INTEGRATED COAL MINING—CUM—POWER GENERATION PROJECTS
Opting for Obsolete Technology may be Disastrous
ENGR HUSSAIN AHMAD SIDDIQUI
Nov 19 - 25, 2007
The international symposium on Sindh Coal (lignite) held recently at Karachi has called upon the authorities to realise that the development of indigenous resources of coal energy was in larger interest of Pakistan, and therefore all efforts be directed to facilitating promotion of investment in the coal-mining as well as power generation from coal. The symposium has also recommended an up-front levelised bulk tariff of about nine US Cents per kilowatt-hour (kWh) to be considered by the government.
Coal is the most abundant and available indigenous energy resource on which Pakistan will largely depend to meet its future electricity needs and for enhancing its energy security. It is heartening that a number of power projects based on indigenous coal are coming up in the private sector sponsored by the Pakistani investors. Private Power and Infrastructure Board (PPIB) has sanctioned four IPP (Independent Power Producer) projects of aggregate capacity of 1,550 MW, as integrated coal mining-cum-power generation projects, to be located at mine-mouths of Thar, Lakhra and Sonda-Jherruk coalfields. The feasibility studies for all these projects, which are scheduled to commence commercial operations by June 2012, are currently at various stages of preparation, though pace of work is slow. These studies are required to be credible bankable documents of an internationally acceptable standard, in accordance with the Power Policy 2002, ensuring advanced technology to be employed.
PROJECT WITHOUT FEASIBILITY STUDY
It is feared that the nation may likely end up with obsolete technology, which is to be employed in the coal-based power projects resulting in environmental degradation, since a couple of projects are coming through backdoors thereby circumventing the rules and regulations of the Power Policy 2002. In a bid to avoid procedural formalities and financial commitments, the sponsors are obtaining approval from the government, routing their projects clandestinely through other agencies, like the Board of Investment, that have no jurisdiction whatsoever on processing such projects. In fact the government mandates the PPIB as a single-window facility for implementation of power projects of above 50 MW capacity in the private sector, which has the requisite capacity, capability and specialized expertise.
The major issue is that sponsors of such projects have not established their financial and technical credentials and are not willing to prepare independent feasibility report for the project, in accordance with the Power Policy 2002. This way they also save arranging a bank guarantee for an amount at the rate of $ 1,000 per MW to the government, a pre-requisite for issuance of the Letter of Interest (LOI) as per Power Policy, besides avoiding a project fee. In fact, the prescribed feasibility study is essentially required to be undertaken before launching the project of this nature, which would conform to the requirements of the government, the power-regulator, the power-purchaser, the lender, the environmental control authority as well as the investor himself. Such sponsors, in violation of the applicable rules and regulations, are not conducting any feasibility studies that would principally allow them to negotiate a tariff with the power purchaser and the National Electric Power Regulatory Authority (NEPRA).
These sponsors are currently lobbying for hypothetical determination and announcement by the NEPRA of an up-front bulk tariff for the proposed power plants based on indigenous coal. This however is being resisted by NEPRA, on its merit, as in the absence of any feasibility study on the respective project, or for that matter of any such project, the proposed tariff—about 9 Cents-- will be unrealistic and consumers will have to pay higher price for the electricity. It may be added that coal-based power tariff made applicable in other countries, such as India and Bangladesh, is much lower compared to the one suggested by the Pakistani investors.
On the other hand, such a hasty decision on the part of regulatory body may hamper further investment, particularly foreign, in the power sector. The feasibility study has to define the parameters of plant capacity, technology, machinery, cost of project and other economics that obviously vary from project to project and form the basis for determination of the power tariff in each case. For tariff determination, which is average or levelised tariff over a period of 30-40 years of the project life, it is also of prime importance to take into consideration various provisions, particularly related to the incentives, benefits and concessions under the proposed National Coal Policy that is not yet in place.
PROJECTS BASED ON LAKHRA COAL
Of late, the domestic investors have shown immense interest in developing integrated coal mine-cum-power generation projects. Habibullah Energy plans to establish a 150-MW capacity mine-mouth plant, whereas Fateh Textile will develop a 200-MW plant, both based on Lakhra coalfields. Lakhra coalmines, with total mine-able reserves of 305 million tons, are well developed and mining is in progress since 1960, though under-capacity. It is the most potential area for establishing an associated power plant by the private sector.
