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China’s shifting energy investments in Pakistan, from coal to renewables

Shahzeb Jillani
November 23, 2022


<p>A wind power plant in Jhimpir, southern Pakistan. Wind projects in this region have been one of several renewable energy projects to have received Chinese investment in recent years. — Photo courtesy: Hasan Zaidi / Alamy</p>


A wind power plant in Jhimpir, southern Pakistan. Wind projects in this region have been one of several renewable energy projects to have received Chinese investment in recent years. — Photo courtesy: Hasan Zaidi / Alamy
Until about a decade ago, the Jhimpir region in Sindh was a dry, barren stretch of land, inhabited by nomadic tribes. Today, it is home to hundreds of mammoth rotating blades in about two dozen wind farms.

Around 90 kilometres from Karachi, Jhimpir is the heartland of the country’s largest ‘wind corridor’, which has the potential to produce 11,000 megawatts (MW) of clean energy.

Among early investors was the China Three Gorges Corporation, a Chinese state-owned power company, operating under an investment holding company, China Three Gorges South Asia Investment Limited.
The company has funded and built three wind projects with a combined capacity of nearly 150 MW. The first of these began construction in 2012.

The latter two projects, completed in 2018, were funded under the China Pakistan Economic Corridor (CPEC), an integral part of Beijing’s flagship multibillion-dollar Belt and Road Initiative (BRI).
In an official statement following Prime Minister Shehbaz Sharif’s visit to China on Nov 1-2, the premier reaffirmed the importance of CPEC to Pakistan’s development.

For the time being, renewables represent only a small portion of Pakistan’s power generation mix. Of a total of 43,775 MW, installed capacity for wind and solar represent around 4.2 per cent (1,831 MW) and 1.4pc (630 MW) respectively, according to the National Electric Power Regulatory Authority’s State of Industry 2022 report.

In terms of CPEC, the November 2022 joint statement from China and Pakistan listed oil and gas as among the “priority areas of CPEC cooperation”.

But a recent shift in the direction of Chinese investment may be hugely significant for the country’s energy future, and the climate.

The shift from coal?​

In the years before the launch of CPEC in 2015, Pakistan was desperate to end its long, crippling power shortages.
The country was keen to develop its untapped indigenous coal in Thar desert, but multilateral financial institutions were not interested. Along came China in 2013, with an offer to lend massive amounts for infrastructure development and coal mining.

Details of the financing deals are a closely guarded secret, but multiple Chinese-funded coal projects followed. Eight completed or under-construction coal projects are listed as part of CPEC, totalling 6,900 MW, which include four on Thar coal.

Then in 2021, after growing pressure on China — currently the world’s biggest polluter — to curb its greenhouse gas emissions, Beijing announced it would not build new coal-fired power plants overseas, and would increase support for low-carbon energy.

In December 2020, Pakistan announced that it would not build any new power projects that depend on imported coal, and pledged that by 2030, 60pc of its energy will come from clean and renewable sources.

The government has since scrapped a number of potential coal projects, including a 300 MW plant at the Chinese-controlled Gwadar sea port in Balochistan. Reportedly, it is to be replaced by a solar plant.

‘Greening’ CPEC​

As Beijing tries to rebrand the BRI as an eco-friendly initiative, Chinese officials have promoted the idea of a ‘green’ CPEC. But Hina Aslam, research fellow at the Sustainable Development Policy Institute (SDPI), a think tank in Islamabad, points out that “in the energy sector, it has meant a greater focus on hydro rather than wind and solar”.

Besides wind energy in Jhimpir, China Three Gorges Corporation is investing heavily in what it is globally known for: hydropower (the company is behind the Three Gorges Dam in China, the world’s biggest power station).

In June 2022, it completed a 720 MW project in Karot in northern side of the country.
Work is advancing on a 1,124 MW hydropower plant near Muzaffarabad, and a third 640 MW project has recently been approved in Mahl. The same company is behind both projects.


Put together, China Three Gorges aims to produce 2,500 MW of renewable energy in Pakistan, mostly through hydro. The Pakistan government – like many others – includes hydropower under the umbrella of renewable energy, but this is disputed by many environmentalists due to the often high environmental, social and financial costs of hydropower, including disruption of important riverine ecosystems. In Pakistan, dams are also politically contentious and a source of discord between upstream and downstream provinces. Yet, both Beijing and Islamabad appear keen to pursue hydropower.

