Renewable Energy: Clean Electrification of Pakistan's Economy

[Riaz Haq]

Access to abundant and cheap electricity is essential for running a modern competitive economy. The rapidly growing power demand for generative AI data centers makes it even more important. The best way to ensure it is in switching to renewable energy sources. That is why Pakistan is in the midst of a renewable power boom. It is ramping up generation of clean energy with solar, hydro, wind and nuclear power. 13 gigawatts of solar panels have been imported in the first half of this year alone. Another 10 gigawatts of hydroelectric power projects are under construction for completion by 2030, bringing the total hydropower capacity to 20 gigawatts. Pakistan's total nuclear energy production capacity rose to 3,620 MW, when the country's sixth nuclear power plant opened two years ago. Pakistan and China have recently signed a $4.8 billion deal to build another 1,200 MW nuclear power plant. There are 36 private wind projects producing approximately 1,845 MW in the country.  Pakistan is phasing out old fossil fuel power plants. It has negotiated the termination of power purchase contracts with five independent fossil fuel power producers (IPPs), including Hubco, the largest IPP currently operating in the country. More negotiations are underway to terminate additional IPP contracts. Payments to these IPPs are a huge burden on the nation’s economy and ordinary consumers alike. There have been violent protests against high electricity rates across the country. 

Renewable Energy. Source: Easy-Peasy.AI

A number of auto companies have announced plans to manufacture electric vehicles. Pakistani automobile joint ventures with Chinese automakers BYD and Changan have recently launched several all-electric and plug-in hybrid models of automobiles in Pakistan. Honda Atlas Cars Pakistan Limited has announced plans to build a hybrid electric vehicles plant in the country. Other major brands like Toyota, Haval, and Hyundai are already offering similar models in the country. It all began with the 2019 electric vehicle policy approved by the government of Prime Minister Imran Khan to incentivize the electrification of the auto industry. Pakistan EV policy goal is to achieve 30% of new cars sales, 50% of new 2-wheeler and 3-wheeler sales and 30% of new truck sales by 2030. By 2040, the target is 90% of all new vehicle sales to be electric. The main incentive is the reduction of sales tax from 17% for internal combustion engine (ICE) vehicles to 1% for all-electric (EV) vehicles.

Pakistan is currently experiencing a huge economic drain in terms of fossil fuel imports. In the first two months of the current fiscal year, Pakistan's oil import bill increased by 23% compared to the same period in 2023. Paying for huge amounts of imported coal, gas, and oil in US dollars has become disastrous, particularly after 40% depreciation of Pakistani currency over the last two years. Switching to cheap renewable sources will have a salutary effect on the country's climate and economy. It will help grow the nation's exports by increasing its exporters' competitiveness. It will also make it easier to manage inflation and reduce the need for recurring IMF bailouts. 

The GenAI revolution is another factor that will dramatically increase global power demand. Wall Street investment bank Goldman Sachs forecasts that the new high-performance AI data centers alone will grow electricity demand by 160% by 2030. Pakistan needs to prepare for it if it wants to be competitive in this brave new world of generative artificial intelligence (Gen AI). 

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[Riaz Haq]

Dominion Plans for Long-Term Virginia Data Center Power Demand, Connects with PJM on Transmission Lines | Data Center Frontier

https://www.datacenterfrontier.com/energy/article/55236892/dominion...

Dominion Energy Virginia this month has released a comprehensive, long-term regional plan to meet growing power demand, and jointly proposed several new large transmission projects with First Energy and American Electric Power (AEP) to strengthen electric reliability across the 13-state PJM region over the next decade.

Dominion Energy said such means will include expansion and modernization of the power grid, deployment of energy storage technologies, and newly implemented energy efficiency programs to maintain grid reliability while meeting the unprecedented growth in power demand.

The utility primarily provides regulated electricity service to 3.6 million homes and businesses in Virginia, North Carolina, and South Carolina, and regulated natural gas service to 400,000 customers in South Carolina.

"We are experiencing the largest growth in power demand since the years following World War II," observed Ed Baine, President of Dominion Energy Virginia. "No single energy source, grid solution or energy efficiency program will reliably serve the growing needs of our customers. We need an 'all-of-the-above' approach, and we are developing innovative solutions to ensure we deliver for our customers."

Dominion noted that the IRP is not a request to build any specific project, but rather a long-term planning document based on a snapshot in time of current technology, market information and load projections. Nearly 80% of the plan's incremental power generation over the next 15 years is carbon-free, including more solar and offshore wind generation, more energy storage, and more nuclear resources.
On Oct. 15, Dominion Energy Virginiareleased a comprehensive, long-term regional plan to meet growing power demand, much of it driven by data centers, with reliable, affordable and increasingly clean electricity.

In its 2024 Integrated Resource Plan (IRP), as filed on Oct. 15 with the Virginia State Corporation Commission (SCC) and the North Carolina Utilities Commission (NCUC), Dominion laid out multiple portfolio options to meet rising power demand through "significant investments in new power generation from every source."

[Riaz Haq]

Google joins Big Tech's move into nuclear power, and other top energy stories

https://www.weforum.org/agenda/2024/10/google-joins-big-tech-move-i...

