Wind Power Energy Pakistan Economical Renewable Power ...

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May 21, 2015 - Abstract. Pakistan today faces a severe energy crisis with a shortfall of approximately up to 5000 megawatts. Limited fossil fuel reserves ...
Wind Power Energy Pakistan Economical Renewable Power Resource Asif Kamran, Syed Nayyer Ali and Fehmida Raufi

Abstract Pakistan today faces a severe energy crisis with a shortfall of approximately up to 5000 megawatts. Limited fossil fuel reserves increases the dependence on import of fossil fuels, particularly oil on a large scale. Moreover, too much reliance on imported oil is critical from energy security point of view along with the burden on a poor economy of Pakistan coupled with the demand of rural population which represents the major size of the population waiting to be connected to the national electricity grid. The study is based on the descriptive research; data is gathered from different institutions and stake holders namely Pakistan Meteorological Department and Pakistan Council of Renewable Energy Technologies responsible for collecting wind data and identifying wind corridors in different parts of Pakistan. To attract investment in the wind power sector which is relatively new in Pakistan the state has to provide investment and production incentives to the investors such as tax incentives and accelerated depreciation which lowers the cost of capital and motivates the investor to inject high capital. Disbursement of grants and aids to municipal and local corporations having limited resources and announcement of fiscal policy by the state lowering the interest rates on the lending and exempting customs duties on the equipment and wind turbines, eliminating or at least reducing the property tax on the land required for the wind farm. Keywords Letter of intent (LOI) · National electric power and regulatory authority (NEPRA) · Alternative energy development board (AEDB) · Operation and maintenance (OM) · Internal rate of return (IRR) · Net present value (NPV) · Plant factor (PF) A. Kamran (B) School of Management and Economics, University of Electronic Science and Technology of China, Chengdu 610054, People’s Republic of China e-mail: [email protected] S. Ali General Studies Department, Yanbu Industrial College, Madinat, P.O. Box 30426, Yanbu Al Sinaiyah, Kingdom of Saudi Arabia F. Raufi Humanities Natural Sciences, Bahria University, Karachi 75260, Pakistan © Springer-Verlag Berlin Heidelberg 2015 J. Xu et al. (eds.), Proceedings of the Ninth International Conference on Management Science and Engineering Management, Advances in Intelligent Systems and Computing 362, DOI 10.1007/978-3-662-47241-5_49

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1 Introduction Wind power is the application of wind energy to drive the wind turbines generating electricity mainly for the commercial purpose. Wind power is a renewable source of energy suitable for commercial operation; all of the available resource is availed as unlike fossil fuel wind energy is plentiful, renewable, clean and green house gases free [13]. Wind turbines are usually arranged in a group at a particular location known as wind farms, a large wind farm ranges from few dozen to several hundred wind turbines. The extended area consists of hundreds of square kilometers and the land lying between the turbines is used for agriculture purpose mainly a wind turbine may be located offshore taking the advantage of strong wind speed blowing over the surface of the sea, the turbines are connected with a medium voltage power collection system which is further transformed into high voltage to be connected to the high voltage power grid [6]. In the ancient times the wind power was used to propel sailboats and ships. The wind powered machines were used in Persia and later introduced to Romans however the practical windmills were built in ancient Afghanistan which was made up of sails covered with cloth material these windmills were used for grinding corn and draw up water [1]. In the 12th century A.D the windmills started appearing in Europe which was horizontal axis windmills; they became popular in Europe as unlike water mills they were not rendered inoperable by the freezing of the water in the winter season of Europe. By the 19th Century A.D there were about 2500 windmills in Denmark used for the mechanical work such as pumps and grinding mills and about Six million windmills were installed on American farm lands to operate irrigation pumps [9]. First windmill for electricity production was installed in Scotland which was used to charge the accumulators developed by Frenchman to power the lighting in the cottage thus making it the first house in the world to be powered by windmill and then later used to produce hydrogen. In the 20th Century the wind power became decentralized electrification, the forerunner of modern 3 blade horizontal axis turbine was installed in USSR. In Second World War, small wind generators were used on German U boats to recharge submarine batteries. In 1930s windmills were used on farms in the United States where the distribution system was not installed at that time. In 1941 the first mega size wind turbine was installed in Vermont, United States, in mid 70s and 80s in United States government worked with the industry to advance the technology and enable large commercial wind turbines [2]. In the beginning of 21st Century rising concerns over energy security, green house gases emission which led to global warming and depletion of fossil fuel led to the dependence on wind energy resources. The wind power industry began to expand at a robust rate of 30 % annually driven by the massive availability of wind resource and decreasing cost due to improved technology and management [7]. Global recession and inflation in the world economy during last 10 years mainly due to rising oil prices led to the shift from fossil fuel to natural gas but it has its own supply problem as the natural gas reserves are also depleting and wind power showed its potential for power generation. Advancement in wind energy technology led to the development