But there are huge challenges facing Pakistan’s shift to renewable energy. “A lack of consistency in policy has been the biggest issue,” says Noman Sohail, senior business manager at China Three Gorges South Asia Investment Ltd.

“Arranging lenders and finance for renewable projects is not a problem. But it’s disorienting when policies are reversed, tariffs renegotiated and unpaid capacity payments allowed to pile up.”

Growing popularity of solar​

There is one form of renewable energy in particular that presents immense potential for Pakistan, but which has seen little investment to date: solar. A World Bank study in 2020 urged Pakistan to urgently expand solar and wind “to at least 30 per cent of electricity generation capacity by 2030, equivalent to around 24,000 MW”.

As of 2022, the proportion is 5.6pc according to the National Electric Power Regulatory Authority’s State of Industry 2022 report.

Pakistan’s slow take-up of solar energy is evident from the fact that of the 21 energy projects completed or in development under CPEC, only one is solar: the 1,000 MW Quaid-i-Azam Solar Park in Cholistan Desert, Punjab, built by Chinese company Zonergy.

This project, promoted as one of the world’s biggest solar parks, was meant to be completed by 2017. But only 40pc of this capacity has been implemented so far.

The Quaid-i-Azam Solar Park in Bahawalpur. — Photo courtesy: Zofeen T Ebrahim / The Third Pole

The Quaid-i-Azam Solar Park in Bahawalpur. — Photo courtesy: Zofeen T Ebrahim / The Third Pole

Suleman Rehman, chief executive of Burj Capital, a Dubai-based investment company focused on renewable energy in Pakistan, says that regardless of the government’s apparent lack of focus, the demand for affordable solar power is growing exponentially.

“The competition is getting intense. More and more local players are coming up every month. Installing a 4MW solar project is no longer a big deal for us,” says Rehman.

According to Rehman, the private sector is not waiting for policymakers to facilitate the energy transition. Those who can are turning to the solar option. That explains the recent proliferation of rooftop photovoltaic panels in big cities, as well as in off-grid villages across the country.

The solar future​

Costly fuel imports have already had a crippling effect on Pakistan’s economy. This year, the volatility of global energy prices, exacerbated by Russia’s invasion of Ukraine, took a damaging toll on Pakistan’s foreign exchange reserves. The country was on the verge of a default before the International Monetary Fund agreed to step in to help it stay afloat.

In an attempt to reduce dependence on imported fuel, on 1 September 2022 Prime Minister Shahbaz Sharif announced the rapid deployment of 10,000 MW of solar power in the country. But details of how this will be achieved, and by when, are sketchy.

The plan reportedly involves transitioning all public sector buildings to solar power. The proposal also encourages power plants running on coal, oil and gas to partially shift to solar power.

China will have a crucial role to play if this shift to solar is to happen, says Rehman, though it may come in a different form than the mega-projects seen under CPEC.

“China will still have a big role because they are producing the cheapest [solar] equipment worldwide. But I really hope the government won’t put this under CPEC because that would put local players at a disadvantage,” says Rehman.

Some Chinese companies will still be involved in investment in solar, but most will not be interested in small local projects, he feels. “In my experience, customers are happy for us to import Chinese-manufactured technology or their raw material, but they prefer to have local contractors and engineers to deal with.”

So far, Pakistan’s dependence on imports from China has prevented creation of local supply chains, says Rehman. That, he says, will need to change if the country is serious about exploiting its solar potential. “The government can facilitate this transition by encouraging domestic manufacturing,” argues Rehman.


 
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Mangla Dam in 1966. It is the sixth-largest dam in the world.
Courtesy : C. Ball
 
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Refurbishment project of units five and six of Mangla Dam

Prime Minister on Monday inaugurated the refurbishment project of units five and six of Mangla dam aimed at enhancing its electricity generation capacity.

Speaking on the occasion, the prime minister termed the project a "wonderful example" of cooperation between Pakistan and the United States.

He said the total cost of the up-gradation project is $483 million, of which $150 million were provided by the US as a grant.

The premier emphasised the need for further enhancing bilateral cooperation between Islamabad and Washington in the field of trade and investment.

Alluding to the contributions Mangla dam has made to the country's economy, PM Shehbaz said "Pakistan cannot afford expensive energy on which annually Rs27 billion are currently being spent".

