By Fasih Ahmed, Daily Times, Aug. 7, 2009.
Not that any confirmation was required, but footage of self-defeating acts of violence—mobs burning trains and destroying offices and equipment of state-owned power producers, opposition politicians with high-wattage smirks foolhardily leading protests against the lack of electricity and higher utility bills—confirms the fact that nationwide blackouts and power outages have roiled the economy and everyday life. Each power disruption and the din of sleepless generators are signs that can spell trouble for any government. There could be no worse daily reminder of the state’s inefficiency.
The Ministry of Water and Power is working to ensure that 3,500 megawatts of new power generation capacity comes online by end-December through state-owned power plants and long-term and short-term power plants in the private sector. Part of the solution, as Prime Minister Yousaf Raza Gilani stated in his first speech to Parliament, can be found in affordable rental power that can be brought online in six to eight months from contract signing to commissioning.
If the Government of Pakistan’s capacity-addition target is realized, load shedding would be significantly reduced, allowing factories to resume work, housewives to watch their favorite soaps, and homes and industries to stop hemorrhaging funds on private power generation. There could be no better daily reminder of the state’s efficiency.
Barring Karachi, Pakistan’s total present de-rated power generation capacity stands at 15,838 megawatts. According to official data available for June, actual power generation, at 14,128 megawatts, fell short by almost 11 percent. During the same month, two public sector and two private sector power plants produced no electricity: if the Lakhra and Shahdara units as well as Japan Power and SEPCOL plants had been working at full capacity, the gap between dependable installed capacity and power produced would have been 1,411 megawatts. This figure does not include present and future additional power demand.
At present, hydroelectricity constitutes 35 percent of Pakistan’s power generation capacity pie. Independent power producers account for 31 percent, thermal power plants owned by the state account for 20 percent, the Karachi system accounts for 10 percent, and nuclear and rental power account for 2 percent each.
Pakistan is said to have the seventh largest coal reserves in the world. But while coal-based power accounts for over 40 percent of the energy mix in both the U.S. and India, its share in Pakistan’s energy mix is a niggardly 0.17 percent. Our only coal-fired power plant, set up in 1995, has been de-rated to 30 percent of its nameplate 150-megawatt capacity. In June, it produced no power. Of the existing IPPs, Japan Power and SEPCOL lie closed on account of problems that have persisted since the previous government. While work on the 969-megawatt Neelum-Jhelum hydroelectricity project is ongoing, lack of political consensus prevents other hydroelectricity projects from being realized.
There is no disagreement that hydroelectric and coal-based power projects must be encouraged; that the problem of delayed payments to power producers must be further improved; that the furnace oil import and distribution infrastructure has to be augmented; that the two shut-down IPPs must be brought online; and that the Iran-Pakistan gas pipeline must come through.
In the meanwhile, the realistic present gap between power demand and supply is over 3,000 megawatts, and, unless the economy and the people of Pakistan can wait it out for three to eight years, the options available to us are quite limited. So now, when 15 fast-track rental power projects are in various stages of implementation, the government is being faulted for allowing this emergency, rental power solution in the first place.
The rental power model is a globally-accepted one and has been deployed in Bangladesh, Sri Lanka, the U.A.E., Saudi Arabia and the U.S. In Pakistan, the model has been validated by three successive governments. There are only two rental power plants operating in Pakistan today: the 150-megawatt rental power plant set up and owned by GE and the 136-megawatt rental power plant owned and operated by Pakistan Power Resources. Both were commissioned in late 2007.
The recent increases in power prices are not because of rental power plants. The brand new 136-megawatt Bhikhi rental power plant was set up in six months. From December 2007 to December 2008, each unit of power has been purchased by WAPDA at a cost of Rs 5.86 (including the pass-through fuel value). Of this Rs 5.86 per unit cost to WAPDA, 42 percent or Rs 2.48 per unit is the net actual received by PPR while the remainder, Rs 3.37 per unit, has been paid to the gas-utility company. Were it not for Bhikhi, nationwide load shedding would have increased by 33 minutes per day. The all-in cost of Bhikhi power to WAPDA at Rs 5.86 per unit cannot be considered unreasonable.
Almost 2,100 megawatts of additional power generation capacity is expected to come online from 15 rental power projects awarded to local and foreign companies through a competitive-bidding process. These projects have already been delayed because state-owned companies have been unable to abide by their contractual obligations on account of the financial crisis. The capacity payments to gas-based rental power plants range from U.S. cents 2.72 to 4.46 per kilowatt-hour. In comparison, capacity payments to upcoming gas-based IPPs range from U.S. cents 2.93 to 4.62 per kilowatt-hour. The capacity payments to RFO-based rental power plants range from U.S. cents 2.80 to 5.20 per kilowatt-hour. In comparison, capacity payments to upcoming RFO-based IPPs range from U.S. cents 3.85 to 5.58 per kilowatt-hour.
Rental power plants are also subject to liquidated damages at the rate of 1.5 times the capacity tariff in case mandatory plant availability of 92 percent in the case of gas-based plants and 85 percent for RFO-based plants is not achieved. In order to comply with contractual performance standards, rental power sponsors are required, in their own interest, to bring in plants that meet availability and heat rate requirements.
The facts on rental power as an affordable, emergency solution for Pakistan are far more favorable than the factoids polluting the public domain. Rental power projects produce power cheaply, are set up quickly but the developers’ risk is higher than in the case of IPPs. Pakistan needs power immediately. Power is everyone’s requirement—industries, homes, hospitals, schools, government, opposition, media—so we’re all on the same side. The opposition is simultaneously beating up the government over load shedding and scoring it for setting up new power plants. Sadly, no matter how you dice it, there is no way this is not politics.
See the original article here.