Monday, December 16, 2019

Is Pakistan Ready For Clean Energy Revolution?

Rising worries about climate change have recently made me join the Clean Energy Revolution by installing rooftop solar and leasing an electric car. What is the Clean Energy Revolution? It is the growing use of solar panels, battery storage and electric vehicles to reduce carbon emissions. Is Pakistan ready to join the Clean Energy Revolution?

Tesla Surpasses China's BYD in EV Sales. Courtesy Electrek

Tesla Electric Cars:

Silicon Valley is at the forefront of this clean energy revolution led by Tesla. Tesla is more than an electric car company; the company also supplies solar panels and batteries. Other automakers are also taking their cues from Tesla.  China's BYD Auto has only recently been surpassed by Tesla in production volumes. Auto giants General Motors and BMW are both building electric cars and planning to build "gigafactories" like Tesla's to manufacture battery packs for vehicles and homes. Pakistan is building up renewable power generation capacity. The country has also recently announced its National Electric Vehicle Policy that offers incentives to transition to clean energy.

Bloomberg estimates that Batteries and electric transmission account for about 40% of passenger cars’ costs. European demand is met by mainly Japanese and South Korean battery makers like Panasonic, LG Chem Ltd. and Samsung SDI Co. In the U.S., Tesla has built its own battery cells at its Gigafactory to manage costs and satisfy demand for the cars it produces. Chinese demand for battery packs is met by BYD.

Battery Backed Renewable Energy Costs:

High-capacity battery pack costs have dropped nearly 40% since 2015, according to Wood Mackenzie data as reported by Wall Street Journal. The prices of lithium and vanadium—two of several key raw materials that are used in such batteries—also have declined over the past year or so.

Battery storage costs have fallen nearly 90% in the past decade, according to NextEra Energy.  Cost reductions are expected to continue to only $8 to $14 per MW-hour by 2020, or about a penny per kW-hour. For perspective, the average kW-hour of electricity costs about 13 cents for retail users.

NextEra Energy forecasts that post-2023, wind plus energy storage costs will be $20 to $30 per MW-hour, and solar plus energy storage will be $30 to $40 per MW-hour. Natural gas is expected to match the solar-plus-storage costs.

Pakistan Electric Vehicle Policy:

Pakistan has a low level of motorization with just 9% of the households owning a car. Nearly half of all households own a motorcycle. Motorization rates in the country have tripled over the last decade and a half, resulting in nearly 40% of all emissions coming from vehicles. Concerns about climate change and environmental pollution have forced the government to to take a number of actions ranging from adoption of Euro6 emission standards for new vehicles with internal combustion engines (ICE) since 2015 and announcement of a national electric vehicle (EV) policy this year.

Private vehicle ownership in Pakistan has risen sharply over the last 4 years. More than 9% of households now own cars, up from 6% in 2015. Motorcycle ownership has jumped from 41% of households in 2015 to 53% now, according to data released by Federal Bureau of Statistics (FBS) recently. There are 32.2 million households in Pakistan, according to 2017 Census.


Vehicle Ownership in Pakistan. Source: PBS

Pakistan's National EV Policy is a forward looking step needed to deal with climate concerns from growing transport sector emissions with rapidly rising vehicle ownership. It offers tax incentives for buyers and sellers. It also focuses on development of nationwide charging infrastructure to ease adoption of electric vehicles.

Low Carbon Energy Growth:

In recent years,  Pakistan government has introduced a number of supportive policies, including feed-in tariffs and a net metering program to incentivize renewables. These have been fairly successful, and renewables capacity in the country surged substantially over 2018 when 1245 MW was added, of which 826MW was contributed by the solar sector, according to Fitch Solutions.

Non-Hydro Renewables in Pakistan. Source: Fitch Solutions

Pakistan’s Alternative Energy Development Board (AEDB) recently signed deals for projects that will see the country expand its wind power capacity by 560 MW.  Fitch Solutions forecasts Pakistan's solar capacity to grow by an annual average of 9.4% between 2019-2028, taking total capacity over 3.8GW by the end of our forecast period.

Sindh government has recently signed a deal for 400MW solar park at Manjhand, 20MW rooftop solar systems on public sector buildings in Karachi and Hyderabad, and 200,000 solar home systems for remote areas in 10 districts of the province. The project is estimated to cost USD105million, with the World Bank funding USD100 million.

The biggest and most important source of low-carbon energy in Pakistan is its hydroelectric power plants. Pakistan ranked third in the world by adding nearly 2,500 MW of hydropower in 2018, according to Hydropower Status Report 2019.  China added the most capacity with the installation of 8,540 megawatts, followed by Brazil (3,866 MW), Pakistan (2,487 MW), Turkey (1,085 MW), Angola (668 MW), Tajikistan (605 MW), Ecuador (556 MW), India (535 MW), Norway (419 MW) and Canada (401 MW).

New Installed Hydroelectric Power Capacity in 2018. Source: Hydroworld.com

Hydropower now makes up about 28% of the total installed capacity of 33,836 MW as of February, 2019.   WAPDA reports contributing 25.63 billion units of hydroelectricity to the national grid during the year, “despite the fact that water flows in 2018 remained historically low.” This contribution “greatly helped the country in meeting electricity needs and lowering the electricity tariff for the consumers.”