He underlined the need for exploiting indigenous resources including hydel, solar, air and coal to produce cheap electricity.

Shehbaz also said the present government has prepared a project to generate 10,000 megawatts of electricity through solar energy and that a 1,320-megawatt power project has also been initiated in Thar to use the indigenous coal for electricity production.

The premier regretted that the country could not fully exploit the hydel power potential of 60,000 megawatts.

He said that in addition to the extension of Mangla and Tarbela Dams, Diamer Basha, Dasu and other projects have been launched.

The prime minister added that if these hydel projects had been completed earlier, the country would not have faced such destruction from the recent floods and its reliance on imported fuel would have been negligible.

PM Shehbaz further stressed the importance of unity to serve the country and steer it out of all challenges.

In his remarks on the occasion, the US Ambassador to Pakistan Donald Blome also said that Mangla dam is "a great symbol of Pakistan-US cooperation".

He said amongst other hydropower projects, the United States is also assisting Pakistan to rehabilitate Tarbela power stations.

The ambassador said the rehabilitation work at Mangla will increase electricity output to meet the needs of an additional two million people and will ensure that Mangla power stations remain productive for the next several years.

Speaking on the occasion, Chairman WAPDA Sajjad Ghani said that the government is showing keen interest in producing clean, green and cheap energy.

He said that WAPDA is pursuing a two pronged strategy under which the existing hydropower projects are being upgraded while construction work on new projects has also begun.
 
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Energy-efficient projects:

World Bank ready to extend $300m financing

Mushtaq Ghumman
December 7, 2022

World Bank (WB) has shown willingness to extend over $ 300 million financing for solarisation of government buildings, water and space heating, shifting from more expensive fuels to electricity and improve efficiency, well informed sources told Business Recorder.

Both National Energy Efficiency and Conservation Agency (NEECA) and Punjab Energy Efficiency and Conservation Agency (PEECA) have sought financing of $ 150 million each and the Bank has agreed to enhance it.

According to a presentation of World Bank shared with the government, Pakistan's fuel import bill surged by 105 per cent in FY 22 compared to FY 21 due to heavy reliance of the energy sector on imported fuel. Households and businesses are struggling with high bills due to fuel costs. International fuel prices will continue to be high for the foreseeable future, putting pressure on the foreign exchange reserves.


Pakistan’s energy intensity is high compared to other countries in the region and improvement can support competitiveness and productivity. While implementation of IGCEP is critical, it will take time to deliver reductions in cost of generation.

Energy efficiency and conservation can provide immediate relief to consumers and firms and can help preserve foreign exchange reserves. In addition to NEECA, there is a potential at the provincial level through their respective agencies.

The Bank stated that the government can implement the following measures immediately by giving top priority to approval of Electric Appliance Regulations, which include Minimum Energy Performance Standards (MEPS) for lights, fans, air conditioners, electric motors and gas and electric water heaters: (i) mandate that all new public sector buildings should be energy efficient; and all appliances being purchased should be MEPS compliant; (ii) continue with electricity reforms to incentivise conservation and the adoption of more efficient appliances; (iii) require energy intensive industries to conduct energy assessments and publish the results, provide them with guidance on low-cost EE&C measures and benefits.

The Bank further contended that the government can implement the following measures within a year with high returns by giving top priority to: (i) develop flagship on-bill financing scheme to allow households to upgrade to efficient appliance, starting with fans but moving on to LED lighting, air conditioners, and water geysers; (ii) retrofitting of public buildings, solar, lighting, cooling, water heating; (iii) SBP credit line or refinancing scheme for energy efficiency through targeting commercial and industrial firms (boilers, motors, compressors); (v) capital grants and concessional loans to target industries to provide upgrade incentives; (iv) retrofitting and solarization of WASA system, pumps, electrical equipment, low cost solar; (v) public awareness campaign educating consumers and businesses on how they can reduce their bills; and (vi) national awards program to recognize firms that have taken strong action.

The government can roll out a mass fan replacement program in the next year to reduce the energy bills of low income households (bottom 50 per cent) in the summer.

Criteria for selecting households: (i) average yearly consumption of less than 200 units; (ii) consumers should not have any arrears in the last one year; and (iii) meter should be tagged to CNIC of the head of household.