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of offshore which are limited to the water depth of 30 m utilizing fixed bottom technology.

2 Literature Review This report summarizes the current conditions for business in the Pakistani Renewable Energy sector the recent power crises in Pakistan where the whole country is in the grip of power crisis with a shortage of around 5,000 MW, immediate investments in new hydroelectric or coal-fired power stations are not in sight as these projects require at least 7 to 8 years of operational time [12]. Pakistan has one of the highest energy prices in its region of about RS 6 per unit due to the international surge in oil prices. Daily load shedding is announced in advance, for Cities load shedding goes on for 3 to 4 h in winter and 8 to 10 h in summers, the situation sounds more intense in rural population as load shedding goes on far about half a day and in some cases more than 24 h. Market conditions for wind power in Pakistan are fertile as the estimated potential indentified by the reliable sources is nearly 50,000 MW sufficient to fulfill the long term energy needs. In rural population hundreds of wind power pumps and electricity generation turbines for micro generation have been installed providing electricity to nearly thousand homes houses in 18 remote villages [11]. This study has enabled to identify the potential areas where economically feasible wind farms can be established, the Potential areas covers 9700 sq. km in Sindh only, the AEDB in collaboration with USAID, has carried out Satellite survey of wind resource of the entire country, which would help to identify specific high-value areas for conducting specific on-site assessments and development, the technical support for wind projects developers includes civil engineering, infrastructure building (roads, foundations, grid connection), logistics, setting up an operation and maintenance (O&M) companies, financing and insurance [4]. The feed-in tariff provided by The Policy for Development of Renewable Energy for power Generation regulation states that companies having the signed LOI (Letter of Intent) with Government of Pakistan, are allowed to negotiate the final tariff with NEPRA. Taking all upfront costs into final calculation is challenging, since infrastructure is weak and no experiences are available at that present time, the implementation of the first wind turbines in Pakistan will have an impact on the replication and will give the necessary confidence for project developers and financiers. AEDB is considering indigenous manufacturing of wind Turbines which would play a part in creating job opportunities and poverty alleviation in the country. Karachi Shipyard, Pakistan Machine Tool Factory, Pakistan Steel Mills, State Engineering Corporation and several other companies were identified by AEDB. The total amount of wind energy is considerably more than the present consumption of electricity from all sources, the potential wind energy of 72 TW can be commercially viable as compared to total power consumption of 15 TW from all sources. The strength of wind varies and an average value for a given location does not indicate the average output of wind turbine, making wind power more consistent

