ALTERNATE ENERGY RESOURCES
The inexpensive choice
By SYED M. ASLAM
Mar 08 - 14, 2004
The rising demand and the high generation cost underlines the importance of developing inexpensive alternate energy resources for a developing country like Pakistan. At present, the country is heavily dependent on thermal and hydro power generation both of which have their own shortcomings. The first being expensive to the point being uneconomic while the second remains highly volatile due to water availability at the major reservoirs depending on season and rainfalls.
It is, thus, vital for Pakistan to initiate developing alternate energy resources which are not only inexpensive but also are more dependable. Fortunately, the nature has gifted Pakistan with huge deposits of coal as well as ideal climatic conditions to help harness energy from a number of alternate resources, namely coal, sun and wind.
According to conservative estimates, the energy demand in Pakistan is growing at a much greater rate than the rest of the world — over 6 per cent per annum compared to 1.7 per cent per annum globally. At present the demand for power in the country is over 11,800mw which is expected to almost double to 21,000mw within next 7 years and four-fold by 2025 much faster than the increase in the global demand which is expected to double by 2020. Between half and two-third of this growing demand for power in Asia would be from coal and diversifying to coal for power generation in Pakistan makes all the more sense because the country has huge reserves enough to last over 100 years unlike oil and gas reserves which are expected to last for just about a dozen and 25 years.
The heavy reliance on thermal power resulting tilting the overall power generation to an unfavourable hydro-thermal mix of 1:2.57 has not only pushed the overall generation costs of power but has also pushed the retail power prices to unaffordable levels for the end consumers be it industrial, commercial or residential. It has pushed production costs of all industrial and commercial outputs thereby severely undermining the Pakistani goods in the international markets. Since electricity is the primary input of all industrial activities, the rising power prices, in addition to spiraling gas, petroleum and water prices, have pushed the production costs to uneconomic levels which pose serious threat to Pakistani exports in the international markets.
Developing alternate energy resources, thus, makes all the sense for a developing economies like Pakistan. Not only the capital costs of hydro and thermal projects are prohibitively high but thermal generation is also extremely costly to not to offer any benefits in term of price to the end consumers of power. Just how capital intensive is a thermal power generation project is, is evident from the fact that the Independent Power Producers (IPPs), many of whom are also working here in Pakistan, don't finance the projects themselves but usually work as a consortium financed by a group of banks.
Entrusting the responsibility of meeting growing power demand on the IPPs is hardly a viable option for a number of reasons. First, the IPPs by their very nature are in the business to maximize their profits and are thus in no position to take risk to develop alternate energy resources unless it offers them financial advantages. Similarly, the banks and financial institutions that provide mega financing to the IPPs are also reluctant to provide credit to unproven power generation technologies for the obvious reason. That explains the reasons why the IPPs are only interested to invest and old and tested power generation technologies, the primary being thermal, not only here in Pakistan but also elsewhere in the world.
This clearly shows that the IPPs can hardly be expected to invest in development of alternate energy resources. This also means that the government has to take the initiative to help develop alternate energy resources that are economically feasible and require much smaller capital investments in small power generation plant be it coal-fired, solar or wind, particularly the first which contributes most heavily in power generation in many developed economies of the world including the global power house US where over half of the power generation comes from the coal. Coal also contributes heavily to the power generation in China and Australia where it contributes 80 per cent to the overall power generation.
Pakistan has coal reserves of over 186 billion tons — the 5th largest coal reserves anywhere in the world. The annual production of coal in the country is around 3.5-4 million tons the major quantity of which is used by the brick kilns. However, lately the cement plants have also started using coal instead of gas to help cut their production costs substantially. Almost half of the cement plants have already converted to coal while the remaining are expected to make the transition by middle of this year. However, the transition has benefited the local coal industry only marginally because the cement units are primary using the imported coal mixed in part with the local counterpart.
The 'ranks' of coal found in Pakistan range from sub-bituminous to lignite (or brown coal) found in Thar, which has the largest coal deposits of 175 billion tons in the country, is suitable for power generation like its counterpart in Australia, albeit with certain limitations.
