Energy transition for sustainable economic development in developing countries (DCs) – The case of utility-scale solar (USS) investments in Pakistan

Abstract

This paper examines how policy regime in developing countries shapes the financial configuration to enable an environmentally and economically sustainable energy future. We build on the case of Utility-scale solar (USS) integration in Pakistan to explore the policy & investment dynamics of USS; and its implications on economic development. First, we deconstruct, compare, and validate the national regulator's PPA model, assumptions, and input-parameters to dispel misconceptions, criticism and alleviate information asymmetry. Second, we present project-level modelling to simulate PPA/LCOE for130 districts in the country. Our findings reveal that low PPA price of 3.30 USc/kWh is viable; and that USS can generate electricity at under 4 USc/kWh in over 50 districts. We also explicate the possible easing in the PPA-prices by adjusting the form of financing (cost, proportion, and debt tenor). Finally, we point-out policy-imperatives and strategies to promote sustainable economic development. Our analysis distilled in to two strategies: (i) cost-optimization through policy derisking; and (ii) de-dollarization through domestic financial development. We reviewed the country's capacity to raise capital domestically and identified alternate structures, actors, and avenues of financial development. Our paper sets the foundation for transition researchers to pursue a conjoint analysis of policy, financial resourcing, and economic development nexus.