Conergy and Suntech enter Pakistan

Conergy, in collaboration with Chinese project developer Ensunt Holdings, will build Pakistan’s first and largest 50MW solar power plant.

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It has been a good year for the solar industry in South Asia. In April, India revealed plans to build its first, and the world’s largest, 214MW solar park. This week, the two leading PV manufacturers, China-based Suntech Power (NYSE: STP) and German Conergy AG have announced that they will build solar power plants across Pakistan with a capacity of up to 150 MW.

Conergy, in collaboration with Chinese project developer Ensunt Holdings, will build Pakistan’s first and largest 50MW solar power plant for DACC Power Generation Company Ltd. (DPGCL), with a total investment of approximately $170M to $190M. According to the e-mailed statement issued on Monday, Conergy’s share of the total investment will be between $74M and $87M and it will do all the planning, engineering and design of the plant.

The company’s Chief Executive Philip Comberg said: ““This project is another step forward in our interesting project pipeline for 2012. It underlines the relevance of the Asian solar markets, their growth potential and further reflects Conergy’s excellent market access, global footprint and ambitions in Asia.”

The solar park, which will jointly be owned by DPGCL and the government of Pakistan, is being built near the city of Bahawalpur, Punjab. It will run on 210,000 modules and 140 central inverters, both of which will be supplied by Conergy. Once completed, the plant will supply electricity to about 30,500 households and agricultural fields. Mr. Doug Melvin, the president of DPGCL, thinks that the current project is just a start as the company “is looking beyond [the] 50MW [generation capacity].”

Pakistan entered the renewable energy market in the 1960s when PVs were installed to provide electricity to 18 villages and a desalination plant was built in Gwadar that used solar stills. Since then, very little progress has been made. According to the Pakistan Council of Renewable Energy Technologies (PCRET), the total installed photovoltaic capacity in Pakistan is about 1MW. The PV systems are primarily being used for street and garden lights, water pumps, emergency telephones for highways and rural areas, refrigeration for vaccines, and other medical uses.

Earlier this year, the Prime Minister of Pakistan Yousaf Raza Gilani met with Suntech’s Chairman and CEO Dr. Shi Zhengrong during his visit to China. On 30^th May, a business delegation from China led by Dr. Zhengrong met with the Premier in Islamabad, Pakistan, to discuss the country’s energy needs. The meeting was also attended by Minister for Water and Power Syed Naveed Qamar and Khalid Saeed, the Chairman of the National Electric and Power Regulatory Authority (NEPRA).  Mr. Gilani said that he believed that solar energy offered the most effective way out of the energy crisis.

It was announced after the meeting that Suntech would add 100MW to the national grid by building five 20MW solar power plants in different areas of Pakistan. The Ministry of Water and Power and NEPRA were directed to assist the company. Dr. Zhengrong has said that he would personally visit several areas of the country to select the suitable sites.

The country is currently going through a massive energy crisis. Pakistan currently generates 22,000MW of electricity, well short of demand, and as a result 37% of the population do not have access to electricity. Frequent power breakdowns and failures have become the daily norm. The province of Punjab, where the solar park is being built, is bearing the brunt of the power shortfall. Its capital city of Lahore is experiencing up to 12 hours of daily planned load shedding, more than twice that of Karachi, the capital of the province of Sindh. Balochistan, the largest province of Pakistan in terms of area, is also its most thinly populated. With a density of 21 persons per square kilometer and 77% rural population, this region receives ample sunlight throughout the year but 90% of the villages do not have access to electricity. It is not only ideal for a solar power plant, but in dire need of one.

The shortage is so severe that the country should ideally add 2,000MW of electricity each year to the national grid. The country has the potential to generate 2.324 million MW of solar electricity. Similar thoughts were also echoed by Marc Lohoff, Conergy Board Member, who said: “Potential in Pakistan is enormous …. solar energy is ideally suited to close [the demand and supply] gap and supply safe, clean, affordable energy.”  According to Dr. Nasim Khan, Vice Chancellor of Hamdard University, the only options left for Pakistan are solar and wind power. While speaking at the recently organized Energy Review conference, the VC offered free use of the university’s labs and equipment for solar power generation to industrialists.

The government is also responding to the calls for solar energy and has recently removed all import duties from solar power systems. Last Wednesday, the country’s first on-grid solar PV power station was inaugurated by the Prime Minister and started its test operations. Built with the collaboration of the Japanese government at a cost of $5.4M, the plant produces 356.16kW of electricity through photovoltaic systems and supplies energy to the Planning Commission and Pakistan Engineering Council. Analysts believe that the plant is more symbolic in nature, as it shows the government’s seriousness towards the solar sector.

Energy shortfall is the biggest issue facing Pakistan. According to the energy analyst Jesse Parent, it has become bigger than terrorism. US-based Star Telegram has claimed that insurgents cause a loss of two GDP points, whereas power shortfalls and blackouts account for a loss of four GDP points to the country. Solar energy offers a long-term solution and has gotten the attention of both the public and private sector. The Prime Minister has announced a $0.5M solar subsidy for the Balochistan province. Two local firms, the Buksh Foundation and the Bank of Punjab, are collaborating to provide microfinance loans and training to entrepreneurs who use renewable energy, to minimize their initial installation costs. With Conergy and Suntech entering the Pakistani market, at appears as if the country has finally embraced solar.