Various studies undertaken by the USAID, JICA and the Chinese and the Polish firms during different periods from 1986 to 1996 have confirmed techno-economic viability of a series of 250-300 MW capacity power plants based on Lakhra coal. Yet such a project remains a pipedream so far, in spite of existing infrastructure. WAPDA's plan to set up additional three units of 50 MW each was dropped many years ago so as to encourage private sector.
DEVELOPING OTHER COALFIELDS
Likewise, Dadabhoy Hydrocarbon is setting up a 200-MW power plant based on Sonda-Jherruk coalfields, which are the second largest coalfields in Sindh with reserves of over seven billion tons, and a 1,000-MW project by Hasan Associates on Thar coal, the country's largest coal resources. In addition, Idrees Steel Co propose to develop a 300 MW capacity plant based on Thar coal and Descon Group has plans to develop 125 MW mine-mouth project at Naukot, Distt Tharparkar and another 125 MW project at Golarchi, Badin. Also, Olympia Chemical Co plans to establish an integrated project to generate 76 MW electricity. It is yet to be seen as to how many investors are really serious to develop the respective integrated projects.
Here, one recalls with despondency of a project sponsored by Associated Group/Smith Co-generation Management Inc. for which mine-lease area of Lakhra coalfields was allotted by the provincial government in 1996. In spite of obtaining repeated extensions of the LOI until 2003, the sponsors could not even prepare a feasibility report for the project and therefore the project could not see light of the day. It is ironical that instead of imposing a penalty for the loss of opportunity for almost a decade, the sponsors were recently favored to takeover WAPDA's Lakhra power station on lease, without any bidding.
One of the projects not being routed through the PPIB, and thus not following the Power Policy, is reported to be sponsored by TASAQ International (Pvt) Ltd, in association with China National Machinery Import and Export Corporation (CMC) of China. They are going ahead with the implementation of an integrated mining-cum-power generation project of 2x300 MW capacity based on Sonda-Jherruk coalmines. The project is to be constructed on BOO (build, operate and own) basis, and has not yet obtained the LOI from the PPIB, as required. The initial agreement (MOU) was signed in August 2002 and the CMC has concluded an agreement with the Government of Sindh on November 12, 2006 for conducting coal geological investigations.
SELECTION OF TECHNOLOGY
Pakistan is emerging as an important market for coal-mining equipment and coal-based power generation equipment. Not surprisingly though, such sponsors plan to develop coalmines and install a power plant, both based on obsolete technology, with the assistance of the Chinese, ignoring the latest technological developments in the coal-mining and coal-based power generation the world over. Their only criterion of selection of technology partners, or the EPC contractors, for the project appears to be self-interest, thus making optimal return on investment, even before investing in reality. This may precisely be the reason why they would be reluctant to seek approval of the project through proper channel, where technology, plant efficiency, plant availability, energy consumption, capital cost, competitiveness, environmental control and other parameters of the project are duly verified and monitored.
The development of an integrated mining-cum-power generation project is a complex and arduous process posing a number of issues, problems and challenges, which should be dealt with professionally in the feasibility study. First and foremost, comprehensive survey, exploration and investigations are to be conducted in the leased area to identify and verify suitable quality and quantity of coal resources on a long-term basis, say 30 to 40 years. This is crucial for project implementation but unfortunately not taken seriously by the sponsors. Also, the geo-technical investigations and hydrological studies have not been carried out satisfactorily by the sponsors of these projects. The Government of Sindh, which is responsible to allow exploration license or mining lease to the sponsors, has repeatedly shown its concern over the unsatisfactory situation, even sometimes threatening to cancel their lease, but to no avail.
COAL MINING TECHNOLOGY
The proposed coal mining technology needs to be latest, cost-effective, reliable, efficient and proven, ensuring economical and safe mining, handling and transportation of coal. In recent times, technology has significantly changed the way coal is mined and processed, which now employs sophisticated machinery, equipment, instrumentation and controls, with the wide application of computers.
Though China has the largest coal mining industry in the world, the technology employed is conventional and obsolete, and the mining management remains outdated. This results in low productivity, higher power consumption, poor mining conditions and higher pollutant emissions.