World Bank has suggested target of 10 million efficient fans sold. Upfront investment cost Rs 81 billion and payback to consumer from energy savings in eight months. Consumer pays back over 16 months (Rs 500 per month) through on-bill recovery starting in October 2023 and avoiding summer peak (four months’ grace).

Audit of five public buildings in Islamabad showed savings potential of Rs 129 million. Combining solarization of public buildings with retrofitting will increase the savings by 49 per cent. Payback of this project is less than two years.

Copyright Business Recorder, 2022
 
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Pakistan's power cost and generation declines significantly in Nov

  • Cost of power generation during first five months of fiscal year up 35%
BR

The total cost of generating electricity in the country dropped nearly 34%, hitting Rs5.99 KWh in November 2022 compared to Rs9.02 KWh registered in the month of October.

On a year-on-year (YoY) basis, electricity generation cost declined marginally by 5.3%.

“On a YoY basis, the decrease in fuel cost is witnessed mainly due to a rise in nuclear, and solar-based generation,” said Arif Habib Limited (AHL) in a note on Monday.

“While on a month-on-month MoM basis, the decline in fuel cost was triggered by a decline in coal (-27% MoM, due to the addition of local coal-based plants), Residual Fuel Oil (RFO) (-28% MoM), and Regasified Liquefied Natural Gas (RLNG) (-16% MoM) based cost of generation,” it added.

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NTDC, SEPCO1 sign 765kv Mansehra Substation EPC project​


By Fatima Javed | Gwadar Pro Dec 28, 2022



NTDC, SEPCO1 sign 765kv Mansehra Substation EPC project

NTDC, SEPCO1 signing 765kv Mansehra Substation EPC project
MANSEHRA, Dec. 28 (Gwadar Pro)- SEPCO1 Electronic Power Construction Corporation and the National Transmission and Despatch Company (NTDC) of Pakistan recently signed the Engineering, Procurement and Construction (EPC) project of the 765 kV Mansehra Substation.
The substation is located in Mansehra City, Northern Cape Province, Pakistan, and it undertakes the power transmission between Dasu Hydropower Station and the Islamabad Power Grid.
The project adopts 765kV voltage for the first time, which is currently the highest voltage grade substation in Pakistan, said Power Construction Corporation of China (POWERCHINA) in a tweet.
After its completion, the project will transmit clean energy from Dasu Hydropower Station, helping alleviate local power shortages and promoting economic development in Pakistan.
Talking to Gwadar Pro, the spokesman of NTDC said that the project will contribute to further electrification of currently non-electrified areas, strengthening of the grid and improvement of the quality of electricity supply.
He said, “during construction, temporary employment opportunities for local contractors and local labor will be generated. It is estimated that the project construction will utilize 150- 200 staff. Although many of these positions will require specialized skills, there will be employment opportunities for non-skilled staff.”
The construction will also induce business opportunities for small businesses or people providing goods and services to project construction or its staff (i.e. machinery, trucks, vehicles, catering, cleaning and entertainment, etc.).
“The project will have positive gender impacts through improved access to electricity or better electricity supply as improved access to electricity and power will facilitate tasks
that are carried out by women and girls and thus promote gender equality, women’s empowerment, and girls’ access to education, health care and employment,” he added.

 
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Chairman WAPDA Lt Gen Sajjad Ghani (Retd) visited Neelum Jhelum Hydropower Project today and reviewed progress on remedial works in Tail Race Tunnel of the project. The Chief Executive Officer of Neelum Jhelum Hydropower Company and representatives of the Contractors of remedial works and the Consultants were also present on the occasion.
Electricity generation from Neelum Jhelum Hydropower Project had to suspend in July 2022 due to blockage at one location of the Tail Race Tunnel, out of the project’s tunneling system which is about 68 Kilometers long. Consequently, WAPDA started remedial works by awarding contract to a Chinese construction firm in August 2022 after seeking approval from the Federal Government. Since then, the remedial works are being carried out day and night at the site.
While witnessing the construction work at the site in the Tail Race Tunnel, the Chairman emphasized upon the project management to complete the remedial works in accordance with the schedule. He further directed that recommendations made by the International Panel of Experts be also adhered to in carrying out the remedial works. Earlier in a briefing, Chief Executive Officer Neelum Jhelum Hydropower Company apprised the Chairman about progress achieved so far on the remedial works.
The 969 MW-Neelum Jhelum Hydropower Project started electricity generation in April 2018. Prior to suspension of electricity generation in July 2022, the project had provided more than 18 billion units of electricity to the National Grid.