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requires existing technologies to be extended by grid energy storage and batteries. Wind energy is rapidly growing energy resource in the world [8]; today a global installed wind power capacity has surpassed the mark of 100,000 MW including onshore and offshore installations. In 2007 alone wind-power capacity had increased by a record 20,000 MW bringing the world total to 94,100 MW. Selection of wind turbine site is based on the economic feasibility of wind power; apart of wind itself other factors include availability of transmission lines, value of energy to be produced, and cost of land acquisition along with its environmental impact of operations. Wind and hydro electric power have negligible fuel cost and relatively low cost of maintenance; wind power benefits producers due to their low marginal cost, average per unit cost which incorporates construction cost of wind turbine, transmission facilities, borrowed funds and their costs averaged over a projected useful life of the equipment. The outcome of research identifies other fields of study having no relevance with the topic but is indirectly related to the subject matter because they are linked with the topic. Some forms of energies create costs that are neither paid by the producer nor by the consumer of the goods or services and the most significant the pollution which has social cost in the form of increased health expenses, reduction in the agricultural productivity and other environmental issues. The carbon dioxide is produced when fossil fuels are burned may impose further cost in the form of global warming, there must be a mechanism to add this cost as it indirectly affects the society in the form of wild habitat destruction and loss of scenery and tourism etc. [3]. The wind energy is the most competitive source of energy if the external cost is taken into account due to its minor environmental effects; wind power consumes no fuel and emits no air pollution, unlike fossil fuel its operation does not produce carbon dioxide, sulfur dioxide and mercury particles [5]. A study by the Irish national grid stated that producing electricity from wind energy reduces CO2 ranging from 0.33 to 0.59 tons per unit of mega watt hours. However leaking lubricating oil or hydraulic fuel running down the turbine blades may be scattered over surrounding area may contaminate the drinking water area if that water area or reservoir is around. Threats to the birds is often the main complaint against installing wind turbines but the fact sheet shows that there are less birds killed each year by other sources of energy which create pollution cause death of birds and other human activities such as hunting, high rise buildings, air and land traffic [10]. In some cases the wind turbines affects the wild life where the older design wind turbines are placed with lower hubs and tighter turbine blade spacing, the number of bats killed both onshore and offshore turbines exceeds over two thousand. Officials claim that wind farms can generate false signals for tornadoes as happen in Kansas, USA. Historical experience of noisy and visually intrusive wind turbines may create resistance on setting up land based wind farms, residents near wind farms complain about shadow flicker caused by turbine blades and intrusive sounds. Light pollution is also a cause of concern for residents near wind farms due to the requirement of aviation light on the wind turbine, these issues can be resolved by placing the wind turbines offshore at least 10 km from shore but some find the onshore wind farms as a source of attraction and others complain a cause of intrusion [13].

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3 Statement of Problem The present energy crises in Pakistan with a short fall of 5000 MW approximately in a peak summer season was due to the negligence of policy makers and regulators in Pakistan towards the alternate sources of energy. The demand for electricity continues to rise 10 % annually which creates further demand for fossil fuel; the dependence on fossil fuel raises the concern for energy security in case of a war situation or shortage of oil supply from the oil producing nations along with the burden on the foreign exchange of a country already facing economic crunch. The problems which relates to the current crises are: Policies, Institutions, Regulatory bodies, Financial and Technology The power policies in Pakistan were traditionally focused on thermal production of electricity and the priority for renewable sources remains low although the acknowledgement for Renewable energy as an alternate source has prevailed in some policy documents but a meaningful development and incentives offered to the investors were still on the low priority, the institutional roles of the various organizations responsible for the development of renewable sources have often overlapped and varied over time is the cause of the lack of policy focus and priority towards renewable energy in the national energy planning process. Lack of knowledge about the potential of wind power and the technical knowledge required for establishing the necessary infrastructure and equipment required for the wind power generation, lack of fiscal and financial incentive necessary to attract the potential investors having necessary experience and knowledge in the wind energy production are causes for the development of wind energy at a snail pace.

4 Significance of Study This study could benefit the electronic media greatly in making documentaries and creating awareness among general public, due to low literacy rate majority of people in Pakistan depends on electronic media as a source of information, through media people in isolated communities, small towns, suburbs and rural areas can get awareness of wind power benefits at the small scale or community level to get electricity for their homes and tube valves from wind energy. The other beneficiaries of this study are the local and foreign investors unaware of wind energy potential in Pakistan and its benefits of economic and financial nature, by studying this research the investors and entities in energy sector can get the idea about the opportunities and barriers in the energy market and can better formulate their business strategies, independent power producers can benefit in the decision making about the diversification of their assets to wind power. The institutions responsible for policy making and enforcing can review their policies towards wind energy and can offer better incentives to attract the investment in the renewable energy sources particularly wind energy and local production of wind turbines.

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The scope of the thesis is geographically limited to Pakistan only; the data used in this descriptive research is obtained from the locations lie inside the frontiers of Pakistan, the analysis, processing and presentation is performed on the data which is obtained through the scientific observations on locations inside Pakistan and the recommendations, solutions and conclusions presented in this report are valid for Pakistan only. Unlike thermal generation plants the capacity or production output varies in wind power depending on the inherent speed of wind, electricity generated from wind power can be highly variable at different time scales and seasons. Like other sources of energy wind power needs to be scheduled but predictability of wind plant output remains uncertain for short term periods which needs to be substituted by other renewable sources in case of non coincidence between the wind speed and electricity demand.

