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Despite the seemingly entrenched position of hydrocarbons as the primary energy providers, renewable sources are the future but are faced with immense challenges, even with subsidies from many governments to compensate for unattractive economics. Oil’s dominant position as the world’s largest source of commercial energy is likely to remain unchallenged until 2030 and perhaps even beyond.
In spite of its relatively low growth rate of only 1.7% a year, oil’s share of global energy use is forecast to drop only marginally, from 39% in 2000 to 38% in 2030. Despite a single percentage drop, it would mean an increase from 76 million barrels per day to 124 million barrels per day by 2030 due to increased energy demand.
Consumption of natural gas is projected to more than double by 2030, largely driven by the use of gas to generate electricity. Similarly, coal use is forecasted to grow, especially in Asia. More than half the coal consumed globally is burned in electric power plants. Renewables are currently only about 3% of the world’s total installed electric capacity.
Expansion in green energy is likely but will be slow, as historically energy transitions have occurred over many decades. Climate change is due to global greenhouse emissions, and is the main driver for renewable energy. Hydrocarbons are warming the planet, thus affecting the climate patterns, and need to be replaced with clean energy.
In 1979, five years after the Saudi oil embargo, President Carter declared, “No one can ever embargo the sun”. Renewables were considered clean, and would never run out. It was, however only around 2004-2005 that the renewable industry started to gain scale. Renewables are being embraced as a key solution to the triple challenges of energy supply, security, and climate change.
The European Union has a 20% renewable goal for 2020/21, while Germany aims to move renewables’ share of electricity from 17% in 2011 to 35% by 20/21. China set a goal of reaching 15% of total energy by 2020/21. Their wind capacity doubled each year between 2005 to 2009.
What are Renewables?
Renewables are an inexhaustible and environmentally friendly energy source. Renewables include several different technologies like wind, solar, or sunlight, biofuels (ethanol, biodiesel), biomass (wood or other plant material, dung), geothermal (use of hot water or hot steam to drive an electricity-producing turbine), and hydropower. Batteries for electric cars are also often considered a source of renewable energy.
Hydropower is a renewable energy form but is not really “green”. Massive new projects such as the three Gorges Dam in China, India’s Tehri Dam, and Malaysia’s Bakun Dam are controversial due to the massive flooding when filled reservoirs release water, and are opposed because of other damages to river ecosystems. (“Energy and Security”, John Kalicki and David L. Goldwyn).
Efforts are in hand to separate hydrogen from water, using wind power, to use it for powering cars, and even aeroplanes and rockets in the future. With the largest group of geothermal power plants, the Geysers in California are the world’s largest producer of geothermal electricity. At its peak in the late 1980s, it had about 21000 megawatts of generating capacity.
Up until a few years back, five countries (El Salvador, Kenya, The Philippines, Iceland, and Costa Rica) generated more than 15% of their electricity from geothermal sources. Of all the types of renewables, solar has the greatest potential, especially in regions where there is plenty of sunshine during the year.
Similarly, wind speed in certain geographic areas lends them to set up wind power generation farms. Pakistan aims for renewables to contribute up to 65% of new capacity additions between 2018-27. This is a target that is ambitious and highly unlikely to be achieved. The installed capacity of solar and wind energy is just 4% of total capacity, equal to around 2% of the total generation.
Challenges of Renewables
There remain problems associated with the initiation of renewable energy at a large scale. These include, first and foremost, lack of government policies and incentives, the energy monopoly of non-renewables (hydrocarbons), limited capacity to store power generated by renewables, lack of infrastructure to produce, as well as connecting renewable energy to the grid, availability of minerals for solar, wind power and electric cars, and finally lack of knowledge and comprehensive awareness about the challenges.
Renewables cannot establish themselves in any country without adequate and suitable incentives. The initial cost of renewables – regardless of the type – is often higher than the traditional energy sources, based on which the entire grid systems are designed. To offset the higher cost, and to incentivize renewables, different countries have tried different models.
One of the more common ones has been what the US did. Public Utility Regulatory Policies Act of 1978, known as PURPA, was enacted and it turned out to be the foundation on which the renewable industry was born. According to this Act, the Electric Utilities Companies were required to buy from renewable producing companies at a price calculated based on the price of oil and the high cost of building theoretical new power plants.
A guaranteed market, with guaranteed high prices, incentivized the nascent renewable industry. Similar models were successfully replicated by some other countries in Europe, like Germany, Denmark, and Spain. The law in Germany was called the “Feed-in Tariff”. For any nascent industry to succeed, it needs to be competitive with the traditional (hydrocarbon) industry.
The fact that significant reserves of fossil fuels are still available impedes the willingness to give sufficient importance to renewables. In the past, whenever there was a push to move towards renewables, the major oil-producing countries would oversupply, plummeting oil prices and thus knocking the economic legs out from under the renewable industry.
Price mattered enormously, and success of the renewable energy depended then, as it would in the future, on relatively high oil prices. The success of renewable energy also depends on the availability of minerals needed to set up renewable plants. These minerals are often found in regions that are insecure, and which prevent exploitation. Afghanistan is an example, as is Congo.
The mineral reserves across the world have to be considered before a massive switch towards renewables is affected. These reserves have to be explored for which an increased number of mining projects are warranted. This means that there is a need not only for adequate mineral reserves but also for time, resources, and regional stability to exploit these minerals.
