HARNESSING 16% OF HYDEL POTENTIAL

DEVELOPMENT OF HYDEL INDUSTRY IN AZAD KASHMIR MAY BRING IN INVESTMENT OF $20-25 BILLION.

KANWAL SALEEM
(feedback@pgeconomist.com)

June 11 - 17, 20
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Pakistan harnesses only 16 per cent of its enormous hydropower potential. Over 40,000 MW hydro potential lies in Azad Kashmir, Khyber Pakhtunkhwa, Northern areas and Punjab, but the hydro capacity stands at around 31-per cent of overall installed electricity generation capacity.

Also, the share of hydro capacity has dropped in power mix as over the years thermal power generation capacity was added in the system.

In the wake of growing power shortages, the government appears anxious to encourage setting up of hydropower plants through Wapda, the provincial governments as well as the private sector.

Under the Hydropower Policy-1995, two independent power plants (IPPs) are under implementation. The first hydropower IPP in the private sector would start commercial production in a few months. The New Bong Escape hydropower project with 84 MW capacity sponsored by Laraib Energy Limited is located at Jehlum River near Mangla, AJ&K. This project has the distinction of being AJ&K's first hydropower IPP.

By developing a bankable framework, this trend-setting project has paved the way for rapid and full-scale development of hydropower potential. The other such IPP like Rajdhani hydropower project with 132 MW capacity sponsored by Iqbal Power Limited at Poonch River near Mangla, AJ&K is scheduled to start commercial operations by 2017.

As the private power infrastructure board (PPIB) has developed the bankable framework for private sector hydropower IPPs, other hydropower projects are expected to be moving relatively quickly. PPIB has issued letter of satisfaction (LOS) to four hydropower projects including 100MW Kotli, 100MW Gulpur, 147MW Patrind and 840MW Suki Kinari hydropower projects with a cumulative capacity of 1187 MW. It is expected that financial close of these projects will be achieved soon for implementation in 4-5 years thereafter.

Feasibility studies of five hydropower projects with a cumulative capacity of 2,322 MW have been completed by their respective sponsors and approved by panel of experts.

PPIB has advised the sponsors to approach national electric power regulatory authority (Nepra) for tariff determination for projects. To date, Nepra has determined the tariff for Suki Kinari project. The feasibility studies of three hydropower projects with a cumulative capacity of 1,270 MW are being processed.

Wapda recently signed an agreement worth Rs611.50 million with a joint venture comprising Australian and Japanese firms for preparation of detailed engineering design and tender documents of 740 MW Munda dam multipurpose project.

After completion of detailed engineering design in two years, the project will enter in construction phase, which is estimated to cost $1401 million and will be completed in seven-year period.

In order to enhance and strengthen its power generation capacity, the Wapda has undertaken feasibility studies work for a number of hydropower projects under the Vision 2025 Programme.

Work on Allai Khawr (21 MW), Khan Khawar (72 MW) and Dubair Khawar (130 MW) hydropower projects is in progress. Implementation of Neelum-Jhelum (969 MW) hydropower project will commence shortly. Feasibility studies of a number of other hydropower projects are underway. Wapda has signed agreements with the USAID for funding three of its projects.

The alternate energy development board (AEDB) is managing ADB's renewable energy development sector investment programme (REDSIP). Under this programme, projects of 56.2 MW in Khyber Pakhtunkhwa, 24.04 MW in Punjab and two projects of 30 MW in Gilgit-Baltistan are under different stages of implementation.

Further, AEDB, UNDP, and Aga Khan Foundation (AKF) are implementing 103 micro-hydro projects (15 MW) in Chitral. The board has also issued a letter of interest (LoI) for 12MW project to generate power from agriculture waste.

The AEDB has been serving as the executing agency at the federal level to consolidate project proposals from federal, provincial, and other public entities for submission to the Asian Development Bank (ADB) for funding. These projects are said to be under implementation in KPK and Punjab with an estimated cost of $139.5 million. AEDB initiated a programme with the GTZ support to assist the provinces solicit private investments in small hydro sector. Feasibility studies for top 25 hydro sites in AJ&K, Sindh, Punjab, and KPK with the cumulative capacity of 284.14 MW have been completed.