5 Research Design Descriptive research is applied in the study to interpret and arrange the data in the understandable form, describing the observations and their analysis, Presentation and description of data in the form of tables, figures and charts. The descriptive research is applied to answer the problems of power crisis and to present renewable power resources. The descriptive study is applied to answer that who will going to form the policies necessary to boost the investment in the wind energy sector, what are the problems or limitations in implementing the wind energy program, how to remove the barriers in executing wind energy projects in Pakistan. The respondents of the study are institutions, stake holders, regulatory bodies and investors. (1) (2) (3) (4) (5)

Pakistan Meteorological Department; National Electric Power Regulatory Authority; Pakistan Council of Renewable Energy Technologies; Private Investors; Private Power and Infrastructure Board.

The data gathered from these respondents was important in identifying the wind corridors. The data about the weather and climate of the wind corridors locations, to forecast the possibilities of natural disasters (storms, tornadoes and earthquake) from geophysical phenomenon, the regulatory bodies provide information about the formulation of policies related to safety standards, quality and supply to consumers and determining the power tariffs for generation and distribution of power. The council of renewable energy was helpful in providing the technical details and the necessary technological development done in the renewable energy sector particularly wind turbines. While a number of investors who have responded to Government’s request for Letters of Interest some of them have been involved in wind energy tariff negotiations with regulatory bodies.

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5.1 Research Instruments The questionnaire had the questions enquiring about the problems faced by the developers, investors and other respondents in implementing and operating wind power on a commercial basis. Types of barriers faced by the developers in getting the sponsors and development of wind farms, meteorological survey of different locations necessary to gauge the wind speed and it’s variation through the year. Tariff and policy formulation and the integration of wind power in the national energy planning along its transfer of technology. Through internet surfing and extracting information from different information sites, internet was helpful in providing technical details necessary to locate the potential sites for developing wind farms. The online information was helpful in predicting the wind speeds throughout the year due to the presence of metro logical data of different locations of Pakistan, the internet was aiding in identifying the potential investors such as independent power producers, international and local engineering concerns developing wind power equipment and identification of marketing conditions for wind power and its potential power output in Pakistan. One of the major sources of data gathered are newspaper articles and latest news covering seminars and programs related to wind energy sources. Special supplements were published by the news papers to educate the readers were helpful in getting the information necessary for research. Special programs and documentaries on renewable energy resources were assisting in getting views from different government officials, bureaucrats, investors, Experts on wind energy resources and the representatives of those Independent power producers having stakes in the wind energy projects in Pakistan. Primary data source of communication with the respondent is a questionnaire designed in an open ended questions and answers format to obtain the data. These questionnaires are posted on the email addresses of the institutions related to the wind energy projects in Pakistan; another source of primary data is the interview with the respondents through telephonic and face to face interviews. Secondary data was gathered through electronic sources of information such as internet, talk shows and renewable energy documentaries on television and the articles written in the newspapers related to the wind energy generation in Pakistan. Most of the data for the research is gathered through secondary data sources, the major dependence on the secondary sources of data was due to the scarcity of time, financial resources and the nature of topic as the wind energy is relatively new in Pakistan and there is limited awareness among the local officials and entities in Pakistan about the topic. The data obtained from primary and secondary sources is interpreted into tabular form, the raw data gathered from questionnaires and electronic cum print sources of information such as internet, television, newspapers and magazines is transformed into tables presenting the data in percentages, frequency distribution and comparative or cross tabulation. The data is organized and analyzed in quantitative as well as qualitative manner and is presented not just in tabular form but in graphical methods of displaying data is also employed. Bar diagrams and line graphs are used in presenting

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Table 1 Monthly mean, maximum and minimum wind speed of locations in m·s−13 Months Karachi Ormara Jiwani Pasni January February March April May June July August September October November December Maximum Minimum Average

