Sep 8 - 14, 2008

The share of hydroelectric power generation in the overall energy mix is persistently decreasing--from 57% in the1980s to 42% in the1990s to current 32%of the total installed capacity.

In recent times, thermal power primarily based on fossil fuels has remained principal source for current electricity generation and expansion. As a large number of thermal power plants are coming up and the addition of hydropower generation will be comparatively much lower, the present contribution of hydropower to total electricity generation will further decrease substantially by the year 2010. This is an alarming situation in the wake of high economic cost of thermal power generation.

Hydropower is globally recognized as renewable, cheap and reliable resource of energy. It generates electricity with zero emission and produces no waste. There is no requirement of fuel, operating cost is much lower and hydel power plants have longer economic lives than thermal power. Today, Pakistan has an installed capacity of 6,493 MW hydropower. There exist enormous potential to exploit this almost unlimited indigenous resource of energy. According to estimates, it is economically possible to generate some 34,000 MW additional hydropower and 150 sites for projects of cumulative capacity of 20,000 MW have already been investigated and identified.

At present, Pakistan has total installed power generation capacity of 20,456 MW. However, dependable or de-rated capacity is in the range of 16,000 to 17,000 MW during the year, due to a variety of factors. The demand is increasing at an average annual rate of about 8%. Resultantly, there is gross power shortage at national level, demand being projected to around 22,000 MW by the year 2010. To meet surging demand, an additional 4,000 MW generating capacity, all based on gas and oil, will be created by December 2010, in private as well as in public sector. In contrast, only 516 MW hydropower is expected to add to the existing system, besides another 325 MW nuclear power plant to be commissioned by then.

To resolve the power crisis in long term and to sustain economic growth the optimal development of hydropower is needed. There is however host of risks, constraints and specific issues linked to undertaking hydropower projects. These include geological risks, hydrological constraints, problems in water use, need for infrastructure, environmental issues and social problems. Thus the complexity and long lead-time inhibits private sector to invest in hydropower projects, in spite of various fiscal and non-fiscal incentives available under the government policies in vogue.

The fallout of these factors is reflected in the fact that not a single Independent Power Producer (IPPs) has started construction of hydel power project. Out of 41 Letters of Interest (LOIs) issued to the private sector under Hydel Power Policy 1995, only 13 Letters of Support (LOSs) for a total of 353 MW capacity could be obtained by the private sector. Among these, only one hydropower project, known as the New Bong Escape of 84 MW capacity downstream Mangla Dam, may materialize eventually, which has yet to achieve financial close though, even after more than a decade of its initiation.

Again, the government has approved another 15 hydropower projects of cumulative capacity of over 3,000 MW under Power Policy 2002. Feasibility studies of two projects have been carried out so far, whereas other project sponsors have asked for extensions in time period as they experienced problem of law-and-order and other issues to access the site, which all are located far from population centers, besides other reasons.

As a result of recent restructuring, the Pakistan Water and Power Development Authority (WAPDA) now focuses on implementing multipurpose water projects, which is a positive advancement seen in the context of harnessing hydropower in a big way. These include medium and mega hydropower generation projects, either reservoir-based or run-of-the-river type. In addition to expediting various on-going hydel power projects and rehabilitating/modernizing the operational power stations, WAPDA has recently embarked upon a series of new hydel power projects.

Hydropower projects of cumulative capacity of 419 MW are scheduled to go on stream during the period 2008-2010. These are Allai Khwar 121 MW, Khan Khwar 72 MW, Duber Khwar 130 MW, all located in Kohistan area, and Jinnah 96 MW to be located on Jinnah Barrage. In addition, Malakand III hydropower project, of 81 MW capacity, has been commissioned by the Government of the NWFP, which is expected to achieve commercial operation within few weeks.

It is a long list of the new projects being implemented or to be launched by WAPDA. Contractors have already mobilised at site to commence construction of the strategic 969-MW Neelum-Jhelum hydropower project, whereas tenders for various works of Diamer Basha Dam project, which is designed for an installed power generation capacity of 4,500 MW, have been invited, while project design is in advanced stage. Also, WAPDA has recently launched Golen Gol 106-MW hydropower project to be constructed in Chitral. Construction of Kurram Tangi Dam project (hydropower generation of 83 MW) is planned to re-commence soon. Construction of the Akhori Dam project is on cards, which will have a power generation capacity of 600 MW. Likewise, design and engineering work on Keyal Khwar project of 122 MW capacity has commenced.

Feasibility studies related to another 8 hydropower projects are in progress being conducted by the consultants appointed by WAPDA. These projects are expected to have an installed capacity of about 12,000 MW and would require $ 16.7 billion to construct. It may take two years to finalize comprehensive studies enabling WAPDA to launch the projects. Kohala hydropower project on the Jhelum River in the AJ&K will have a capacity of 1,100 MW, whereas Bunji hydropower project (Gilgit) will generate 5,400 MW on its completion. Dasu of 3,700 MW capacity is a run-of-the-river scheme, 69-km downstream Diamer Basha Dam. Lower Palas Valley of 621 MW and Lower Spat Gah hydropower project of 610 MW are proposed to be located at Patan, Kohistan. The remaining projects are Phander (Gilgit) 80 MW, Basho (Skardu) 28 MW and Lawi (Chitral) 70 MW. In addition, pre-feasibility or initial studies are being conducted for Thakot hydropower of 2,800 MW and Patan of 2,800 MW, both proposed on Indus River, and Harpo of 33 MW near Skardu.

In view of reluctance on the part of private sector to developing hydropower projects, the government may be well advised to allow WAPDA to implement all the hydropower projects, in pipeline as well as proposed, which has the requisite experience, expertise and resources. Developing hydropower projects in public sector will also curtail the import bill, improve ever-increasing trade deficit and reduce outflow of foreign exchange in terms of profit and dividend by the IPPs. During seven months of the current fiscal year (2007-08) the IPPs operating thermal power plants have repatriated an amount of US$ 102 million as profit and dividend, which is a record. Above all, the electricity could be made available to the consumers at an affordable tariff if hydropower generation share in total power generation increases in coming years.

If the new government would like to continue to pursue the policy of inducting private sector in hydropower sub-sector, this may be achieved through adopting a well-planned strategy. WAPDA may be asked to construct, operate and divest small and medium hydel power stations, in a phased manner. Sarhad Hydel Development Organisation (SHYDO) has recently followed the modality to privatize its small and mini hydel power stations in the NWFP after putting them into operation and the experience has been successful.

(The contributor, former Chairman of State Engineering Corporation, is currently on the Board of Directors, National Engineering Services Pakistan Pvt Ltd--NESPAK)