The growth of renewables compulsorily will have to remain in sync with the availability of relevant minerals. Wind turbines need copper, aluminium, rare earth metals, zinc, and molybdenum. Solar panels need glass, polymer, aluminium, silicon, copper, silver, tin, and lead. Batteries need nickel, lithium, cobalt, and manganese. Any rapid expansion in the use of renewable energy would bring under stress, the availability of at least some of these minerals, and therefore renewable growth has to remain in sync with the exploration and production of these minerals.
The International Energy Agency says that global supplies of lithium, copper, nickel, cobalt and rare earth elements need to increase sharply, or the world would fail in its attempt to tackle the climate crisis. Three countries i.e., China, Congo, and Australia, currently account for 75% of the global output of lithium, cobalt, and rare earth minerals.
The average electric car requires six times more minerals than a conventional car, according to the International Energy Agency (IEA). These electric cars run on batteries that have to be frequently charged, often using electricity. This electricity is frequently produced using hydrocarbons (coal, oil, and/or gas), all of which are considered unfriendly to nature and therefore are not ‘clean energy’.
This brings into question the very presumption of electric cars being environmentally clean. While electric cars do not pollute the environment, the manner in which the electricity is produced to charge their batteries is environmentally unclean. Ideally, the entire cycle should be based on clean energy, which is a goal that can eventually be achieved but will take time.
Another problem with electric cars is the lack of availability of charging stations for the batteries, and the substantial time needed to charge the batteries of each car. Superchargers, which take much less time, are an answer, but their cost and availability could be prohibitive. Researchers at Cornell University are developing technology that can charge an electric car while it is in motion. Highways in the future could embed the roads with metal plates that charge cars as they drive over them.
Thermal power generation is the main contributor of electricity generation worldwide because it offers high benefits such as high ramping rates, quick start-up, grid stability, and comparatively low generation cost. Electricity generation is dependent most on fossil fuels. Within fossil fuels, natural gas is used to the maximum, followed by furnace oil and coal.
The overall thermal power generation constitutes 65% of the total fuel power generation in Pakistan. Most of the thermal power plants in Pakistan are operating at 25-45% thermal efficiency. Three key trends are shaping the power sector. Firstly, Pakistan is forecasted to be in excess supply from 2021-2027 as installed capacity is expected to increase from 36 GW to 55GW. Secondly, the power sector is economically challenged, given a circular debt of over Rs. 1600 billion. Due to inefficiencies, the government finances are being strained.
Thirdly, as has recently transpired, IPP (Independent Power Producer) returns are at risk. The Pakistan government has given “take or pay” guarantees to numerous IPPs, which means that even if renewable, cheaper sources of energy were to become available, the government would still have to make capacity payments to these IPPs, compounding its challenges.
So, it’s not just about producing power through renewables, it is also about the government being able to use that power in the face of poor, past “take or pay” arrangements with the IPPs. The government is trying to negotiate a reduced profit; IRR with IPPs. Currently, IPPs in Pakistan make dollarized IRR (internal rate of return) of 15-20%, compared to the peer average of 11%. It is because of these challenges that the Central Power Purchasing Agency (CPPA) says that Pakistan’s electricity dispatch is determined by a mixture of economics and contractual obligations, not merely by economics.
Despite having abundant conventional (hydro-carbons) and renewable energy reserves, Pakistan is faced with a serious energy crisis. Lack of far-sighted policies, outdated power plants, and transmission grid, dependence on imported fossil fuels, use of natural gas for domestic consumers rather than the industry, lack of overall efficiency (including power leakages), have all contributed to the challenges that we find ourselves in.
Recommendations for Pakistan
It is crucial for Pakistan to formulate a diverse energy strategy, increasing the share of sustainable and indigenous energy resources to at least 30% of its total electricity generation capacity by 2030. Pakistan remains predominantly reliant on fossil fuels as its primary source of energy. For it to transition successfully to renewables would warrant measures beyond the usual “sweet talk”.
A more pragmatic and long-term policy that incentivizes renewables and gradually enhances their contribution to the energy mix is crucial for success. Expanding renewable energy can eventually make electricity cheaper, achieve greater security, reduce carbon emissions, and help Pakistan save up to $5 billion over the next 20 years.
However, to achieve such targets, a massive and immediate expansion of solar and wind is required. Efforts to reduce power generation from uneconomical thermal plants and continued investment in hydropower must continue as well. Hydropower, solar, and wind should remain Pakistan’s preference.
With an average of 300 clean sunny days available, solar irradiance remains promising. There is also a need to combine solar and wind generation parks to supplement each other. PV cell manufacturing industry within Pakistan faces policy challenges that merit attention. To support the energy strategy, certain laws will have to be enacted to encourage industries and households to install renewables for producing electricity for their respective businesses and households.
The recent American and NATO departure from Afghanistan has brought to the fore, the utilization and exploitation of the immense mineral resource of that country. It seems that China is all set to take advantage of this mineral resource at the expense of the US and other European countries.
Afghanistan has been described as the “Saudi Arabia of Lithium”, holding 1.4 million tonnes of rare earth minerals prized for their applications in consumer electronics and military equipment. Pakistan needs to take advantage of the situation and help Afghanistan, perhaps in coordination with China, to galvanize its efforts towards renewables and, in the process, expedite its own renewable growth in a more sustainable manner.
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