HOW MUCH TO PRODUCE AND HOW TO PRODUCE?

SHAMSUL GHANI (shams_ghani@hotmail.com)
Nov 02 - 08, 2009

The basic economic question referred to in the headline of this article applies as aptly to the power sector as it does to the agriculture sector. A number of ongoing programs under different government organizations seem to have their focus more on "how much" than on "how". According to Pakistan Economic Survey, power generation projects are expected to add to our generating capacity 4,039 MW during FY-10, another 3,370 MW during FY-11 and still another 1,739 MW during FY-12. With the estimated annual increase of 12 per cent in power demand, 2012 should comparatively be a far better year given the timely commissioning of capacity enhancement projects.

Alternate Energy Development Board (AEDB) too has plans to add 9,700 MW by 2030. While alternate energy development programs (wind, bio, solar, small hydro etc) augur well for the developing economy like ours, their role is limited since we cannot depend on them for mega generation of power for which oil, gas and water are relied upon since long.

Coal is the latest addition to the mega generation fuel club, thanks to the gigantic Thar coal reserves. However, owing to our lethargic approach to the all important economic problems and the traditional politicizing of natural resource utilization issues, coal still remains a doubtful starter. We continue to import coal for power generation purpose. Sindh Cabinet's approval of a 600-1000 MW Thar coal power project under public-private partnership (between Sindh government and Engro-Pak) is a welcome sign no doubt, but since the project will take a number of years before it is commissioned, one should keep fingers crossed to see the materialization.

TABLE
PAKISTAN COAL STATISTICS (000 TONS)
YEAR PRODUC-TION IMPORTS TOTAL YEAR PRODUC-TION IMPORTS TOTAL
2001-02 3,328 1,081 4,409 2005-06 4,871 2,843 7,714
2002-03 3,312 1,578 4,890 2006-07 3,643 4,251 7,894
2003-04 3,275 2,789 6,064 2007-08 4,124 5,987 10,111
2004-05 4,587 3,307 7,894 2008-09* 1,822 3,000 4,822
*Figures for 09 months

According to IEA, the fast depleting world oil and gas reserves are going to last for another 40 to 60 years while coal which has been tagged as the "fuel of the century" is likely to outlive the said traditional fuels by almost 150 years. While we ought to at least double our generating capacity by 2015 together with the simultaneous cutting down of our transmission and distribution losses by at least 50 per cent (WAPDA and KESC lost 19.4 and 34.2 per cent respectively on transmission and distribution during 2008-09), we will also have to decide on an optimal generation mix. In other words, while we know how much to produce, we must also know how to produce. What should be the most optimal mix? Our natural resource inventory shall be the right place to look for an answer.

How much thermal power we should produce on the principle of cost effectiveness? Further more, how much of the thermal power generation should be oil-based given the violently fluctuating international oil prices. Again, how much power generation should be gas-based.

According to the Pakistan Economic Survey, we had in January 2009 estimated recoverable gas reserves of 29.671 trillion cubic feet. Moreover, the average production of natural gas is 3,986 million cubic feet per day. Simple arithmetic tells us that the recoverable reserves are not going to last for more than 20 years. It may be noted that the gas-based power generation, after touching a high of 50% in 2004, has dropped back to 37% in 2007. The obvious reason is the depletion of known gas reserves resulting from the lack of investment on gas exploration side. We must review our gas exploration policy to attract fresh investment in this all important sector of economy. While we need to make huge investment on gas exploration, we must look for an alternate fuel resource for our power generation needs.

The oil-based power generation, after dropping to 20% level in 2006, has again resumed its upward journey. This is a disturbing development as we can not afford high oil-based generation in the wake of rising oil prices. The coal-based generation has dropped during the last four years to an almost zero level. This is mockery of resource utilization. We have ample coal reserves that need to be mined and utilized in power generation The sooner we replace the oil-based generation with the coal-based generation the better. The hydel power is also the future power for our country which is endowed with sufficient water resources. The bifurcation of thermal and hydel power generation responsibilities between PEPCO and WAPDA should be a welcome sign as the arrangement will allow WAPDA to concentrate on hydel power generation alone. Hydel power is the cheapest and cleanest source of energy and every one looks with keen interest the development of hydel power sector. The nuclear power generation is closely linked to our relations with the outside world. This sector may be allowed to develop at its own pace. Renewable energy has found a significant place in the Planning Commission's Vision-2030 energy mix development program reproduced here below.

TABLE
PLANNING COMMISSION'S VISION-2030 POWER GENERATION PROGRAM

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THERMAL

. . . .
OIL GAS COAL HYDEL NUCLEAR RENEWABLE TOTAL
Existing Capacity MW 6,400 5,940 160 6,460 400 180 19,540
ADDITION
2010 160 4,860 900 1,260 - 700 27,420
2015 300 7,550 3,000 7,570 900 800 47,540
2020 300 12,560 4,200 4,700 1,500 1,470 72,270
2025 300 22,490 5,400 5,600 2,000 2,700 110,760
2030 300 30,360 6,250 7,070 4,000 3,850 162,590
Total 7,760 83,760 19,910 32,660 8,800 9,700 162,590
%age 4.77 51.52 12.25 20.09 5.40 5.97 100

It will be an industrial miracle if we are able to have an installed capacity of 162,600 MW just after 20 years from now. Ambitious planning and lethargic implementation pace have taken us nowhere. Now a word on the projected power generation mix. If after 20 years, we are able to produce just 12 per cent of our power needs from the fuel of the century - coal - which nature has been kind enough to provide us in abundance, we should better give up the job of planning and let the things happen as they choose to. By the way, our neighbors China and India are meeting 80 and 60 per cent of their power needs through coal-based generation, respectively. If we are able to meet at least 40 per cent of our power needs through coal by 2030, it will not only be a major economic and industrial breakthrough but will also revolutionize the lives of the downtrodden people of Thar district who for decades have been mercilessly treated by the forces of nature. These forces are now smiling on them.