CCOE’s decisions have been considered as committed power plants.

As a result of these considerations candidate Wind and Solar Power projects of 1,500 MW each per year, from the year 2022-23 and onwards are included in the IGCEP. IGCEP is designed to oblige these targets and therefore its skewed towards wind and solar power projects. Hydro optimisation is done during study period i.e. between 2020-47, however as data presented in this article demonstrates, almost all private sector hydropower projects are pushed to the end of study period.

Committed Projects:

As per IGCEP all committed projects are included in the planned power projects, however definition of committed project is somewhat controversial as it considers only those projects which are either already under construction or have achieved financial close or has strategic importance like CPEC and G2G projects. Assumptions entirely ignore the projects which have been awarded LOI/ LOS by relevant agencies and sponsors have spent a considerable amount to develop these projects.

Economic Life of Projects:

As per IGCEP a plant is supposed to be declared as retired upon completing its PPA term. The retirement schedule for the IGCEP is provided in the Table 6.2 of the Main Report. A total of 11,511 MW of installed capacity is assumed to be retired during the study period. As per assumptions listed in IGCEP economic life of wind and solar power projects is 25 years.

However its pertinent to mention here that many projects which actually retire during this period are not included in table 6.2. For example PPAs of all wind and solar power projects commissioned before year 2023 will expire before or at year 2047 but IGCEP data shows that these projects will keep generating energy for an indefinite period. Similarly definition of a retiring project is not valid because all hydropower projects commissioned before year 2018 will have PPA’s expiring before year 2047, however as their economic life is considered 50 years in report, generation from these projects will continue till year 2067. Therefore definition should include “Economic Life” rather than “PPA Term”.

Reference Costs of Candidate Projects:

Projects are selected based on current development costs (updated costs as on December 31, 2020). Many projects are delayed due to comparison based on current costs. However due to delay, impact on cost has not been considered. It may be noted that some projects may entirely become unviable at the time of their proposed COD in IGCEP. It has been assumed in the IGCEP report that cost of solar and wind power projects will keep on decreasing during planning period, however no assumption has been made for other technologies.

For example, hydropower projects delayed till last couple of years (2045 onward) will become too expensive during delay period. Contrary to solar and wind power projects, cost of hydropower development is on increasing trend. It is therefore necessary to reconsider the selection keeping in view the optimal balance among different technologies. What if most the hydropower projects become unviable on proposed commission dates?

As costs of RE projects is decreasing with the passage of time, would not it be more prudent to urgently develop projects whose cost are increasing over time? In this way we can increase the generation capacity and avoid the imported fuel projects like RLNG and Coal. Later when RE is developed, these hydropower projects may prove reliable support to them as well. Tis way we can completely get rid of imported fuel projects in the long run.

Environmental Considerations:

As per IGCEP, carbon emissions in the country by power generation accounts for 0.406 kg-CO2/kWh in FY 2019-20 and this indicator reduces to 0.32 kg-CO2/kWh by FY 2046-47 due to proposed energy mix in the IGCEP.

It is to be noted that total generation during FY 2019-20 was recorded as ~108,205 GWh, which means that total emissions of CO2 were recorded as ~44,000 tons during 2019-20. Also note that total generation is planned as 559,760 GWh in year 2046-47, which means that absolute total emissions in that year would be ~179,000 tons of CO2.

The Long-Term Climate Risk Index (CRI) placed Pakistan as the 5th most vulnerable country to environmental calamities. The Intergovernmental Panel on Climate Change (IPCC) has already predicted that risks associated with extreme events will continue to increase as the global mean temperature rises. In terms of economic costs at $3.8 million, Pakistan is ranked number three over a 20-year period. What this means is that our economy is constantly at risk from climate devastations and this is not just an environmental challenge but an issue impacting our economy, human health, agriculture, and ecosystem as well.

When coal is burned it releases several airborne toxins and pollutants. They include mercury, lead, sulphur dioxide, nitrogen oxides, particulates, and various other heavy metals. Health impacts can range from asthma and breathing difficulties, to brain damage, heart problems, cancer, neurological disorders, and premature death. Although limits set by the Environmental Protection Agency (EPA) have helped prevent some of these emissions, many plants do not have the necessary pollution controls installed. The future of these protections remains unclear.

This analysis therefore requires us to think out of box and realise that although CO2 emissions have reduced in per kilowatt-hour terms, in absolute figures, it has increased more than 300% in 28 years or equivalently more than 11% per annum during each year between 2020 & 2047. During analysis of IGCEP it was noted that NTDC recommends more projects on local and imported coal as shown in table below.

Coal Projects

Proposed Coal Power Projects in IGCEP

Please follow us to read more about power sector of Pakistan.