Chinese BYD in Pakistan:

Multiple media reports suggest that China's BYD is about to enter Pakistan market following the announcement of Pakistan National EV Policy.   These reports indicate that Toyota, one of the largest automakers in Pakistan, has signed a deal with BYD to manufacture electric vehicles.

Other reports indicate that Pakistan's Rahmat Group is in talks with BYD to set up an electric vehicle plant at Nooriabad in Sindh province.

Minister for Science and Technology Fawad Chaudhry has claimed that in three years Pakistan will become the first country to manufacture electric buses, which will be driven by an electric motor and obtains energy from on-board batteries.

Summary: 

It appears that Pakistan is starting to get serious about joining the Clean Energy Revolution to deal with rising climate change concerns. The country has set targets for renewable energy growth and announced National Electric Vehicle Policy.  In recent years,  Pakistan government has introduced a number of supportive policies, including feed-in tariffs and a net metering program to incentivize renewables. These have been fairly successful, and renewables capacity in the country surged substantially over 2018 when 1245 MW was added, of which 826MW was contributed by the solar sector, according to Fitch Solutions.  High-capacity battery pack costs have dropped nearly 40% since 2015, according to Wood Mackenzie data as reported by Wall Street Journal.  Cost reductions are expected to continue to only $8 to $14 per MW-hour by 2020, or about a penny per kW-hour. While production and use of renewable energy are growing, the electric vehicles in Pakistan have yet to find traction. Hopefully, the National EV policy will encourage production and adoption of electric vehicles in the country.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Electric Vehicle Policy

Nuclear Power in Pakistan

Recurring Cycles of Drought and Floods in Pakistan

Pakistan's Response to Climate Change

Massive Oil and Gas Discovery in Pakistan: Hype vs Reality

Renewable Energy for Pakistan

Digital BRI: China and Pakistan Building Fiber, 5G Networks

LNG Imports in Pakistan

Growing Water Scarcity in Pakistan

China-Pakistan Economic Corridor

Ownership of Appliances and Vehicles in Pakistan

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Riaz Haq's YouTube Channel

PakAlumni Social Network

4 comments:

Zaffar HM said...

According to friend working at BYD the Chinese have agreed for transfer of technology along with export production out of Sindh and/or Balochistan. Many anicllary units have already been mobilised to scout lands before official announcements are made.

However the point is the recent oil discovery you informed us recently. If that oil is coming in very soon, how can we manage the contradictions between these two.

Riaz Haq said...

Zaffar: " If that oil is coming in very soon, how can we manage the contradictions between these two."

There is no contradiction. Pakistan will need oil and gas for bulk of its energy needs for many years. Clean energy revolution will not happen in a few days or weeks. It will take years.

Riaz Haq said...

IFC invests $450m in #Pakistan’s 6 #windfarms in Jhimpir wind corridor in #Sindh to generate more than 1,000 gigawatt-hours of electricity annually, enough to power 450,000 homes. Expected emission reductions of 650,000 tons of CO2 per year. #renewables https://www.esi-africa.com/industry-sectors/finance-and-policy/ifc-invests-450m-in-pakistans-six-wind-power-projects/

All Super Six projects are being developed by domestic companies: ACT Group, Artistic Milliners (Private) Limited, Din Group, Gul Ahmed Group and Younus Brothers Group.

“The government is aiming to increase the non-hydro renewable energy share in the overall generation mix from 4 to 20% by 2025 and it is welcoming to see Pakistan’s local private sector behind these Super Six wind projects, supporting the government’s long-term objective to see more wind and solar in the country’s energy mix,” said Ayub.

“This additional clean power will help meet growing demand, reduce the average cost of electricity, and improve both reliability and security of supply,” IFC’s Vice President for Asia and Pacific, Nena Stoiljkovic said. “We hope this will send a strong signal to the private sector that the renewable energy market in Pakistan is viable and sustainable, as well as beneficial to the Pakistani people.”

As part of the programme, IFC is providing a financing package of $320 million, comprising $86 million from its own account and $234 million mobilised from other lenders, which include Deutsche Investitions- und Entwicklungsgesellschaft (DEG, part of KfW Group of Germany), and local banks Bank Alfalah, Bank Al Habib and Meezan Bank.

The programme is in line with the joint energy strategy of the World Bank Group, which includes IFC, the World Bank and the Multilateral Investment Guarantee Agency (MIGA), to help address Pakistan’s structural issues in the energy sector, through policy reforms and increases in private investments to expand clean energy generation and bring down the cost of power.

The cost of power from the Super Six projects is expected to be more than 40% lower than the current average cost of generation, a move that is expected to spur more investments in renewable energy in the country.

IFC, one of the largest investors in Pakistan’s power sector, financed the first wind power project in the country in 2011 and helped created the framework for financing hydro and wind Independent Power Producers. With this programme, IFC will have made investments in 11 wind power projects in Pakistan.

The World Bank is supporting the government on policy reforms to enhance the energy sector’s sustainability and the implementation of the upcoming new renewable energy policy framework.

Riaz Haq said...

Estimated number of premature pollution-related deaths per year:

🇮🇳India: 2.33m
🇨🇳China: 1.87m
🇳🇬Nigeria: 279K
🇮🇩Indonesia: 232K
🇵🇰Pakistan: 223K
🇧🇩Bangladesh: 207K
🇺🇸United States: 196K
🇷🇺Russia: 118K
🇪🇹Ethiopia: 110K
🇧🇷Brazil: 109K

(Global Alliance On Health And Pollution)