2.5 3.4 4.0 4.2 5.0 5.9 5.4 5.0 4.6 3.5 2.3 2.0 5.9 2.0 3.98

3.1 3.4 5.0 6.5 5.3 5.8 5.8 4.4 4.3 3.7 3.8 3.2 6.5 3.1 4.525

4.2 5.0 6.0 5.3 5.3 6.2 5.3 5.9 5.2 4.3 3.8 3.5 6.2 3.5 5.0

5.0 5.6 6.5 8.5 7.7 7.6 6.5 6.7 6.9 5.9 4.2 3.9 8.5 3.9 6.25

Fig. 1 Monthly wind speed for coastal locations of Pakistan

Wind Speed m.s-1

the data in a more simple and understandable form, the employing of various tools of mathematical calculations, financial and statistical formulas aid in conducting analysis and forming final opinion on recommending wind power as the feasible source of renewable energy in Pakistan. Presentation of Data. The assessment of wind power potential for four coastal locations of Karachi, Ormara, Jiwani and Pasni shows in Table 1 that the annual wind speed pattern in Karachi is on the lower side and Pasni and Jivani are observed to have the higher wind speeds. Figure 1 shows the Wind speed for Karachi, Ormara and Jiwani are identical in some time periods or months such as in the months of February the wind speeds of Karachi and Ormara are identical, in May and November wind speeds of Ormara and Jiwani are identical. The months of peak temperature in Pakistan when the electricity

9 8 7 6 5 4 3 2 1 0

Karachi

Ormara

Jiwani

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Month

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demand is at peak are April, May and June and these are the months showing correspondence with the maximum wind speeds of all four locations. Maximum wind speeds of Pasni and Ormara in the month of April is 8.5 and 6.5 m·s−1 respectively and maximum wind speeds of Karachi and Jiwani in the month of June is 5.9 and 6.2 m·s−1 respectively, the location of Jiwani is relatively stable in terms of wind speed and the most unstable is Pasni followed by Karachi and Ormara, the most preferable among these locations for wind generation is Jiwani followed by Ormara. The development of institutional support is necessary for the effective implementation of renewable energy projects especially wind energy, the technological, financial environmental and metro logical awareness is necessary to frame the policies to develop the institutional support. The Pakistan council for renewable energy technology is placed under the ministry of science and technology responsible for the development of policy essential for wind energy resources and technology in the country, currently the institution is involved in the installation of micro wind turbine units on a community levels or on a test basis, the institution is responsible for establishing business links from the equipment suppliers and the producers and acquiring of technology. The Pakistan metro logical department operates under the Ministry of Science and Technology and is responsible for the collection and dissemination of weather and climatic data. The department is currently implementing a project on behalf of ministry for the collection of data to map the wind resource potential in the country, and is expected to set up more automated anemometry towers to collect relevant data, the ministry of environment implements the national conservation strategy. The ministry of water and power which acts as a power sector planner and manager for power purchasing companies, generation and transmission companies, The Private Power and Infrastructure Board operates under the Ministry of Water and power provides facility to private investors in power generation, operates as a custodian of government policies related to private sector power generation and transmission, and is also responsible for handling all matters related to the implementation of these policies and act as a bridge among various federal and provincial agencies, the execution of implementation agreements with the independent power producers on the behalf of government and independent power producers who can build, own and operate power plants. The provincial and local governments must also be taken into confidence for the approval of projects from Pakistan council for renewable energy technology and Private power infrastructure board; there must be a mechanism to establish a regular coordination among the provincial and local governments and the PCRET and PPIB to establish projects in conformity with the developmental priorities. The NEPRA (National electric power and regulatory authority) regulates tariffs for the generation, transmission and distribution companies. It establishes the quality and operation safety standards for the independent power producers, private power infrastructure board along with the state owned distribution and transmission companies, approving investment programs for the utility companies and determining bulks and consumer energy tariffs. It is recommended that there must be a long term relationship among the ministries of Environment, Science and technology and Water and Power, the Functional Organization structure is essential in managing the

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A. Kamran et al. Electricity Consumers in Pakistan 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0

1997

2007

2017

2027

2037

Fig. 2 Projected number of electricity consumers in Pakistan

Table 2 Projected number of electricity consumers in Pakistan Year Consumers 1997 2007 2017 2027 2037

