WIND ENERGY: TALL CLAIMS, NO OUTCOMES
TARIQ AHMED SAEEDI
Dec 12 - 18, 2011
The people of Pakistan are fed up with the tall claims of the authorities that their power woes would come to end this or that year. However, nothing is happening in reality. There is literally a mound of promises unattended, unfulfilled, and unachieved.
One famous made by the then minister of water and power that power load shedding would dissipate by December 2010 is still fresh in memory. And, this time around too, the country's only facilitator of investments into the renewable energy sector, alternative energy development board (AEDB), has made yet another claim of adding at least 100 megawatts wind electricity to the sagging power sector by the end of 2012.
AEDB chief executive officer Arif Alauddin is confident of Chinese wind power project going online soon. "I am very much hopeful that CWE's project of near 50mw will come online by June 2012,î he told Page over a telephone.
China international water and electric corporation (CWE) is a subsidiary of a latter-day Chinese company CTGPC that operates Three Gorges Hydropower Station that is the mega power plant in China.
Another wind power project of 50mw that is near completion is owned by Fauji Fertilizer Company (FFC), and expected to start production by next year.
Mr. Alauddin said 18 turbines of FFC had been landed at a port. According to him, the company had committed to operationalize the turbines by December 2012.
The company has reached the financial close and a consortium led by Habib Bank has consented to finance 80 per cent of the project cost estimated at $137 million. FFC would achieve concerted action on offshore wind energy deployment (COD) by yearend. The company has been working on the project for last six months.
These are not the only independent power producers (IPPs) in pipeline. In fact, a number of local and foreign investors have expressed their willingness to the government to tap the renewable energy potential in Pakistan. Across Sindh and Balochistan, wind energy potential is estimated at 50,000mw.
Zolru Enerji of Turkey owns and operates six megawatts windmill at Jhimpir in Sindh. The company has also planned to extend the generation by 50mw. Under the power purchase agreement, the power producer sells electricity to national transmission and despatch company is currently supplying Turkish wind power to Hyderabad electric supply company's system.
Moreover, interested investors include Lucky Cement planning 50mw, Metro 50mw, Gul Ahmed, and Tenaga.
Tariff determination is a big issue in renewable energy sector, it was learnt. As near as four investors including Sapphire, Tango, Dawood Power, and Zephyr are waiting for approval of tariffs by National electric power regulatory authority (Nepra), according to a well-placed source.
Nepra is dilly-dallying in tariff approval. The regulator is said to lack capacity to determine the tariff. Apparently, tariff is calculated after adding certain margin to cost and set after assessing a project's cost. Notably, assessment of project cost requires technical expertise that is absent.
The approval is mandatory to kick-start a project. An unnecessary delay pushes up the cost of a project. Many promising plans have been frustrated on indecisiveness of the regulator in relation to rate of return.
In 2007, when investors demanded nine cents per unit, Nepra was adamant on 8.5 cents, said an official privy to the developments. The prospective investor backed out as a result, he added. Come 2011, and now the regulator has to agree on 16 cents.
The government agrees to offer competitive tariffs to the investors to attract them, even if that implies offering them good rate as an incentive. Had the regulator done this four years ago, a good numbers of power projects would have seen the daylight, he said. In addition, we could have saved ourselves from cost over-escalation, he added.
Contrastingly, AEDB chief said there was an issue of tariff in past. "But, now Nepra announces upfront tariff." Minus wind risk, the tariffs have to take into account Libor or Kibor depending on type of investments. Local investment is indexed with local interest rate while foreign investors have to pay off loan as per the international benchmark. One can interpret in that case the tariff is negotiable and not fixed.
According to the renewable energy policy 2006, "wind risk refers to risk of variability of wind speed, and therefore of the effective energy output of the wind IPP. The risk shall be absorbed by the power purchaser. For judicious assessment of this risk, a benchmark wind speed based on monthly mean of means of wind speed will be determined from the available wind data".
The main problem for the IPP's point of view lies in the last few words.