This round-up brings you the key stories from the energy sector over recent weeks.
Top energy news: Google invests in nuclear power; IEA says new 'age of electricity' is coming; China leading clean energy roll-out.
For more on the World Economic Forum’s work in the energy space, visit the Centre for Energy and Materials.
1. Google joins Big Tech's move into nuclear power
Google has signed an agreement to buy power from small modular nuclear reactors, in a move the company has described as a "world first".

The deal with the start-up Kairos Power will help Google meet the increasing demand for electricity created by artificial intelligence.

It will bring up to 500MW of carbon-free power to US electricity grids, the company says, with the first reactor planned to come online by 2030, followed by additional deployments through 2035.

Small modular reactors are advanced reactors with a capacity of up to 300MW per unit – about a third of the power produced by traditional nuclear reactors. With a smaller footprint, these plants can deliver power to areas unsuitable for larger nuclear facilities, are more cost-effective to construct, and can be deployed incrementally to meet rising energy demand.

Big tech firms have signed several agreements with nuclear power companies in recent weeks, with Microsoft agreeing on a deal that will see the reopening of a plant in Pennsylvania, and Amazon buying a nuclear-powered data centre, Reuters reports.

Nuclear power accounts for about 10% of global electricity generation today, and has "significant potential" to contribute to decarbonization in some countries, including those in the G7 and China, the International Energy Agency (IEA) says.

But it will require overcoming hurdles, from mistrust to underinvestment, writes Rafael Mariano Grossi, Director General at the International Atomic Energy Agency (IAEA).

2. IEA: 'Age of electricity' will follow fossil fuel peak
Fossil fuel demand will peak by the end of the decade, followed by a new age of electricity, the IEA has said in a release accompanying the latest edition of its annual World Energy Outlook report.

In the second half of this decade, ample or surplus supplies of oil and natural gas would likely lead to lower prices and could enable countries to dedicate more resources to clean energy, moving the world into an "age of electricity", according to IEA Executive Director, Fatih Birol.

However, for clean energy to meet accelerating demand, greater investment in new energy systems – especially in grids and energy storage – is needed, the agency said, adding: "Today, for every dollar spent on renewable power, 60 cents are spent on grids and storage, highlighting how essential supporting infrastructure is not keeping pace with clean energy transitions."

The World Energy Outlook 2024 examines three "overarching and inter-related themes", which it describes as follows:

"Energy security, corresponding to the longstanding core of the IEA’s mandate as well as the imperatives of the present given escalating risks in the Middle East.
The prospects for clean energy transitions, which have accelerated rapidly in recent years, but which need to move much faster to meet climate goals.
Uncertainty, an ever-present factor in any forward-looking analysis but particularly visible this year.”

[Riaz Haq]

Pakistan to reform power distribution after IMF meetings, minister says
Owais Rawda explores what the most recent request for IMF climate funding means for power sector reform.

https://www.power-technology.com/comment/pakistan-to-reform-power-d...

At last week’s International Monetary Fund (IMF) Annual Meetings, Pakistan’s finance minister Muhammad Aurangzeb requested $1bn in funding from the IMF’s Resilience and Sustainability Trust (RST) to help mitigate the country’s climate risks and accelerate its energy transition. Established in 2022, the RST offers vulnerable low- and middle-income countries long-term concessional cash for climate-related spending.

Pakistan’s power sector circular debt, driven by inefficiencies in the power distribution network, crossed Rs2.66tn ($9.5bn) in May, according to a debt report released by the government’s power division. Meanwhile, citizens have suffered significant and frequent power outages in recent years, leaving millions without electricity.

The government’s faulty capacity payment contracts with independent power producers (IPPs) have come to light as the primary source of these challenges. Interest rates borne from private IPPs have not only worsened the debt crisis but spiked consumer tariffs, making electricity unaffordable.

In light of Aurangzeb’s request, coupled with multiple IPPs terminating their contracts with the government, the South Asian nation is now likely to announce significant reforms.

“These IPP payments had a detrimental effect on the overall quality of life for our citizens,” Awais Laghari, Pakistan’s minister for energy’s power division, tells Power Technology. “It is imperative that necessary steps are taken to resolve the issue.”

Without specifying the plans, he claims that the power division is currently evaluating options “through which the fiscal burden shared by the consumer, whether through taxes or debt repayments, can be optimised through various interventions that improves household economics and consumption at the same time”.

Laghari says that there are also plans to “unbundle electricity” and create a competitive market for energy, citing the recent introduction of an independent system and market operator (ISMO) as a step in this direction.

“This will ensure that a B2B [business-to-business] market for electricity can develop, which can eventually evolve into a B2B2C [business-to-business-to-consumer] market thereby providing greater options for consumers and lower prices through a competitive process,” he says.

The minister adds that the role of renewables in reforming the country’s power market will be imperative, “given their price advantage”. He believes that their ability to generate cheap electricity will “always put them ahead in any competitive market regime, making them critical to the success of the market.”

Following the IMF meetings, Laghari says that the government plans to “move forward actively” with the privatisation of electricity distribution companies and that “necessary improvements in governance are already underway”.

He believes that privatisation can enhance the efficiency of these companies, allowing them to remain a key player in the power market, which in turn will result in more affordable prices for consumers.

“Similarly, we continue to focus on investment in transmission to remove constraints so that lower cost electricity generated in the South can be moved across the country and overall consumer tariff can be reduced.”

About the author: Owais Rawda is a regulatory policy researcher that has written about the energy and technology industries.