K-Electric misses out on $250 million savings by ignoring renewables, study says

KARACHI: K-Electric Ltd., Pakistan’s only vertically integrated power utility, could have saved at least $250 million in the past two years if it had invested more in renewable energy sources instead of extending contracts for aging and inefficient thermal power plants, according to a new study.

The study, conducted by Renewables First and Policy Research Institute for Equitable Development, found that K-Electric, which serves Karachi and its surrounding areas, has added only 100 megawatts of solar power to its total generation capacity of 2,132 megawatts in the last two decades, despite operating in a region with significant wind and solar potential.

"K-Electric operates in a region with significant wind and solar potential, yet it only has 100 MW of solar capacity and no operational wind plants in its system. Unfortunately, it remains reluctant to tap into this opportunity and plans around 50 percent of future capacity additions that are fossil-fuel based, with already having 97 percent existing thermal power plants in its current power generation," the study titled 'Examining K-Electric’s Cost of Inaction in Deploying Renewables' said.

The utility’s current projections show that it will fall short of its 2023 goal of achieving 30 percent renewable energy by 2030, even with hydro inclusion, the study showed. To provide relief to inflation-stricken consumers in terms of cheaper electricity, the study called for a cease of extensions in PPAs for costly and inefficient thermal power plants, ensuring a consistent and efficient integration of least-cost wind and solar energy projects and refraining from incorporating expensive and environmentally hazardous coal power plant additions.

“K-Electric’s cost of inaction in deploying renewables is staggering,” said Hammad Ali, a researcher at Renewables First, who presented the findings at an event in Karachi on Thursday.

“Previous decisions by the utility to procure thermal generation sources instead of cheaper renewable alternatives have resulted in losses of over $250 million in terms of cost of missed opportunity. Moreover, timely decisions now by K-Electric can still save up to $4.51 billion in the next seven years.”

Ex-chairman NEPRA Tauseef Farooqi regretted that there had been absolutely zero planning in Pakistan’s energy sector prior to the IGCEP and new IPPs appeared into the mix like weeds and bushes.

Talking of the potential of renewables in lowering the cost for ordinary consumers and industrial users alike, he stressed that the country and utilities must now move towards a competitive, transparent and open market mechanism as proposed under the CTBCM.

Dr. Zulfiqar Ali Umrani from Ziauddin university commented that the purpose of the session was not to accuse KE but to advise them on how $ 4.5 billion could be saved in the coming years. He also mentioned that if KE refuses to improve its decisions, it will soon become redundant in a competitive market.

During a session, a study “Significance of renewables for Pakistan’s export industry” by Soman Ul Haq from Net Zero Pakistan, a coalition of industries committed to net zero emissions by the end of 2050, highlighted that the export industry in Pakistan is increasingly coming under pressure from the global supply chains and there is a growing demand for Renewable Energy Credits (RECs) in the country with 300 GWh to be sold this year alone.

Sunya Faiz, head of sustainability at Liberty Mills, highlighted that after the 2016 Paris Agreement, the requirements for clean energy have become much more stringent and manufacturers are losing business due to non-availability of clean energy in the grid.

Raazia Anum, Sustainability Lead at Yunus Textile Mills, commented that sustainability in terms of emissions reductions has moved beyond a competitive edge to a non-negotiable business condition for the industry players.

Farhan Aslam, head of Sustainability at Gul Ahmed, mentioned that their own generation sources were cleaner than the K-Electric’s generation mix and they held 60 MW in terms of their own captive load.

He also put forward the concern that Europe is setting up limits for per kg of carbon footprint and soon export products that do not satisfy these regulations will not be able to enter these regions.