11, 605, 000 16, 700, 000 24, 031, 882 34, 582, 718 49, 765, 738

Growth rate % – 43.903 43.903 43.903 43.903

project coordination, the different ministries and the institutions working under their jurisdiction must coordinate and work like a single unit in implementing the wind energy projects in Pakistan. Figure 2 shows the electricity consumption in Pakistan till 1997 to 2037. The projected data in the Table 2 shows the constant growth rate of 44 % approximately each decade, from 2007 to 2017 expected number of consumers would be 24 million approximately, in 2027 the expected consumers will reach to 35 million approximately and 50 million consumers will be expected in 2037. This increasing trend of electricity consumers at 7.00 % (approx) annually shows the scope for power generation projects in the future. Figure 3 shows financial model structure the project financing structure is based on capital outflows, which are further based on Debt and equity structure although it is likely that some grant support would be available to overcome financial barriers to the wind plant’s construction, in the form of insurance, risk, and green tariff support. The project capital cost for each option has been divided into local and foreign components. It is assumed that the private sector equity portion would mainly fund the local cost component of the project costs, whereas the balance local costs would be met through local borrowing. Cost of capital The wind power projects capital cost is assumed to be raised through conventional sources of debt and private equity, the equity would be raised in local currency to cover the local costs of the project in part or whole.

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Assumptions

Macroeconomic Conditions

Cost of Capital

Financing Structure

Operating Cost

Debt Service

Power Tariff

Economic Analysis

Fig. 3 Financial model structure Table 3 Debt service Installments per year Repayment (years) Interest rate

Wind farm

Diesel plant

2 12 7.5 %

2 10 7.5 %

Debt service Table 3 shows the financial model will assist in serving the local and foreign debts the debt service costs on an annual basis, the financial model also allows for payment of interest in each year of construction or to capitalize within the loan during the construction years, equal annual repayment of principal with interest paid on outstanding balance. Operating costs Table 4 shows the operating parameters for the projects have been worked out on a production capacity, energy generated, capital costs and operating expenditures, including fuel, operational and maintenance costs, the costs have been adjusted keeping in view the macroeconomic indices for equipment, fuel and other project inputs over the projected period project revenues have been also evaluated using an estimated tariff and the projects estimated operational capabilities.

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Table 4 Comparative operational cost Wind farm Plant factor (at the output) Projected life (years) Salvage value Land price (per acre) Transportation Contingencies Decommissioning Duties and other charges

Table 5 Financial data Assumed year Debt/Equity Return on equity Variable cost Income tax on thermal plants

Diesel plant

18 % 20 5.0 % 20,000 2.0 % 15 % 2.0 % 10 %

40 % 20 5.0 % 35,000 2.0 % 20 % 2.5 % 15 %

2007 80 % 14 % 30 % 43 %

Power tariff Table 5 shows the bulk power purchase tariff for the project has been calculated keeping in view the fact That tariff must cover for all project costs as well as assure a reasonable return on equity the project costs for the wind farm are debt service requirements, including repayment of principal and interest, fixed and variable costs, return on equity, and decommissioning costs at the end of the project. However, in determining these costs certain credits, such as salvage value and environmental credits have been deducted from the costs in the respective years to arrive at a yearwise tariff rate for the project. Before setting the final tariff the net present value, internal rate of return and payback period must also be taken into account to make the project economically feasible. Economic analysis Certain financial and economic parameters, such as the internal rate of return (IRR), net Present value (NPV), and payback periods have been assessed in line with standard Economic analysis methodology Net annual cash flows have been projected from Initiation of the project’s development to eventual decommissioning in arriving at the NPV, a discount rate equal to the weighted average rate of financing, including both Equity and debt, has been applied in Table 6. Macroeconomic conditions Table 7 shows the macroeconomic conditions include inflation, U.S. dollar inflation and the foreign exchange rate which affects the price of items to be imported from abroad. The crude oil prices play a vital role the prices of which are set by the OPEC

Wind Power Energy Pakistan Economical Renewable Power Resource Table 6 Comparative economic analysis Wind farm Internal rate of return Payback period (years) Net present [email protected] % (Rs)

Local inflation (average) Dollar inflation (average) Crude oil price (average)

Diesel plant

11.85 % 9.02 519 Million

Table 7 Inflation indices data Inflation indices 2001–2010 (%)

587

7.9 % 9.85 12.1 Million

2011–2020 (%)

2021–2030 (%)

