Rising capacity payments: EVs to the rescue

17 April 2024

Published in: Business Recorder

Pakistan energy sector has multifaced issues, and the sector has never been seen holistically, with power and petroleum interlinks ages and intricacies have largely been missed in the discourse.

The country today has surplus power generation capacity with growing capacities on cleaner sources (such as nuclear, hydel, and other renewables) and efficient plants (such as RLNG new plants). However, demand is not growing from conventional sources, due to higher pricing. At the same time, the energy use in transportation is largely relying on Imported fuels and old technology engines – especially in 2/3 wheelers and busses.

The opportunity is to convert transportation load to electricity, and that would help in higher utilization of power grid, and optimal use of growing solar panels. The good news is the challenges in the conversion are not huge, and there is economic rationale to do so at the consumer level.

The only reason the penetration is growing at a snail pace is due to persistent economic uncertainty which is hindering the investment to pour into EVs. This may require government push and the savings are huge in terms of less reliance of imported fuel, efficient use of energy and better environment due to less fuel pollution.

A report by LUMS Energy institute and US Pakistan’s Center for Advanced Studies in Energy (USPCAS-E) published in 2019, suggested to bring in 0.5 million EVs into the transportation grid by 2025. The report argued that it would help to consume the incoming new power capacity without challenging other types of loads on grid.

The suggestion becomes more persuasive today, given that power consumption has almost stagnated since 2019 and growing capacity payment is making power unaffordable for industrial users and households. The conversion of 2/3 wheelers and intercity buses to EVs should be done on wars footing basis.

According to the study bringing in 0.5 million EVs into the transportation grid (assuming they will be charged for 300 days), each EV will require 28KWh of energy daily the total load on the grid would be 4.8TWH which was 12 percent of then Pakistan’s unutilized energy. And that helps reduce the capacity payment per unit too. This is to limit carbon dioxide emissions by 1.47 billion kg /year.

Then there are savings on oil imports bill, as per the study, half a million EVs on roads will save half a billion dollar a year on fuel import.

In the long-term, XWDISCOs and KE have also submitted their Power Acquisition Programs envisaging addition of generation based on renewable energy sources. There can be huge potential benefits for the country if policies that encourage addition of generation at least costs are taken in parallel with policies for electricity demand creation. Together they could help put the brakes on the derailing circular debt in the energy sector which is estimated to be touching Rs5.5 trillion.

There is another study by NEECA and UNDP that found out that the projected growth of electric vehicles will not drive substantial increase in total electricity demand, globally, and Pakistan is no exception. While the EVs are unlikely to add any significant strain on the power grid at a national level, it will likely reshape the power load curve at the distribution scale.

At a national level, this would represent a small load, which the power network could likely absorb without any challenge. However, at a distribution scale, this changing load curve may lead to electricity network congestion or voltages below normal. This element may need investment at Discos level and KE is already working on it. Privatizing Discos on NTDC system can make them do the same.