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884MW - Suki Kinari HPP (under construction)
The construction activities are in progress with severe weather conditions. The civil and electro-mechanical works are going on.
The construction activities were started in 2017 and expected completion date of the project is 2024.


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The government has quietly delisted two power plants, which over four years ago, had been put on an active list for privatisation to raise an estimated $1.5 billion. The government aims to sell these state assets to Qatar in a direct deal to avoid a looming sovereign default.

The development came two days after the govt constituted a new cabinet committee aimed at selling the state assets on a fast track basis. The 2460 megawatts (MW) capacity LNG-fired power plants will now be handed over to this committee to find a suitable foreign nation buyer.
 
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ISLAMABAD-Federal Minister for Planning, Development & Special Initiatives Ahsan Iqbal on Tuesday gave a nod to 300MW coal-fired power project in Gwadar and directed to complete the project by January 2025.

Minister for Planning Ahsan Iqbal has also directed Ministry for Maritime Affairs, Power Division, Gwadar Port Authority GPA and China Overseas Ports Holding Company Ltd (COPHCL) to ensure 100 percent power consumption of 300MW coal fired power project in order to avoid any financial loss to the national exchequer.

The minister made these remarks while chairing a meeting to review progress over 300MW coal fired power project on Tuesday. The meeting was attended by chairman COPHCL, chairman Gwadar Port Authority GPA and other relevant stakeholders. The project was conceived under the China Pakistan Economic Corridor (CEPC) in 2016 that would cater to the needs of some 150,000 local people by the end of 2023. During the meeting, the minister also directed the Power Division to review the project and address impediments within six months enabling the project to achieve COD in January 2025.

The project aimed at improving the reliability of the local power supply that would help gradually solve the problems in current economic development and urban construction in the Gwadar region, which is being restricted by the shortage of power. Earlier, the minister had directed the COPHECL to provide exact demand of the electricity for Gwadar Free Zone and share 10-year plan for electricity consumption by Gwadar Free Zone Company in order to establish exact electricity utilization of 300MW coal fired power project at Gwadar.

The minister further said that the government is already working on a project of two transmission lines from Iran that will increase the supply of the electricity to the port city.

It also merits mentioning here that earlier the Chinese company CIHC Pak Power Company Limited (CPPCL) working on 300MW Gwadar coal fired power project had termed the proposal for import of electricity from Iran to Gwadar and the proposed 600km 500KV transmission line from Hub to Gwadar as unreliable, susceptible to blackout due to technical or security concerns, which did not give investors the confidence to invest in the port city. The CIHC Pak Power Company Limited (CPPCL) had also termed the proposal of the PPIB regarding converting to local Thar coal instead of imported coal and relocation of power plant from Gwadar to Thar not feasible, official source told The Nation.

Ahsan Iqbal said that the incumbent government had revived all the CPEC projects since it came into power in April this year. The previous government had stopped all the CPEC projects. It is worth mentioning here that Prime Minister Shahbaz Sharif had already assured his Chinese counterparts that CPEC was the top priority of the govt.
 
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January 10,2023: WAPDA has awarded contract Package XI of Mangla Refurbishment Projectfor Units 9 and 10 to G.E Hydro France. The contract worth Rs.11.922 billion includes manufacturing, supply, installation and commissioning of the two units.

WAPDA is implementing Mangla Refurbishment Project with an approved PC-I cost of Rs.52.224 billion. The Project is beingcarried out in various phases, wherein the generating units are to be refurbished by closing down one tunnel (two generating units) at a time.The refurbishment works have been divided into 11 different packages. Prior to signing of Package-XI, as many as nine other packages have already been awarded, while works on four packages have been completed. Refurbishment of the first two units has been completed in 2022,

while refurbishment of all 10 generating units is likely to be accomplished by year 2026-27.

Mangla Refurbishment Project, on its completion, will enhance generation capacity of the existing Mangla Hydel Power Station from 1000 megawatt (MW) to 1310 MW,thus adding 310 MW additional power with average 1610 million units of additional energy per annum to the National Grid.

It may be mentioned that the USAID is providing US$150 million as grant and AFD is providing Euro 90 million as loan for Mangla Refurbishment Project, while rest of the amount is being arranged by WAPDA through loans and from its own resources.
 

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