The REDSIP entails construction of five hydropower projects at different locations in Punjab, one subproject each at Marala, Chianwali, Degoutfall, Okara and Pakpattan.

Within the Punjab Irrigation and Power Department, the project executing agency, a management unit called the Punjab power management unit has been set up to monitor projects. Other provinces will be making arrangements on similar lines for receiving ADB funds under REDSIP.

Pakistan is passing through a critical stage of economic distress. There are fears that the hydropower projects may experience slippages and special measures at various levels need to be adopted to forestall such an eventuality.

Azad Kashmir is emerging as a savior for Pakistan's power sector, developing small hydel projects and mega-projects such as rising of Mangla Dam to 1,300 MW and Neelum-Jhelum to 969 MW in public sector, Patrind 148 MW, Kohala 1,100 MW, Karot 700 MW and Azad Pattan 640 MW in the private sector. These are already under process.

The competitive advantage of Azad Kashmir over Khyber Pakhtunkhwa and Gilgit and Baltistan (carrying the same hydel potential) is its nearby location, as rivers Jehlum, Neelum and Poonch, together with their tributaries, are located at a proximity of 50 to 150 kilometers from the national grid with the huge hydel potential of 18,000 MW.

In addition to the ongoing projects, there are many other projects including Mahl 550 MW, Dudhnyal 550 MW, Chakothi 500 MW, Ashkot 250 MW, Sehra 350 MW, Kotli and Gulpur 250 MW and Rajdhani 126 MW, with a number of smaller projects at different stages of implementation, which can be developed and inducted into the system shortly.

Development of 8,000-MW hydel projects in Azad Kashmir can turn around Pakistan's power sector and revive its industry and economy. The government needs to facilitate private-sector developers and set in place transmission ways from the valleys of Jehlum, Neelum and Poonch up to the national grid to pick the generated power into the national grid.

Development of hydel industry in Azad Kashmir may also bring the much-needed investment of $20-25 billion in the country through the private sector, which may inject new blood to our ailing economy.

Azad Kashmir, with a domestic demand of only 350 MW, can send the rest of the energy to the national grid reviving the struggling industry and sharply increasing exports as a result.

The dozens of small hydel projects below 50 MW with a cumulative capacity of 2,000 MW could have been developed and inducted in the national grid in the shorter term of two to three years but were stalled due to smaller issues awaiting resolutions by the government. The issues including tariff determination, issuance of sovereign guarantee for project financing and signing of power purchase agreement can be resolved within days and weeks but are pending since 1995 as the ministry of water and power is not showing adequate interest despite having been apprised many a time.

Under the prevalent law, the government enjoys monopoly over transmission and distribution of electricity and no private project can be set up or operated unless given access to the national grid by the federal entities such as Wapda, NTDC, Discos.

The need of the hour is to take serious and decisive steps to promote private-sector hydropower industry, so as to ward off serious crises by following an integrated plan in the country with focus on Azad Kashmir. The pending issues of tariff determination, sovereign guarantees for financing and PPA signing must be resolved forthwith, and all those responsible for inordinate delays on these counts need to be addressed.

Official sources told Page that Wapda identified hydropower projects of 25,000MW in Azad Kashmir, Gilgit-Baltistan, Khyber Pakhtunkhwa and Punjab. The WAPDA also proposed that multi-purpose and run of the river hydropower projects should be given top priority because they would ensure water availability for agriculture besides producing cheap electricity and reduce dependence on imported fuel.

According to information, about seven run-of-the-river hydropower projects (without dams) are currently under implementation with a total generation capacity of 1,505MW, including 969MW Neelum-Jhelum project in Azad Kashmir, four projects in Khyber Pakhtunkhwa and one in Punjab. Neelum-Jhelum project would be completed in October 2016.

According to one estimate, Pakistan is merely producing 6,000MW electricity through hydel projects against its capacity of generating 40,000MW.

Since the delay in starting the Bhasha Dam has already resulted in increased cost, it is imperative to expedite the construction of the dam, as any delay could increase the cost because of the galloping inflation.

Electricity crisis is leaving negative impact on the country's economy and the need of the hour is to tap potential of hydro production so that cheap electricity may be made available to country. The government must facilitate private investors for investment in such hydel projects.