There occur a large number of accidents in coalmines in China, causing more than 6,000 deaths each year. These represent almost 80% of total number of deaths in mine-accidents worldwide. Or, in other words, the death rate in China is hundred-times that of deaths in the American coalmines and thirty-times that of coalmines in South Africa. The high number of fatal and frequent accidents in China is attributed to inadequate coalmines gas utilisation facilities, poor ventilation systems, lack of appropriate monitoring instrumentation & environmental controls, poor safety practices and inadequate emergency procedures. All these aspects relate to the coalmine design, engineering and technology.
For these reasons, China is currently closing down as many as some 7,000 coalmines, whereas coal-fired power stations with capacity up to 200 MW were closed down in January 2007 as these were heavily polluting the atmosphere. The Chinese government has banned, on March 06, 2007, the construction of coal-based power plants in future with capacity below 300 MW. Realising that larger capacity would result in higher efficiency with less energy consumption and less pollution, the newly adopted policy allows installation of 600 MW to 1,000 MW coal-based power plants.
Simultaneously, China is seeking collaboration with the West to acquire latest coal-mining methods and technology. The acquisition, absorption and assimilation of the modern mining technology and management by the Chinese, though initiated in 2005, will take sometime before it can be relied upon. China therefore currently resorts to massive imports of advanced control equipment from the West to meet current requirements of up-gradation/modernization of its coalmines. The list includes gas control systems, coal safety equipment, fire monitoring and control, security equipment etc.
China has imported large-scale coal-mining equipment from the USA, UK, Germany and Japan worth $ 4.5 billion during the last seven years. Recently Shenhua Group, the largest coal company in China, has imported major equipment from the USA, including long-wall comprehensive mechanized underground coal mining equipment, short-wall continuous underground coal mining equipment, walking draglines, electrical mining shovels, coal plough, shearers, screening machines, hydraulic support systems, armored face conveyors, coal washing equipment etc. This is also a reflection on the fact that the Chinese consultants do not have hands-on experience of the latest coal-mining methods and technology, and so is the case with the mining machinery manufacturers. Also, the Chinese mining technology, design codes and standards are not considered at par with international standards and practices.
Thus selection of appropriate, sound and cost-effective coal technology, incorporating latest advancements, duly supported with economic studies on proper module/plant configuration, is a pre-requisite for launching such a project. The only experience Pakistan has is that of 150 MW capacity (three units of 50 MW each) power station at Khanot, District Dadu in public sector using Lakhra coal. The Chinese have supplied the machinery, said to be of advanced technology of fluidized bed combustion but it is in fact first generation technology, which was already outdated when the power station was installed.
These units are not giving satisfactory performance in terms of economy, efficiency, pollution control and operational reliability, due to a number of factors including that of the obsolete technology. Currently, only one unit, at de-rated capacity of 30 MW, is operational, whereas the other two units are not functional for quite sometime. We need to learn from our experience, rather than repeating the same, time and again.
EFFICIENT AND ENVIRONMENT-FRIENDLY POWER GENERATION
It is a well-known fact that there is not much emphasis placed in China on environmental protection, and coal-based power plants largely continue dispersing emissions into the air, causing severe pollution. China has an installed power generation capacity of over 622,000 MW and almost 80% electricity is generated from coal. In 2006, coal-fired power plants accounted for 54% of the country's sulphur dioxide emissions.
The various technologies available globally include conventional pulverized coal, sub-critical/ultra supercritical, circulating fluidized bed combustion (CFBC), pulverized fluidized bed combustion (PFBC) and integrated gasification combined cycle (IGCC), which is identified as the most efficient, cost effective and environmental friendly technology. Lately, coal chemical engineering has developed advanced technologies of coal gasification and coal liquefaction, and improved combustion and control technologies are also available. Thus, the modern coal-based power plants are cleaner and efficient than plants operating on old technology.
China has already taken initiatives to acquire advanced technology. Still, China has to go a long way to catch up with developed countries' technologies. In November 2006, China, with the support of the European Union, launched the designing of a coal-fired power station in the Beijing region incorporating CO2 capture and storage technologies, which is scheduled to be constructed and operative by 2010. On August 07, 2007 China has commenced on the "green coal-based power generation plan", which is a 250-MW demonstration project based on advanced integrated gasification combined cycle technology, in cooperation with the world giants Siemens, GE and Mitsubishi (MHI).
