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Role of private sector in power generation

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Existence of IPPs must to meet increasing demand

By Syed M. Aslam
Oct 11 - 17, 1999

The demand for additional electricity in Pakistan is expected to increase by 15 per cent in next two years— from existing 11,821 mega watts to 13,575 mw in the year 2001.

This was disclosed in a paper, read by the Chief Executive officer of Tapal Energy, Syed Hassan Nawab, at a seminar on ‘Role of private sector in power generation’ held in Karachi by the Karachi Section of the Institute of Electrical and Electronics Engineers Inc., USA.

Nawab was one the two speakers who presented their papers at the seminar. The other speaker was the Chief Engineer of Gul Ahmed Energy Limited, Nisar A. Khateeb. Both Tapal and Gul Ahmed, which have a generation capacity of 125 mw and 128 mw respectively, have signed power purchase agreements with the Karachi Electric Supply Corporation (KESC) which is respsonsible to generate, transmit and distribute power to Karachi and its suburban areas including closeby areas of Balochistan.

Khateeb presented a paper titled ‘Private power— Looking for an Asian model’, said that during the next decade the growth in energy demand in Asian region is expected to increase at an average of 7-8 per cent. To meet this increasing demand of power in the region, he said, the World Bank estimates that a total of 340,000 mw of additional power generating capacity will be needed. This would require a huge investment of $ 550 billion for power generation, transmission and distribution in the region, he added.

While most Asian power initiatives to-date focused on creation of new generation capacity through the induction of Independent Power Plants (IPPs) than the privatization of existing public utilities they lack any single model. However, the experiences of several countries in the region as well as that of the International Finance Corporation (IFC), which is a part of the World Bank, show that their are some common elements of IPPs success.

The IPP focus in Asia reflects the on-going need to create new generation capacity rapidly in the fastest growing region of the world and surveys suggest that IPPs would continue to be an important form of new capacity additions in the power sector though privatization initiatives have also started appearing in the region. Korea, Malaysia, Thailand, China, Philippines and Indonesia are all pursuing privatization plans and so is Pakistan.

However, the increasing demand plus the huge gap between the installed and effective power generation capacity highlights the important role IPPs will keep on playing to help meet the power needs of many countries in the region. A prime example is that of Pakistan whose power demand today is around 11,821 mw while its maximum power generation capacity stands at 10,766 mw. This represents a shortfall of over 1,000 mw.

The situation is even worse in Karachi, the biggest industrial and the only port city of the country, which is dependent solely on KESC for its power needs. Though KESC has an installed generation capacity of 1,756 mw, it usually operates at just 65 per cent of this capacity due to maintenance and repair works. Rampant loadsheddings have become a part of life in Karachi disrupting all industrial, social and commercial activities.

While the peak load demand in Karachi is 1,750 mw, the KESC’s effective power generation capacity is just 1,120 mw. While the KESC system receives some 50 mw from KANUPP (Karachi Atomic and Nuclear Power Plant) plus an additional 250 mw from Tapal and Gul Ahmed their is still a shortage of 330 mw which has to be met by purchase from WAPDA which is responsible for power generation, transmission and distribution for the rest of the country.

This dependence of KESC on WAPDA, which generates both hydel and thermal energy, is a big drawback as WAPDA itself is dependent on IPPs to supplement its power load. WAPDA has an installed capacity of 9,945 mw— 4,825 from hydel and 5,120 mw from thermal. However, its maximum effective capability is just 9,646 mw during July and November when water levels at major dams like Tarbela and Mangla and smaller ones at Warsak and others are good. During December to June the effective capability of WAPDA decreases to as low as 6,217 mw primarily due to low water levels at the dams. WAPDA is also dependent on imports from IPPs like HUBCO, KAPCO, Kohinoor Energy, AES Lalpir and AES Pak Gen. HUBCO and KAPCO can provide a maximum of 1,200 mw and 1,600 mw respectively to the WAPDA while rest of the three private producers are capable of providing 825 mw.

During July-November the peak load demand on the WAPDA system is around 10,000 mw while it has a total of 13,271 mw available from its own generation of 9,646 mw plus 1,200 mw from HUBCO, 1,600 mw from KAPCO and 825 mw from the three other IPPs. While peak load demand declines to 9,000 mw during December to June, the effective capability also falls to 9,142 mw thus creating a shortage of 142 mw in the WAPDA system.

The increasing power demand, the low effective capability of the WAPDA system during December to June, the high transmission loss ratios of 23 per cent and 33 per cent at WAPDA and KESC respectively, highlight the important role the IPPs will keep on playing in the power sector of Pakistan despite the HUBCO-government dispute over the power tariff.