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Future of Pakistan linked with renewable energy

Published on 5th Sep, Edition 36, 2016

 

Interview with Mr Inam Ur Rahman – CEO, Reon Energy Ltd & Tenaga Generasi Ltd

Profile

Inam ur Rahman is the Chief Executive Officer of Reon Energy Limited (REL) and Tenaga Generasi Limited (TGL), wholly-owned subsidiaries of Dawood Lawrencepur Limited (DLL). He joined DLL as CEO in September 2009 and was re-elected at the 21st AGM on 27th Sep 2012. He is currently serving as a Director on the board of The Hub Power Company Limited (HUBCO).

Mr. Rahman has diverse experience in business development, management consulting, and has helped several Pakistani firms with strategy and development initiatives. He has earlier worked with SME firms helping them make the transition to organizations capable of attracting strong human resources. He has an avid interest in training and teaching and was a part of the adjunct faculty at LUMS, teaching mostly at undergraduate level and at the Executive Development Center. As a qualified electrical engineer, he started his career designing instrumentation and control systems for large scale industrial projects. He has previously served as a director on the boards of Sui Northern Gas Pipelines Limited and Dawood Hercules Chemicals Limited.

Mr. Rahman holds an MBA degree from LUMS and is an Electrical Engineer from UET Lahore. He has more than 20 years of experience in engineering and operations across various business sectors.

Dawood Group, one of the largest business houses in Pakistan, has completed a 50MW wind power project at Gharo, the wind corridor of Sindh coastal area, and is waiting for a go ahead from the regulatory authority to connect the project with the national grid. This was stated by Inam ur Rahman, Chief Executive Officer of Reon Energy Ltd & Tenaga Generasi Ltd in an interview.

The project was developed at a cost of $118 million, which is ready to add 50MW in the national grid immediately; it is just a matter of signal from the government. It is, however, sound strange that on one hand there is a hue and cry over electricity shortages while on the other hand the bureaucratic functionaries were engaged in formalities for utilization of a project readily available to add to the energy generation capacity.

PAGE: How much solar power can be generated in Pakistan, over the next five years?

CEO: Pakistan has ample amount of solar resources. Sunlight is available 8-10 hours per day over much of the plains of Sindh, Balochistan and Southern Punjab. There is ample amount of land available for both Utility Scale generation i.e. selling to Wapda or for Distributed Generation i.e. solar solutions for residences, commercial areas, and industries. Whilst the potential is for 250,000MW, through prudent policies we should see about 10,000MW of solar in the next five years.

PAGE: What are current rates of duties and taxes on import of solar power equipment?

CEO: At present, there is zero duty on imports of any solar panels. However, ancillary solar equipments like inverters/charge controllers etc have to be brought in for specific projects in order to benefit from zero duty.

PAGE: Is Reon energy producing solar power equipment in pakistan or is it simply importing and supplying it to the industrial and domestic users?

CEO: At present, Reon Energy Limited is sourcing from the top notch manufacturers all over the world. However, we are at all times exploring technologies to see if something viable can be produced here. At present we have the technical and financial expertise to design, deploy and maintain operations of small and large solar projects.

Reon offers solar energy solutions for businesses, industrial units and other organizations with excessive energy dependence. Few of its recent installations involve a 1MW solution at Wah Chemical Limited and another 100kW solution at Unilever Tea Factory Khanewal.

Reon is a part of Dawood Hercules Corporation-the largest diversified private energy provider in the energy sector of Pakistan.

PAGE: What are the issues plaguing the solar industry in Pakistan?

CEO: We are still at the introductory stage of the technology. Most users are still trying to understand how this can be implemented to their benefit. In the meantime, low quality equipment has been dumped in to the market and that has created uncertainty about the effectiveness of the solutions.

Since the equipment is tax-free and completely unregulated so some traders have brought in rejected panels and are selling them as new. I believe that we need serious consumer protection and education in this field.

Also at present, the government has not brought about a coherent policy on induction of solar in to our energy mix. This means that there is a lot of dangerous and unfettered experimentation going on.

PAGE: What steps have been taken by other developed and developing nations to expedite conversion on solar technology?

CEO: This is a very good question. We should learn from the successes and failures of other countries. Germany is one of the biggest solar user countries and they have reached here by encouraging everyone to invest in Solar. They provided incentives for domestic users by offering them high net-metering rates. They got the utility sector involved with both tax incentives as well as carbon credits – eventually leading to quick adoption of renewables including solar.

Similar benefits are still being given in the Unites States, as well as developing countries.