2031–2040 (%)

8.45

7.00

5.50

5.00

2.09

2.40

2.40

2.50

2.94

0.00

(1.50)

(1.00)

nations, the transportation of equipment and plant from where it is produced to the site of their installation is done on the modes of transportation consuming crude oil. Assumptions The assumption is based on the financial and tariff evaluation which should covers the entire project life and a number of external cost parameters which are expected to change during the future period, these parameters are linked with basic macroeconomic indicators that have a bearing on project costs, such as Pakistani inflation, US inflation, fuel prices, foreign exchange rates, etc. In order to accommodate such parametric variances over the project’s life cycle, current projections have been obtained from appropriate and credible sources and factored into the financial modeling. Besides those economical factors the other factors of cost of capital which include cost of equity and annual repayment of principal along with its interest payment, these financial and economic factors affects the operating cost show the Table 8.

Table 8 Cash flow statement for economic analysis assumption Cash flows 2008 2009–2013 2014–2016 2017 (Rs. 000) Wind power (782, 584) (258, 628) 781, 030 254, 810 Cumulative (782, 584) (1041, 212) (260, 182) 5, 372 Thermal (372, 587) 205, 093 106, 821 32, 951 power Cumulative (372, 587) (167, 494) (60, 673) (27, 722)

2018

2019–2028

252, 154 246, 782 32, 453

2, 355, 291 2, 602, 073 364, 370

4, 731

369, 101

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Project Selection On the basis of Internal Rate of Return wind power project is more feasible; in case of Payback Period the difference between thermal Plant and wind power is more or less similar is more suitable but the most authentic criteria followed by most of the financial managers is the project with the higher net present value is preferred as share holders will get more return and there will be more increase in their wealth.

6 Conclusion There is a rising need for alternate and renewable sources of energy, especially in developing countries, whose progress and economic growth may strongly be linked to its development. With the ever increasing growth in energy consumption and rapidly depleting fossil fuel reserves, it is feared the world will soon exhaust its fossil fuel reserves. Pakistan is an energy deficient country and each year spends a large amount of its foreign exchange to import oil, to meet its energy requirements thus the need to develop alternate energy resources has become inevitable. The oldest and most widely used renewable energy resources are solar and wind, which have shown prospects and potential for efficient utilization. In the recent past, wind energy has emerged as clean, abundant, adorable, inexhaustible and environmentally caring source of energy. The worldwide attention with the development and availability of inexpensive technology that allow its easy conversion into useful energy wind energy has the advantage that it can be utilized independently, and deployed locally in rural and remote areas. The coastal areas and mountains with high wind potential are considered most suitable for wind energy utilization. Therefore this study aims in investigating the prospects of harnessing the wind for energy generation the high wind speed is always available nearly all year round in the coastal and mountain regions of Pakistan.

6.1 Recommendation To make the entire system of wind energy projects more efficient and productive by employing new techniques, devising policies and implementing reforms to make this field more attractive for the potential investors. Tax incentives must be given to the investors to reduce the cost of investment through the savings in tax expenditures, investment tax incentives can be availed by investors paying corporate taxes on account of ongoing business operations. Investment tax incentives are redundant where exemptions from corporate taxes have already been granted, but new investors can avail this facility only during the expansion phase, provided that cash outflows associated with payment of corporate taxes exist.

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It is allowed in a business to depreciate the value of its assets, such as equipment, plant and building in the financial statements; this depreciation can be deducted from the businesses yearly income taxes paid to the government. Usually, this reduction is based on the market value of the equipment and can only be depreciated at a certain, defined rate. However, allowing accelerated depreciation of wind equipment for example allowing 100 % depreciation of a wind turbine in the first year of operation will significantly lower the amount of income taxes paid during the initial stage of the project which can help ease the extra financial burden on wind developers which were experiencing due to the higher initial capital costs of a wind plant. Direct cash payments can enhance the promotion of wind power, a direct cash payment for the installation of a wind energy system is beneficial to a potential developer who has a limited revenue base to fully take advantage of assistance, this type of incentive also helps both taxable and non-taxable entities such as a municipal or state owned utilities. In addition, grants provide an additional benefit to a private investor by reducing the total tax burden, since the grant portion of the equity usually is not taxed.

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