A 150 mw coal-fired power plant using Lakhra, which has substantial deposits of 1.3 billion tons, has been commissioned and a Chinese company is going to set up a 600 mw coal-fired plant at Thar. The feasibility study has been carried out and the geological and chemical study is being done to pave up the way for the installation of the plant by end of this year.
As mentioned above coal remains the primary source of electricity generation in many developed countries because it is the most inexpensive source of power generation. For long, Pakistan has been sitting on vast deposits of coal which could have been used for inexpensive power generation like elsewhere in the world, particularly the developed countries.
The use of coal in power generation would not only help lessen dependence on costly thermal generation and uncertainties that are parts of hydro generation, the two primary energy resources at present, but it would also help better the lives of one of the most poor people in the country by creating thousands of jobs in coal exploration. It would also help bring the production costs of power generation to help better the unfavourable mix which tilts heavily to expensive thermal generation.
The importance of using inexpensive coal as the primary power generation resource like elsewhere in the world has also been realised by the government that plans to meet 20 per cent of its energy demand from coal by 2020. The Chinese investment in 600mw coal-fired project in Thar, for which it would provide half a million dollars soft credit, is a part of the government plans under which many other coal-powered plants would be developed across the country to generate a total of 3,000 mw to meet 20 per cent of the energy demand from the coal.
The plan to meet 20 per cent of Pakistan's energy demand from coal was announced in November 2002. It was a welcomed shift in policy because the country was hardly producing 3-4 per cent of power through coal way lower than the 38 per cent globally. As mentioned earlier, China and Australia meet 80 per cent of their power demand from coal while the US meets over half of its power demand from coal. India meets 40 per cent of its power demand from coal.
Pakistan has failed to benefit from the vast reserves of coal which value over $ 5,000 billion according to moderate estimates based on the current prices which shot up from Rs 700 to over Rs 1,400 per ton low quality coal and from Rs 1,400 to over Rs 2,800 per ton for better varieties in recent months. The international prices of coal have also registered an increasing trend lately.
Thus far, local coal has been used primary by the brick kilns and only a small portion of it is used for power generation. It has not been exploited commercially but plans to use increased volume of coal for power generation over the next 15 years would change all that. Since substantial coal deposits are found in all the four provinces of the country setting up small power generation plants near the sites of the deposits would not only help provide electricity to people in the remote and urban areas of the city but in the process would also create employment to the most dispossessed and marginalised segments of the society.
Coal, thus, appears to be the only fuel of choice for power generation in Pakistan. It is abundant and offers inexpensive.
Nature has gifted Pakistan with ideal climatic conditions to harness energy from the sun — the solar energy. Though a number of basic solar units have been tested successfully to generate small scale power for domestic as well as irrigation needs such as fans, light bulbs, irrigation pumping, domestic heating, pressure cookers, etc., the use of solar energy has remained extremely limited. The primary reasons for the failure of the solar energy to make any visible impact can be attributed to the initial investment which the people living in the rural areas, for which it was meant and for whom it was primary directed, can ill afford to pay. Despite the successful testing the use of solar energy failed to take off because of numerous reasons, the foremost being the lack of governmental support and incentives for the users.
Though the solar energy has also being used commercially, like the solar-powered phone boxes installed along the Lahore-Islamabad Motorway, the limited commercial applications elsewhere have failed to provide it with the necessary boast. Absence of institutionalized promotion and support and lack of incentives to the users have also undermined the development of solar energy on solid commercial lines to help better the costly hydro-thermal energy mix which has pushed the power generation costs and electricity prices for the extreme financial inconvenience of all categories of consumers alike.
Much attention has been focused on coal as a primary energy resource compared to more capital and cost intensive thermal and hydro power generation projects. However, developing solar energy does not appear to be a priority with the policy makers despite small-scale testing of the solar energy successfully which unlike coal is far more environment-friendly, inexhaustible and lowest operating costs.
The lack of commercial application of solar energy and the absence of governmental support makes solar technology an unlikely prospect. In developed countries like Japan solar energy has been able to headway because the government offers many tax incentives to the solar energy users thereby subsidising the cost of installation and generation.