IMPROPER BANKABLE WIND DATA
Unavailability of or inaccuracies in bankable wind data mars the viability of a prospective project. Earlier, data obtained by Pakistan Metrological Department used to be the prime foundation of working things out. Such data were not up to the mark. There were anomalies in findings, said an official. For instance, heights were ignored. Heights of masts must be given importance in collection of data including wind speed and be in conjunction with other topographical prerequisites.
As per the international standards, there has to be available at least two-year wind data related to a particular site to give it try to the natural resource.
At present, besides Jhimpir, wind data is also being collected from other promising wind corridors situated across the suburbs of Karachi such as Hawksbay and coastal belts. AEDB has installed towering systems in different potential-laden sites to measure the wind tendencies.
UNAVAILABILITY OF APPROPRIATE LANDS
Suitable territory is a major input to wind electricity. Apparently, there are thousands of acres deserted tracts in both Sindh and Balochistan. But, unfortunately these lands despite having located in the wind corridor can not be harnessed because of mainly poor land records maintained by the provincial revenue departments.
Majority of the lands have suspicious ownerships. If somehow an investor purchases a right tract from an existing owner, he/she cannot be guaranteed proprietorship rights. A purported owner might move the court for repossession or achieve stay order to the least. A stay order could prove a serious dent to a budding power plant.
Therefore, AEDB assumes the role of facilitator on behalf of the government of Pakistan under the ministry of power. The board provides sovereign guarantee to lessee.
It is an irony that the board is itself running short of lands. Its stock has ended up; it has earmarked 20,000 acres thus far, according to an official. The provincial government leases a land to AEDB for 25 years that subleases it further. As per the current rate, one acre is leased for Rs500 per year for 10 years, for next 10 year the rate is revised up to Rs1000 per year, and finally for remaining five years the rent is Rs2000 per year per acre. The land is subleased with no additional charges, said the official.
The whacked AEDB has asked the Sindh revenue department to allocate more lands in the province. It has been requested by a Chinese company to arrange at least 50 acres of land in the wind zone. The company is planned to establish wind turbines manufacturing plant in the area and looking for acreage within the wind corridor.
Both local and foreign investors are interested to capitalize on the wind energy potential of Pakistan. The incumbent government is serious to make use of cheap energy for the betterment of the economy and therefore ensuring that investments are to be secured.
AEDB has also sought third party financial guarantee from Asian development bank (ADB).
It was learnt that ADB had agreed to give financial cover of $300 million to the wind power projects. That implies the projects would be insured partly from any mishap, for example, failure of sovereign guarantee. If extended the financial cover would secure the future investments notwithstanding change in government, political instability, or other untoward incident.
A windmill is capital-intensive feat. According to an estimate, a 50mw project costs around $140 million.
Local banks have perhaps no issues in financing clean energy as they did in case of FFC.
State-owned foreign companies face no paucity of funds. Therefore, they could materialize power projects as early as possible. For example, well-heeled power company like CWE has no problem in raising funds as it is a state-owned company and eager to pioneer bulk production in Pakistan. It is said the energy sector's titan wants to run 50,000mw wind turbines in Pakistan
WHAT'S IN THE AIR?
At present, despite all its facilitation services the government is unable to remove the main barriers in the way of wind energy exploitation. There are shortages of technologies and equipments in the country. Heavy machineries are to be imported from foreign countries. Cranes that require to install towers are to be imported from Dubai.
The official is content with the progress in renewable energy sector particularly wind sources in Pakistan. He said comparison with India was not justified in this relation.
India initiated wind power generation back in 1980 whereas AEDB was established in 2003 and maiden renewable energy policy came into being in 2006. "I think our progress in wind power production in a short span should be commendable," he said.
Clean energy is a cheap energy and hands-on solution to energy crisis in the country. Wind energy is one of the alternative sources of energy that are matchless in terms of their practicability and commercial viability. Since the tariff is not indexed with fuel price, it is exempted of throbbing volatility in prices of fuels. The tariffs remain same for many years to come.