Pakistan is a country that is significantly blessed with hydropower potential because of its distinct topography and extensive river system. According to conservative estimates, Pakistan’s potential for hydropower generation is more than 60GW, of which Pakistan has only been able to harness about 10.6GW.

The benefits of hydropower are enormous, which can be ascertained from the fact that hydrocarbon resources-rich countries like

Norway and Iran also prioritise the development of hydel power, with Norway having an installed capacity of more than 30GW and Iran having 12GW.

The hydel generation dovetails with Pakistan’s demand patterns, which are primarily driven by the summer cooling load. Pakistan has seen demand peaks during the summertime period of up to 25.5GW observed on 21st August this year; at that time, hydel was generating at its peak of more than 9GW.

KP and AJK collectively hold 38GW of hydropower potential

During winters, this power demand is usually reduced to half of the summer peak, and hydel is curtailed as well. As hydel is an indigenous and sustainable resource, it also helps to conserve foreign exchange reserves.

The current debate of contracting excess generation capacity has been going on for some time, and one of the key outcomes of this is the amplified focus towards long-term planning to avoid such scenarios in the future.

The indicative generation capacity expansion plan (‘IGCEP’) is a sacred document that dictates the capacity to be added in the coming 10 years. The criterion for inclusion of projects into the IGCEP is the least cost. Only projects included in the document are granted regulatory consent.

On the other hand, the gestation time for developing private hydro is at least eight to 10 years. For a project to successfully achieve fruition within this time, it has to solicit a set of approvals in a cascaded manner. Failure to receive any of the consents derails the project’s overall progress, consequently causing delays. The implication of the non-inclusion of the project into the IGCEP is that its development progress gets stalled.

The process for developing IGCEP for the next year has been reinitiated. It has also been reported in the media recently that authorities concerned foresee that the 4,500MW Diamir Basha project is expected to reach its commercial operations (COD) in 2029.

Additionally, the 1,200MW Chashma-5 nuclear power project is also forecasted to achieve COD in the same year. It is critical to mention here that both of these projects were not considered to come online together during the previous iteration of IGCEP. Due to this variation, it is highly likely that a significant number of candidate hydropower projects that had been selected purely on the basis of least cost will be dropped in the upcoming version.

Since the next iteration will also incorporate the transmission costs of the projects, the cost of candidate projects will be further incremented due to the addition of these transmission costs, thus making their selection unlikely.

Hence, with the renewed assumption of reduced demand along with the addition of these committed projects, the development of several private hydel projects will be facing issues. In this very manner, the public sector will crowd out the private sector, as is the case for most of the industries in Pakistan.

Although public sector development is usually marred by inefficiencies, the sad reality is that the planning document doesn’t factor in any kind of such delays into its assumption basis. In one of the recent public hearings of the regulator, a large-scale private hydro project developed by a Korean entity faced challenges due to its non-inclusion into the IGCEP.

Another factor is the recent international event transpiring within Intermittent Renewable Energy (IRE) — solar and wind sector — wherein, during the UK’s recent offshore wind power auction held in September, no bids were received, although the maximum guaranteed price offered was 5.6 cents per kilowatt-hour (c/Kwh).

This is due to the global macroeconomic and supply chain challenges, and it is therefore expected that Britain will raise the guaranteed maximum price for the upcoming auction of solar and wind to 9.1 c/KWh.

If such high numbers are also observed in the upcoming auction of the 600MW Muzaffargarh solar project, then it will be a challenge to justify the inclusion of such generation, given that the national average purchase price is 22 Rs/KWh for FY23-FY24. Similarly, the architects of the IGCEP will have to tread a tightrope to work out the actual cost-reflective price of IRE for the next iteration.

The major affectees from the non-inclusion of hydel will be the private developers and the federal and provincial agencies that have issued these concessions.

It is high time that these entities start looking beyond the conventional way of doing things, as one of the options worth pursuing is the generation of green hydrogen by conducting electrolysis through a co-located plant with abundant and inexpensive hydel power resources.

Hydel, being a base load power, has the unique advantage of providing electricity at higher capacity factors than IRE, thus enabling greater utilisation of hydrogen generation assets. It can then be converted to green ammonia and transported to other parts of the world, just like how LNG is currently shipped.

Hydel is mostly concentrated in the northern parts of the country, with Khyber Pakhtunkhwa having at least about 30GW of potential and Azad Jammu and Kashmir also having another about 8GW. Thus they have the potential to become hydrogen exporting hubs.

Another downstream sector that can be coupled with this initiative is the development of Pakistan’s inland waterways. As the mighty Indus connects the northern parts of the country with the Arabian Sea, it can be used to transport hydrogen generated in the north.

This may be needed because the current price for wheeling the power from north to south through the existing transmission network is prohibitively high, as the discos have petitioned 27 Rs/KWh to the regulator for the wheeling charges.

As per the US Department of Transport, the cost of transporting through inland waterways can be nine times cheaper than transportation through trucks. A recent study conducted by the World Bank on the development of the Inland Water Way Transport system in Pakistan in 2022 clearly states that there is a significant advantage to developing this system in Pakistan, as it has an economic IRR of 35.1pc.

Pakistan is strategically located at the centre of sea routes for Europe and East Asian economic giants like Japan, Korea and China, who are all eager to decarbonise their energy sources.

Further, within the recently approved National Electricity Plan 2023-27, it has been stated that the long-term hydrogen development strategy will be developed by December 2025. It will be highly prudent to consider the development of hydel power and inland waterways as the key drivers for achieving the competitive advantage for the development of green fuel of the future, making Pakistan a hydrogen exporting hub for the entire region and the world.

The writer is an energy expert.
X (formerly Twitter): @deHAMMAD

Published in Dawn, The Business and Finance Weekly, December 25th, 2023