The coastal areas of Pakistan in particular and mountainous areas in the Northern areas in general offer ideal climatic conditions for the generation of wind energy. No attempts have been made thus far to benefit from the meteorological data on the speed and direction of winds to harness energy from the wind which can be used to provide small-scale power generation enough to meet small-scale power needs as well as water extraction for the benefits of many who otherwise have no access to power.
As is, wind energy has playing a vital role in such developed economies like the Netherlands, the pioneer and master of the technology, as well as Germany and Japan. It's time for the policy makers to discuss the merits of developing wind energy to understand the benefits that it offers. Certainly, one does not expect an over-night shift in the energy policy but it is time that the policy makers should demonstrate that they are not averse to new ideas to help develop inexpensive power generation resources.
CONVERSATION TO GAS
The cement industry has find coal an inexpensive alternate fuel. Over half of the industry has already shifted to coal and the remaining half is expected to make the transition by end of this year. Despite the fact that the transition has mainly benefited the imported coal offering only limited benefits to the local counterpart whose usage remains restricted to blending, the fact remains that the transition has helped cut the production costs for the cement industry by half.
While the cement industry is in the process of shifting entirely on coal from gas, the power producers are also in the process of shifting their thermal power generation from costly fuel oil to much less expensive gas which is available in abundance in the country — at least presently. The Water and Power Development Authority, the public sector organisation responsible for the generation, distribution and supply of electricity in all parts of the country except Karachi, which has its own power generation and distribution network to supply power to Karachi and adjacent areas, have already shifted a power of their power generating operations from fuel oil to gas.
Hubco, an IPP-based in Hub, Balochistan near Karachi, has also announced to develop gas-powered plants recently. The shift from fuel oil to gas clearly indicates that the power producers, public or private, have realised the importance of shifting to less expensive fuel to cut the production which have already pushed the retail power tariffs to unaffordable levels. The ongoing transition will not only make Pakistan's energy mix more cost-effective but also more environmentally friendly.
Energy can also be generated in many other ways — From municipal waste, agricultural residues, animal waste and desalination plants. A beginning has already been made by the Defence Housing Authority (DHA) initiative to install a co-generation desalination plant that would not only turn seawater into drinking water but also co-generate energy.
The DHA announced the launching of the project early last year which would be spread over 30 acres. It signed a MoU with Siemens Pakistan in September 2002. The plant would cost $ 50 million to desalinate enough water to meet DHA's own requirement of around 8 mgd, which it is getting from Karachi Water and Sewerage Board currently, but also would have extra water that it has said it would sell to the Clifton Cantonment Board. The plant would initially produce 1 mgd water and generate 30mw of electricity per day. However, the plant would be economical only when it would desalinate 20 mgd water.
Karachi Port Trust, the manager of the busiest port of the country, has also announced to develop 25 mgd desalination plant. It signed an agreement with US company, California Enviro-Management, on January 23 last year under which the US Trade and Development Agency would provide $ 28 million grant to partially fund a feasibility report for the plant which would cost $ 60 million. Like DHA's desalination plant, the KPT plant would also be a co-generation plant that would be producing 15 mw of electricity.
The co-generation desalination projects initiated by the DHA and KPT highlights the importance of tapping another energy resources to meet the growing demand of electricity in the country which is growing at a much faster pace than the global rate. It also highlights the importance of finding, and developing, new resources for energy generation besides the traditional thermal and hydro plants which has extensive capital costs and are susceptible to many other influences such as unaffordable running costs as is the case with thermal generation, uncertain climatic conditions as is the case with water levels for hydro generation, environmental and human displacement problems.
Finding, promoting and developing alternate energy resources is therefore a must to make our energy mix more cost-effective for the benefit of the industry, commerce, trade and people. Developing inexpensive alternate energy resources is a must to ensure meeting the growing demand at prices that would be affordable. For an export-led economy of Pakistan the benefits of affordable power can hardly be over-emphasised.
It is time to better our costly energy mix where presently fourty per cent of it remains heavily dependent on costly fuel oil, uncertain hydro, little coal and negligible nuclear generation. The transition should take place despite the fact that oil would remain the fuel of choice for power, transportation in particular and electricity generation in general.