Promote the manufacture of solar equipment

ISLAMABAD:

Photovoltaic (PV) solar panels have reached maturity. The global installed capacity of photovoltaic solar panels stands at 728 gigawatts in 2021, and is expected to grow at a rapid rate of 13.78% to reach 1,645 GW. In monetary terms, the 2026 market is valued at over $ 200 billion.

Rooftop and utility-scale capacity is growing. Its production cost has come down to 2 US cents per kilowatt hour (kWh) and even lower in some countries. In Pakistan, its cost is a bit higher at Rs4-6 per kWh, but it is still less than half that of fossil fuel power plants.

Adding solar capacity would significantly reduce the average cost. The current market for fossil fuels is rather destructively high. This, however, created incentives and sensitivities in importing countries to switch to renewable sources, including solar power.

Solar demand and market

The Indicative Production Capacity Expansion Plan (IGCEP) foresees a capacity of 7,932 megawatts for solar energy and 5,005 MW for wind energy by 2030. Solar has an advantage because it is available throughout Pakistan. The solar intensity in Pakistan is double that of Europe. Wind power can only be produced in part of Sindh.

Solar panels can be installed in a distributed fashion near almost any neighborhood. This would not require large transmission networks. Even if 50 districts are covered with solar capacities of 100 MW, this would represent 5,000 MW.

Then there is the demand for off-grid rural electrification. There is also a solar market on the roofs of urban areas. If 10,000 rural towns were electrified by solar energy, that would represent several thousand megawatts of off-grid energy.

It can be considered to organize electricity or energy cooperatives to include solar, biomass and biogas. There are a large number of electric co-ops in the United States.

Some pilot cooperatives can be tried as a first step. This can have a significant impact on agricultural productivity, education and health sector awareness.

The market for solar panels in Pakistan is 1,000 MW. In monetary terms, it has been estimated at Rs60 billion for panels and Rs10 billion per year for all auxiliary equipment such as inverters. This is primarily a private purchase for rooftop solar power.

Recently, there hasn’t been a big solar power project. A number of solar projects are in the works, but there are pricing issues. Temporary power overcapacity, circular debt and current financial problems have also impacted the lack of solar project installations.

Provincial governments, however, are very keen to launch their own projects. A certain formalization and distribution of solar capacities in this regard is necessary.

Provincial interest and action can go a long way in increasing solar capacity, especially in the education and health sectors, and rural electrification. However, this must be the subject of a consultative agreement in order not to cause overcapacity problems.

Manufacture of photovoltaic solar panels

Several developing countries have set up local factories to manufacture solar panels. These include India, Turkey, Chile, Thailand, Malaysia, Hong Kong, Singapore and Vietnam and may be other developing countries.

Turkey, Malaysia and Vietnam appear to have become the main manufacturers of photovoltaic solar panels.

Turkey entered the solar PV industry in 2011 and within a decade has built a thriving industry consisting of more than 20 solar PV assemblies and manufacturing plants with a total capacity of 5,610 MW.

Recently, a Chinese company installed a 500 MW integrated photovoltaic solar panel manufacturing facility with an investment of $ 400 million.

Malaysia has a manufacturing sector of photovoltaic solar panels of several thousand megawatts despite a small installed solar power generation capacity of 1,500 MW. This means that most of the production is destined for export.

China plans to invest $ 10 billion in integrated manufacturing of photovoltaic solar panels in Malaysia. Recently, an agreement was reached between a leading Chinese company to set up a 7 GW large capacity ingot and wafer manufacturing plant in Vietnam.

In Saudi Arabia, a relatively large 1.2 MW solar cell assembly and plant has been commissioned with an investment of $ 186.9 million, which does not appear to be an extraordinarily large investment. Even the UAE has four solar PV panel manufacturing plants despite high labor costs and uptime issues. In India and Turkey, there are incentives and subsidies for local manufacturing.

Chinese companies are the main suppliers of solar panels and other related equipment, and are also active in installing manufacturing facilities abroad.

We have a special economic zone (SEZ) program with China under the CPEC. Efforts should be made to initiate local manufacturing projects for solar equipment.

Pakistan’s trade gap widens with increasing imports. The export of textiles and some agricultural products is not enough to fill the trade deficit.

Local manufacturing needs to be developed in engineering, IT and other pioneering fields. Solar is an ideal field which has significant and growing potential. Parts of the solar industry are also labor intensive, such as solar panels, inverters, and other ancillary equipment.

In addition to saving foreign exchange, local manufacturing would increase employment and promote technologies and skills. Pakistan’s solar market today is dominated by small traders and the informal sector, leading to quality and even safety issues.

Local manufacturing would organize the market, reduce costs and improve quality. Although our topic is solar photovoltaic, it may not be out of place to focus on local manufacture of solar water heaters and biomass stoves to reduce the demand for gas.

Remarkably, Pakistan set up a pilot plant to manufacture solar ingots and wafers as early as the 1970s. The plant is still there and is operating. Panel assembly facilities were added later.

It was a good nucleus for expanding know-how. Unfortunately, the initiative could not be supported. However, the economics and competitiveness of solar PV have only recently emerged.

Although there is a large user market, solar PV projects would be necessary to attract foreign direct investment (FDI) in the manufacturing sector.

There are some manufacturers of ancillary equipment such as inverters, most of which are limited to assembly operations. It can also be encouraged and extended.

It can be noted that the solar energy manufacturing capacities in developing countries are much higher than the installed solar energy production capacity, which means that all of these capacities are geared towards export in addition to local consumption. .

One wonders, what is wrong with Pakistan? Is forward-looking and positive thinking necessary, avoiding pessimism?

The Pakistani user market is estimated at 1,000 MW. There is a potential for the installation of around twenty photovoltaic solar power plants of 50 MW each. Local investors have as much capital to set up a factory each. Joint ventures are also possible for know-how, brand and export possibilities.

Local investors are generally timid without government initiatives and policies, especially in new areas. The government, the Board of Investments and the Electricity Division should consider engaging in consultations and policy dialogue in this regard.

The writer is a former energy member of the Planning Commission and author of several books on the energy sector

Posted in The Express Tribune, December 13e, 2021.

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