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Lacking role of regulators in big power projects

The electricity and gas prices for manufacturing businesses and households have increased sharply in recent months and indications are that prices will continue to increase.

It’s a great reason to worry that in Pakistan with the existence of cheaper sources of energy; the government prefers costly energy choices. The government predominantly focused on the plants dependent on the imported fuel, i.e. imported RLNG (Regasified Liquefied Natural Gas).

The statements of government officials look more like political slogans and nothing are passed to the customers yet. The government policies are not consistent, one day; one department announced a project and the next day the other denied to support. Recently the government has rescinded the power policy for renewable fuels projects. All upfront tariffs (a relatively quick option to start a renewable project) are dismissed.

The government has signed the long term Power Purchase Agreements of approximately 5,000 MW & 1,320 MW on imported RLNG and coal respectively near Lahore. The all four RLNG fuel power projects will be based on latest technology with highest designed thermal efficiency of approximately 61.5%.

The initiative of installation of world’s most efficient plant looks very good. But it also raises some questions in mind.

  1. Is RLNG cheapest available fuel?
  2. What will be impact on the overall electricity prices in Pakistan?
  3. Is site selection for the projects on merit?
  4. Environmental Issues of Installing Coal Plant in Big City?

We will discuss these points in detail and how the regulator can timely address these issues.

Is RLNG cheapest available fuel?

The present price of RLNG (as notified by the OGRA on 3rd January 2018) is US$11.4678 per mmbtu (HHV based) and US$12.70 per mmbtu (LHV based).This is equal to Rs1,407 per mmbtu. The cost of imported coal at Karachi Port is approximately US$110 per ton that is equal to Rs512 per mmbtu. The pricing mechanism of local coal is not yet finalized, so considering the same price of local and international coal.

It is clear that the price of imported RLNG in Pakistan is 2.75 times more than that of Coal. It is a point of great concern that why the government decided to go for RLNG fuel power plants instead of plants on local/Thar coal. Secondly, the pricing mechanism of imported RLNG is not clear and all agreements are not in the access of the public.


What will be impact on the overall electricity prices in Pakistan?

It is clear from the above discussion that the RLNG is more expensive than coal. The second point is that RLNG fuel power plants are approximately 22% more efficient than coal fuel power plants. The government decided for coal fuel power plants in 2013 but all of a sudden the policy was shifted to the RLNG fuel projects. It is the great dilemma that even the price of the electricity unit generated by the RLNG is expensive than coal, still government and regulators decided to install RLNG fuel power plants.

Price (Rs. /mmbtu)1,407512
Heat Rate (Btu/kWh)5,5488,749
Cost (Rs. / kWh)7.814.48

The above table is clearly showing that the electricity cost from RLNG is 1.74 times than that produced from the coal. This makes the complete fuel selection process questionable. The reader can easily think the reason behind going for the imported RLNG instead of coal.

Is site selection of the mega projects on merit?

There is another concern regarding site selection of these five plants. These plants are less expensive if installed near port or the coal mine. The transmission losses of electricity are around 2.5% and similar of RLNG is around 8.0%. The transportation losses for coal are 2% and its transportation cost is almost 20% of the cost of the commodity.

The losses are always less on installing the plants near port and transmit electricity to the power center. It is surprising that why government installed these plants away from the port and put extra burden on the public of Pakistan.

The answer is very simple that that the ruling family is only focused on their power center. All the plants are installed near Lahore to keep control on the electricity generation. This shows the negative approach of the federal government that they are ignoring the development of the South Punjab, Sindh, Balochistan and KPK. The planning department and regulators should be independent to select the locations of the mega projects.

The selection of the wrong location will put a drastic impact on the price of the electricity produced from these big projects. The role of the planning authority and regulator is not appreciable.

Environmental issue of installing coal plant in big city

The coal plant is installed near the Divisional Headquarter only 150 km away from the Lahore. The plants operating on coal emitting large amounts of pollutants in the air and on the ground should be installed away from the population. This power plant will use approximately 10,000 ton coal daily and generate approximately 1,500 ton ash. The ash produced from the coal is a hazardous material and not good for the land. The question is how to safely dump the large quantity of ash in the highly fertile area. It is difficult to swallow that how the environmental department allowed such a large project near a big city and in a fertile land. It would be better if these types of big projects are installed in the less populated areas of South Punjab or Sindh.

It would be better for the country and people that that all regulatory agencies should be independent of all political pressures and sincere to the country. There are many regulators involved in the installation of the power plants, but their role is not appreciable. It looks that the electricity load shedding will be finished in next three to four years. There is the need to empower the regulators to protect the rights of the public of the Pakistan.

Muhammad Farhan is an engineer by profession and has been working in the Power sector since 2007. twitter: @farhan6309902

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