Chinese battery glut plugs into solar boom to power Pakistan

On a typically sunny and breezy day at Lucky Cement in an industrial town outside Karachi, the powerful draughts from the Arabian Sea and Thar Desert and the scorching rays combine to generate more than half of the power it needs thanks to cheap Chinese wind turbines and solar panels.

The 5mn tonnes of cement that its 1,300 workers produce at the Nooriabad plant is enough to build 100,000 houses. Since installing wind and solar sources last year, the facility now emits 60,000 fewer tonnes of carbon dioxide than it did when it was fossil fuel-dependent.

But the variability of the sun and wind means that it is relying for the rest of the time on dirty and expensive fossil fuel-based generators.

Now Lucky Cement is working to plug the energy gap by storing power captured from 110-metre-tall wind turbines and a sea of shimmering solar panels sourced from China in a battery energy storage system — also sourced from China.

The combination of a glut of lithium, a key battery material, and overcapacity of lower-tier China-made batteries has created a flood of cut-price battery energy storage systems for lower-income countries such as Pakistan.

Lucky is investing roughly Rs1.5bn ($5.3mn) to convert a rubble-strewn site into a 20.7MW unit supplied by the world’s biggest battery maker CATL, which can hold enough energy to power up to 20,000 homes for an hour.

The battery energy storage system will be Pakistan’s largest to date, Lucky said. “A price collapse in wind, solar and batteries has made the payback periods very competitive,” said Hassan Mazhar Rizvi, the factory’s general manager for power generation. “This will ensure smooth operations, and increase our solar and wind portions.”

Chinese solar panel prices have plummeted in recent years as the cost of electricity from Pakistan’s grid has surged, prompting the country of 240mn people to import solar panels with the capacity to generate about 19GW last year, according to Jenny Chase, BloombergNEF lead solar analyst.

Pakistan is still buying panels that collectively could generate 1GW to 3GW a month this year, she estimated, enough to power a city of millions.

The battery storage system will help factories to more cheaply extend their operations beyond daylight hours and scale back the use of fossil fuels, compensating for reliability issues from the grid’s renewable sources.

For households, hooking up to a battery is a way to store enough energy to cope with spontaneous blackouts and avoid higher rates for energy from the grid during peak usage times in the evenings.

“The limit on the [solar] boom was always likely to be the number of daylight hours,” said Chase. “Larger solar systems are useful, because as well as meeting instantaneous demand they can charge the battery for later.”

“Customer interest has gone through the roof,” said Mujtaba Haider Khan, chief executive of Reon Energy, a Karachi-based renewable energy and battery company.

Reon’s energy storage systems, including the one purchased by Lucky, mix predictive software, CATL-made batteries and mostly Chinese-origin solar and wind technology, and can boost a factory’s clean energy usage and cut fossil fuel energy waste, said Khan.

“Companies can now recover their investment in transitioning to predominantly renewable energy — using solar, wind and batteries — in less than two years.”

The battery storage systems are still too expensive to be adopted as widely as solar has been in Pakistan in the near future. But distributors say prices are falling rapidly and demand continues to grow.

Faaz Diwan, director at Karachi-based Diwan International, one of Pakistan’s largest solar and battery distributors, said the cost of the BYD batteries he sold had fallen by more than a third since last year to about Rs275,000 for a 5kWh unit that is enough to power a small house.

His company has been importing more than 500 batteries a month since March, three times more than last year, as wealthier households, gyms, mosques and businesses gobble up storage systems to save money on air-conditioning ahead of summer.

“Definitely, demand will go up this summer,” said Diwan, who estimated that the roughly Rs150mn in sales he was registering each month would double from July.

Pakistan’s grid, meanwhile, faces what analysts have called a “death spiral” as usage falls and more bills go unpaid by poorer customers who cannot afford the jump in costs. Households that can afford solar panels are switching off.

Since 2015, Pakistan has drawn in billions of dollars’ worth of sovereign-backed loans to finance new power plants and signed long-term liquefied natural gas deals with QatarEnergy and Italy’s Eni. 

Both efforts resolved the worst of the blackouts but proved costly, as Pakistan’s economic growth has not kept up with the demand projections made at the time. The result is a cash-strapped country that owes some $18bn in mounting power and gas sector debts.

To bring down costs, the government, with the help of the military and intelligence services, has renegotiated contracts signed with local power producers. It has also pleaded with China to extend the time needed to repay the sovereign-backed loans and sought to defer or redirect LNG shipments.

The government has introduced a levy on industries that use captive natural gas plants instead of energy from the grid, and converted savings from contract renegotiations and a downturn in global commodity prices into a power tariff reduction of between 12 and 17 per cent. It has also offered 2,000MW worth of excess power for crypto miners and artificial intelligence data centres.

In April, power generation involving the grid, a proxy for consumption, rose almost 22 per cent year on year, but overall demand in the 10 months to April is still below where it was the year before.

Javed Hassan, an Islamabad-based independent economic analyst, said the gain was “likely to be temporary”.

Pakistan’s power minister Awais Leghari told the Financial Times that the government was working to create a more competitive electricity market and find other ways to sustain power cost reductions.

“I can’t stop the evolution of technology,” he said. “Competition is a very healthy way to bring about efficiencies in the entire system.”