Pakistan boosts clean energy spending, as industry bemoans power crisis

by Saleem Shaikh and Sughra Tunio | @saleemzeal | Thomson Reuters Foundation
Thursday, 17 July 2014 08:19 GMT

Technicians work on solar panels at a power station in Hub about 25 km from Karachi, June 18, 2010. REUTERS/Akhtar Soomro

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Central government and Punjab state make big investments in solar and wind in a bid to plug crippling power shortages

ISLAMABAD (Thomson Reuters Foundation) - Worsening energy shortages in Pakistan are driving politicians in Punjab, the largest and most energy-hungry state, to back a surge in spending on renewable energy, the latest budget figures show.

The federal government has earmarked hefty funds in its budget for the fiscal year 2014-15, which began on July 1, to harness Pakistan’s huge clean energy potential, especially solar, to power the economy.

“We cannot afford to wait and see for the next five to seven years when some small-to-medium capacity hydropower projects…will start producing electricity, while our industrial and agriculture sectors suffer from intermittent and protracted power breakdowns,” Federal Finance Minister Ishaq Dar told Thomson Reuters Foundation on the sidelines of his budget press conference in early June.

“We should have a plan B and try to generate cheap and clean energy from renewable energy sources,” he added.

The finance ministry has allocated a “good amount” in the new budget to kick start this plan B by investing in solar energy and wind farms with a capacity of between 1 and 10 megawatts (MW), the finance minister said.

“We are under spiralling pressure from the industrial sector - which accounts for more than 24 percent of national GDP and almost half of total employment - to boost the country’s power generation capacity, to keep the economic wheel turning,” Dar said.

Federal budget documents show that around $150 million has been allocated for several major renewable energy projects. They include the 1,000 MW Quaid-e-Azam Solar Park, a 5 MW solar power plant in the Moola area of the southwestern district of Khuzdar in Balochistan province, and multi-megawatt wind power projects in Jhimpir and Gharo towns in southern Sindh province.

ASIA’S BIGGEST SOLAR PARK

Among Pakistan’s five provinces, which also presented their 2014-15 budgets in June, the Punjab provincial government has earmarked the highest amount by far for investment in solar, wind and biomass energy sources.

It has allocated around $324 million to its energy development portfolio. More than 80 percent of this is for generating power from solar and biomass, including biogas, budget documents indicate.

The 1,000-MW Quaid-e-Azam Solar Energy Park is Pakistan’s biggest energy project, and is being built in the province’s southern Bahawalpur district on more than 2,630 hectares, for which the Punjab government has allocated $172 million from its own kitty for 2014-15.

The solar park, Asia’s largest such project, is expected to start generating 100 MW of solar energy by December. Its capacity will be expanded to 1,000 MW within the next three years, requiring a total investment of over $2 billion.

The Punjab government has allocated $20 million for biomass power plants in rice and wheat-growing areas. It also plans to spend $500,000 on studies to explore local sources of power such as biomass, biogas, solar and wind in 36 villages, documents show.

In a separate initiative, the government has decided to spend nearly $12 million to install 13,000 irrigation tubewells run on biogas in rural areas, which would save the use of 40 million litres of diesel annually.

In comparison, the budgets for Sindh, Balochistan and Khyber-Pakhtunkhwa provinces make much smaller allocations for renewable energy, even though residents are living without electricity for over 15 hours a day.

Sindh province’s new budget shows that, of a total $203 million allocated for the energy sector, over 60 percent is to establish coal power plants. Less than 20 percent has been earmarked for renewable energy, the budget documents indicate.

Major initiatives that are being funded include solar power for 350 off-grid schools in Nagarparkar town in southern Tharparkar district, and the installation of 250 solar tubewells and 1,800 solar-powered reverse osmosis water purification plants.

Khyber-Pakhtunkhwa provincial government plans to spend $71 million on constructing 350 hydropower projects with a capacity of 1 to 10 MW in its Hazara and Malakand areas.

TEXTILE MILL CLOSURES

Punjab’s finance minister, Mujtaba Shuja-ur-Rehman, told Thomson Reuters Foundation from Lahore that the province’s business community has been piling pressure on the government, threatening to cut back or end activities if industrial units do not get an uninterrupted power supply.

“Government is focusing more on renewable energy, particularly solar energy, to cope with the power shortfall, which has already been slowing the province’s economic activity, leading to the closure of industrial units and rendering thousands of workers - most of them daily wage labourers - jobless,” he said.

Pakistan’s total installed electricity generation capacity is 22,668 MW, with demand growing at 8 percent annually. At present, nearly 14,000 MW power is generated against demand of 17,000 MW. Some 60 percent of electricity is produced using furnace oil and less than 4,000 MW from hydro.

The oil is imported, and the cost of buying it is a drain on Pakistan’s foreign exchange reserves. Fearing this could lead to a devaluation of the Pakistani rupee, the government opts to generate less power than the country’s facilities are capable of producing.

Punjab consumes 68 percent of all electricity generated in Pakistan, and is struggling to cope with a severe energy shortfall that has long dragged on its economy.

Around 100 textile mills have shut down in the last year, slashing over 50,000 direct and indirect jobs, with more on the verge of closing, according to S.M. Tanveer, Punjab chapter chairman of the All Pakistan Textile Mills Association.

“How can they continue with their business while seeing their industrial units idle for 15 hours a day because of power shortages?” he asked.

Wage payments have become a drain on depleting financial resources, and mills have defaulted on delivering export orders, most of them from Europe. Hundreds of textile industry owners have also failed to repay bank loans, he added.

“The majority of the energy projects of the government are long-term solutions. But the industrial sector needs immediate relief,” Tanveer pointed out.

Businesses are hoping that mega solar power projects like the Quaid-e-Azam Solar Park will at least be able to shorten the duration of power outages, he noted. 

Munawar Mughal, vice president of the Federation of Pakistan Chambers of Commerce and Industry, said its members were trying to persuade provincial governments to shift their investment from coal to renewables, particularly solar and wind.

“We have seen such pressure and threats of business closures (used elsewhere), and can push the provincial governments into action,” he said.  

Saleem Shaikh and Sughra Tunio are climate change and development science correspondents based in Islamabad, Pakistan.

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