Punjab Solar: More To Come
BMI View : The urgency placed on the development of the Quaid-i-Azam solar park and the high level of government involvement underscore the severity of power shortages suffered by the province of Punjab and the country as a whole. Solar energy appears to be a feasible solution to this problem as it is financially viable and competitive against alternative forms of generation.
Chief Minister of Punjab, Muhammad Shahbaz Sharif, announced on May 12 that he had given his approval to increase the capacity of the Quaid-i-Azam solar park from 1000MW to 1500MW. Construction on the first phase of the project (with a capacity of 100MW) had commenced just two days before the announcement, and this phase is scheduled to be completed by December 2014. The Punjab government had first announced plans to develop the Quaid-i-Azam solar park in September 2013, and the project is being developed by China's TBEA.
The urgency placed on the development of the Quaid-i-Azam solar park and the high level of government involvement underscore the severity of power shortages suffered by the province of Punjab and the country as a whole. Punjab has experienced persistent power shortages since 2007 - due to a lack of generation capacity as well as fuel/water shortages - and the problem looks set to continue for the foreseeable future. The country's Central Electricity Authority projects that the province will suffer an overall power shortage of 19.7% throughout FY2013/14 (July - June), and a peak shortage of up to 25.6% between June and October 2014. Meanwhile, Pakistan experienced a shortfall of 25% of electricity supply in 2012 and 2013, which has led to severe losses in the agricultural and industrial sectors.
|Growing Electricity Supply Deficit|
|Pakistan - Electricity Demand And Generation Capability, MW|
A Viable Option
We believe that the Quaid-i-Azam solar park will be financially viable and competitive against alternative forms of generation. The Quaid-e-Azam solar park is being developed on desert land in Cholistan. The project site benefits from very high solar irradiance, while the lack of alternative uses for the land means that it is extremely affordable. This makes it very viable relative to thermal generation, which is costly and prone to fuel supply disruptions due to the lack of domestic thermal fuel production ( see 'Solar Viable, But Case For Coal Remains', September 10 2013).
Solar power is also viable in other parts of Punjab and throughout Pakistan. The government of Punjab is currently conducting technical studies to explore the feasibility of setting up small solar power projects in various parts of the province. In fact, the country as a whole possesses significant potential for solar generation, with proven power generation of 4-5kWh per metre square and more than 3,000 hours of sunshine throughout the year (according to the Japan International Corporation Agency).
We note that solar farms in Pakistan will benefit from a feed-in tariff (FiT) which is relatively attractive. A tariff for solar energy had first been introduced by the central government in February 2013 in a bid to encourage development of solar resources in the country, and the rates were updated in January 2014 ( see 'Pakistan Renewables: New Tariffs To Support Growth', February 22 2013). Projects completed in the northern region in 2014 (such as phase one of the Quaid-i-Azam solar park) will receive PKR22.02/kWh (USD0.21) for the first ten years, and PKR 9.13/kWh for the subsequent fifteen years. Meanwhile, plants in the southern region will receive PKR21.11/kWh (USD0.20) for the first ten years, and PKR8.76/kWh for the following fifteen years.