Dubai has recently signed a 100MW solar project with very cheap financing and the cost per unit is only 5.8 cents. In certain African countries, the rate has come down to 4 cents because cheap debt is available for solar projects.

Bangladesh is another nation that has encouraged use of solar technology through policies, which require that every application for electricity connection to the local utility for a new development/building must convert at least 3% of its load on renewables.

PAGE: What incentives from the government are required for quick adoption of solar power at consumer level?

CEO: First of all the government has to give a clear 5-year policy of the integration and adoption of renewables in to our national energy supply. Then they have to implement the policy as well. At the moment, we keep getting mixed signals from the government about its commitment to this sector.

Net-Metering is an effective policy that is already in place by the government. However, there a serious lack of implementation due to certain technical and commercial concerns at the distribution company level. As soon as it is implemented, we shall see a rapid rooftop conversion on solar across the country.

A fact is that not everyone can afford to buy solar equipment at one go. The government also has to make consumer financing easily available for people to be able to purchase solar solutions.

It is similar to car financing and home financing. Once the different commercial banks are encouraged by the government to invest in solar solutions, we will see a big boom in this field.

To meet infrastructure limitations, the government can initiate the Distributed Generation policy i.e. to produce electricity at the point of use rather than at a centralized location as presently being done.

To bring electricity to rural areas without added capital constraints, the government can introduce Pay-as-you-go Model applied successfully in Africa that provides access to electricity after buying credit for use through a mobile platform.

 

PAGE: Many analysts and writers are criticizing solar energy solution streaming it uneconomical and costly despite the fact that Pakistan needs diversified energy mix. What is your point of view?

CEO: Yes, I have also met a lot of these armchair experts. The reality is different. In the year 2015 more investment was made in renewable energy than any other technology in the world. Clearly those people know better. There is rapid development in the field of solar and other renewables and cost structures keep improving. The world has moved towards finding cheap sources of financing for these projects because there is no fuel risk involved. This is why projects in Dubai are at less than 6 cents per unit whilst we are still at 10.7 cents. Interestingly solar equipment is cheaper in Pakistan.

The energy mix in Pakistan is skewed towards imported resources as well as depleting domestic energy pipeline. This is a major threat to the country’s energy paradigm. Secondly the health impacts of burning oil, diesel and coal are immense. We are destroying our environment so rapidly that our next generations may not even have clean air to breathe in. Renewable resources, specifically solar, wind and hydel are present in Pakistan and if harnessed smartly can eradicate the dependence on imported fuels. It is an economic decision and any government would make use of the best internal resources rather than remain slaves to other countries.

A solar backed system can be set up in less than a year and is operational even in the remotest of locations. Backup batteries help overcome the system’s downtime in the absence of sunlight.

PAGE: Is solar system an expensive investment?

CEO: The cost of energy from a solar system is less than grid price today and the expected system life is 25 years. Yes it may seem that an investment has to be made in the panels etc but it is all worth in the short term even. As I said earlier, we are working with banks to ensure that cheap and easy options are available for people to invest in solar systems. The expected payback time is around 3 years and there is minimal maintenance required throughout the life of the solar energy system. Even if financed through a bank, the cost can be met in 5 years.

PAGE: Elaborate on the solar projects installed by reon and financial options available to install solar projects.

CEO: Reon has an extensive portfolio; few of its projects include solution at Wah Chemicals Limited, Wah Medical College, Wah Nobel Limited, Unilever Tea Factory, Asia Petroleum Limited and many others.

Reon has also successfully provided customized solutions for both on-grid and off-grid localities. Solar solutions for Help NGO’s Hospital in Surjani Town and Telecom Stations all over are few of such projects.

Reon offers energy sale agreements-in which we design, finance, and install the entire system on the client’s property and the client can pay from the energy savings that they make i.e. no extra cost at all.

PAGE: The government had recently announced a relief package of over Rs341 billion for the agricultural community, which include interest free-loans for farmers willing to convert their diesel run tube wells on to solar energy. Can you discuss the need for such an initiative?

CEO: According to an estimate, per hour cost of running an average-sized tube well on diesel is Rs. 173 and on solar energy it is Rs. 83. Farmers can save over Rs. 314,400 per year on each tube well if they opt for solar tubewells. It is very simple once the relief package actually gets implemented.

Agriculture is still a primary sector of the country’s economy. Through the use of solar operated tubewells, farmers can have water available at the right time increasing their agricultural yield by approximately 20 percent.

Solar tubewells are now becoming increasingly affordable and can both be deployed for both Open Flood Irrigation and Drip Irrigation methods.

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