The coal-fired power plant at mine-mouth commissioned in Yangcheng (Shanxi province) in 2002-03 of 6x350 MW capacity has generators, instrumentation and controls imported from Siemens valuing $ 400 million, whereas an amount of $ 350 million has been paid to Foster Wheeler for technology and engineering. Likewise, Beilungang (Ningbo province) coal-fired power plant at mine-mouth of 3x600 MW capacity has been set up in collaboration with the Western and Japanese companies. Toshiba and Mitsui have supplied turbines; Mitsui and IHI have supplied boilers, whereas balance of plant is from Sargent & Lundi. Also, EBASCO/Raytheon and Fichtner have provided technology and consultancy for the project.
Similarly, GE Power Systems were awarded turnkey contract for the steam turbine island for Dezhou (Shandong province) coal-fired power plant, commissioned in 2003 for which GE turbines were manufactured in New York State. Siemens supplied instrumentation and control equipment and BBP Energy of Germany were responsible for design, manufacturing and supply of 2x660 MW pulverized coal-fired steam generators, auxiliary equipment and technical services including erection and commissioning. In general, advanced coal pulverizing equipment, ash removal system and power piping, 300-MW and above circulating fluidized bed boilers and integrated coal gasification combined cycle plants are being imported by China from the Western and Japanese companies.
Addressing the environmental issues is a key challenge. Therefore the Environmental Impact Assessment (EIA) Study is required to be carried out by an independent specialist consultant, complying with the related provisions of Pakistan law, the WHO standards and the World Bank guidelines, with commitment to install and maintain specific measuring, monitoring and verifying instrumentation and environmental controls. The modern and efficient control technologies and equipment are not available in China, which is the declared source of plant machinery for such integrated projects being established in Pakistan with the collaboration of the Chinese. Power plant emissions also include radioactive elements, which are more than that of a nuclear power plant.
Toxic mercury air emissions from coal-fired power plants require continuous emission-monitoring systems at coal burning. About 52 tons of mercury is emitted by the coal-fired power plants in the USA alone, which otherwise is the only country to regulate mercury emissions from coal. A detailed EIA Report is therefore required to cover baseline data, impacts associated with mining activities, impacts associated with project construction activities and during plant operation phase and details of mitigation and remedial measures, separately for the coalmine and for the power plant. The detailed EIA Study required, along-with the project feasibility, has to be approved by the Environmental Protection Agency (EPA), Sindh, as per regulations, and strictly enforced to protect air and water quality and to avert possible disaster in the area.
COAL MINING-CUM-POWER GENERATION PROJECT IN BANGLADESH
Interestingly, the only reference the Chinese have in the international market in this field is the Barapukuria (District Dinajpur) coalmines-cum-power generation project for Bangladesh Power Development Board, in public sector, on turnkey basis. The coalmines were developed during 1996-2005, under the Chinese suppliers' credit, to produce one million tons of coal annually, whereas the 2x125 MW power plant commenced construction in 2001 and achieved commissioning by end 2006.
To overcome their deficiencies in related areas, the Chinese consortium led by CMC had associated international consultants specialising in mining design and engineering, project management, hydrogeology and groundwater engineering and environmental consultancy. These were Wardell Armstrong International Ltd, UK, International Mining Consultants Ltd (IMC), UK and Pattle Delamore Partners Ltd (PDP), New Zealand. Nonetheless, within a year or so of the commercial operation of Barapukuria power plant, the coalmines have faced a number of problems, the latest accident resulting in partially sealing of mines. Now, coal is being imported to operate the power plant. Earlier, in October 2005, and again during April and July 2006, there was deadly saturation of coalmine gas, while in September 2007 there were emissions of poisonous gas from the coalmines.
The government is therefore well advised to review its strategy, curbing back-door investment in power sector, on priority, to meet aspirations of the nation as it shall be disastrous, unfair and discriminatory to allow setting up of coal-fired power plants, without conducting a detailed project feasibility study as per PPIB rules. As regards technology, the Chinese companies should be asked to seek strong collaboration with the consultancy companies in the Western countries specialising in the latest technology for implementation of identified projects in Pakistan. The government however shall ensure that, for future projects, modern technology for mining as well as power generation was acquired.
(The writer, now a consulting engineer, is currently on the Board of Directors of National Engineering Services Pakistan (Pvt) Ltd (NESPAK) operating under the Ministry of Water and Power, Government of Pakistan)