DIRE NEED FOR DEVELOPING ALTERNATE SOURCES OF ENERGY

Fuel plays the most decisive role in fixing electricity tariff

SHABBIR H. KAZMI, Special Correspondent
Feb 26 - Mar 04, 2007

Pakistan is heavily dependent on foreign resources to meet its energy requirements - both crude oil and finished products. In an attempt to solicit foreign investment in the energy sector lucrative incentives have been offered. However, production of crude is almost stagnant and gas reserves are on the decline. A policy has been announced to facilitate import of LNG because of slow progress on the three proposed gas pipeline projects. The reports also warn about widening gap of demand and supply of electricity. Pakistan is heavily dependent on gas and furnace oil in power generation. Therefore, fuel cost plays the most crucial role.

Till about two decades ago Pakistan was meeting bulk of its electricity requirement through hydroelectricity, being the cheapest source of electricity generation. Then came the thermal plants mostly having duel firing system bust mostly using furnace oil. As WAPDA and KESC faced liquidity crunch, emerging from huge transmission and distribution losses, power plants were advised to use gas to contain power generation cost. Though the financial health of WAPDA and KESC has not improved, the use of gas for power generation is depleting gas reserves at a faster rate.

WAPDA has prepared 'Hydropower Development Plan' commonly referred to Vision 2025. The plan suggests ways to meet the upcoming deficits through additional power generation. The plan consists of potential projects to be implemented in the short, medium and long term. The list of projects will be periodically reviewed and medium and long term. The list of projects will be periodically reviewed and updated. Identified projects will be implemented by the public sector, private sector, or by public-private partnership. The choice of implementing projects by the public sector, private sector, or by public-private partnership will depend upon the urgency of meeting the demand while keeping in view the resource availability position.

The basis for selection of the successful bidder in each case will be the minimum levelized tariff, either through International Competitive Bidding (ICB) for solicited proposals or through negotiations/ICB for proposals on raw sites, i.e. locations whereof no feasibility study has been initiated. Variable tariffs over the life of the project will be permitted under the terms specified in the Request for Proposals (RFP). The process of selection will involve pre-qualification, issuance of the RFP and bidding and evaluation in accordance with the bid criteria clearly laid down in the RFP.

The presence of coal deposits in Pakistan was known before independence, but its economic value was highlighted in 1980 when large reserves of coal were discovered in Lakhra and Sonda areas of Sindh. The discovery of another huge coal deposit of 175.5 billion tons in an area of 10,000 sq. km in Tharparkar District of Sindh has provided a quantum increase in the coal resources of Pakistan. After this discovery, Pakistan is now the 6th richest nation of the world in respect of coal resources. However, the country has benefited least due to its failure in attracting investment in coal mining. According to energy sector experts, Pakistan's entire power generation can be switched over to coal. This will yield two benefits: 1) cost of power would be reduced considerably and 2) gas could be used in fertilizer sector, offering the highest value addition.

Some critics say that higher cost of generation is responsible for exorbitant electricity tariff. However, a few analysts are of the view that the factor responsible for higher tariff is huge transmission and distribution losses. In the past the government has been approving hike in tariff to increase revenue. But with each hike in electricity tariff power theft has increased. At times it was as high as 40%.

According to the details posted at the website of Private Power & Infrastructure Board, about 50 projects are under consideration. These have an aggregate capacity of slightly more 14,000MW. However, nearly half of the capacity is based on oil and gas and only 2,550MW is coal based and 22 hydel projects would have an aggregate capacity of 5,720MW. Therefore, one is compelled to say that policy planners are once again committing the same mistake and dependable capacity would be less than 10,000MW.

According to a critic, electricity generation from hydel plants varies in different months. When sufficient water is available in dams, turbines could be operated at optimum capacity. However, at times generation could go down as low as 25% of the installed capacity. Therefore, dependable capacity of hydel units should be calculated on monthly basis.

Another analyst is of the view that establishment of hydel power has the potential to offline thermal power plants when water levels are high in the reservoirs. This would on the one hand help contain average cost of generation and on the other hand undertake periodical repair and maintenance of the thermal power plants, which is not being done at present.

PROJECTS UNDER PPIB CONSIDERATION

S.#

CATEGORY

NO OF PROJECTS

CAPACITY (MW)

ESTIMATED COST
(US $ MILLION)

1

Oil based

10

2355

1766

2

Pipeline quality gas/dual

7

1600

1200

3

Dedicated gas fields

6

1174

881

4

Hydel

22

5720

6450

5

Coal

5

2550

2550

 

Total

50

13399

12847