IN NEED OF GOVERNMENT'S ATTENTION
SHABBIR H. KAZMI
Nov 29 - Dec 5, 2010
Pakistan faces an acute shortage of energy also affecting its economic growth. The country's electricity generation is fairly diversified and comprises of thermal, hydel and nuclear. To overcome the shortage the focus has been on the traditional sources where project gestation ranges from 5 to 10 years in wide contrast to the requirement that is urgent.
Under the prevailing circumstances exploiting wind energy seems a lucrative proposal because wind power projects can start generating electricity within couple of years.
This is also evident from the growth registered in wind power generation around the globe. Around the world wind power generation installed capacity is growing at a very fast pace. The global leaders are USA, China, and India. China plans to install 20,000 MW by the year 2020. Pakistan should emulate these countries not because it is pollution free but because it helps in containing other negative impacts.
The propagators of thermal power generation often ignore certain harsh realities when they do not take into account implied costs of thermal power generation. One of the most recent observations was curtailing/suspending gas supply of power plants. Since total availability of natural gas is limited power plants become the first victim of load shedding. Since Pakistan is an active partner of war o terror any act of terrorists can disrupt supply of oil through tankers and gas pipelines. This extra cost of security is a negative externality of thermal power plants. Compared to thermal power generation, wind power provides a secure and independent source of externality-free energy.
Pakistan's trade deficit is mainly because of high oil import bill. The deficit is likely to worsen over the years with the persistent hike in crude oil prices. Growing reliance of thermal power plants, particularly oil-fired does not bode well for Pakistan. Any strategy to cut trade deficit has to aim at cutting oil import bill and this can be achieved by reducing reliance on power generation and relying on wind power offering an efficient alternative to oil-fired power plants.
Tariff of electricity generated through thermal power tariff is vulnerable to surges in international prices of crude oil. It is on record that crude oil touched its highest level of US$147/barrel in 2008. For the IPPs cost of fuel is a passed-on factor. As the government aims on withdrawing all sort of subsidies available to electricity consumers exploiting wind energy option makes sense since wind is free and it will make cost of electricity generation less vulnerable to temporary or permanent increases in oil prices.
Pakistan has a huge potential to develop wind power. The "wind corridor" in the coastal area of Sindh and Balochistan offers potential to generate 50,000MW. However, progress on wind power plant has been hindered by a severe shortage of wind turbines. The experience of other countries is that once the first project is executed, subsequent additions to capacity take place at an accelerated pace. This should be the case with Pakistan as well.
Lately, Pakistan and the United States have signed an agreement for establishing 150-megawatt wind power generation project. The project will be set in the coastal areas of Sindh and will be completed at a cost of Rs32 billion. US Envoy for Pakistan and Afghanistan Richard Holbrooke and Secretary Water and Power Javed Iqbal in Islamabad signed the agreement. It was reported that the project would save Pakistan $45 million per year in fuel cost.
Pakistan is building wind power plants in Jhimpir, Gharo, Keti Bandar and Bin Qasim in Sindh. The government of Pakistan envisages developing wind power projects to overcome electricity shortage problems in the coastal areas. Five wind turbines in Jhimpir, 70 km from Karachi, were installed by Zorlu Enerji Pakistan, the local subsidiary of a Turkish company. Total cost of the project is $110 million. Zorlu Enerji is reported to have completed five wind turbines in Jhimpir, each capable of producing 1.2 megawatt of electricity. Though initially 6MW of electricity will be produced by the company, the project will be expanded to 50MW in the next few years.
Pakistani government has plans to achieve electric power up to 2500 MW by the end of 2015 from wind energy to bring down energy shortage. However, the country faces two key problems: 1) mobilising the funds and 2) acquiring desired number of turbines. To date the country has not been able to acquire any credit line, which has to come from the multilateral financial institutions. Ironically, there is a lot of talk about containing carbon emission, but when it comes to mobilising of funds and transfer of technology, the response of developed countries seems lukewarm.
Maybe the situation is because a lot of time and energy is being spent in preparing bailout packages for the countries facing default due to prolonged recession. Many of the developed countries are bogged down with their own domestic problems. The other reason seems to be investing in the shares of blue chip companies rather than acquiring any majority stake in the equity of new projects.
However, unless Pakistani entrepreneurs take the lead expecting foreign investors to initiate any project in the country is hoping against the hopes. Ironically, local financial institutions seem least interested in extending credit to the private sector. Instead they are investing heavily in government papers, offering risk free as well as high return.
Some of the critics oppose SRO-based lending where central bank makes it mandatory for the commercial banks to extend a minimum amount of loans to specific sectors. However, the time has come to determine the national priorities and then mobilise funds to initiate various projects. It is expected when such projects are initiated multilateral financial institutions will also be willing to join hands.