Fears about discarded technology
By Engr Hussain Ahmad Siddiqui
A number of power projects based on indigenous coal are coming up in the private sector sponsored by local investors. Private Power and Infrastructure Board (PPIB) has sanctioned four independent power producer (IPP) projects of aggregate capacity of 1,550 MW, as integrated coal mining-cum-power generation projects, to be located at mine-mouths of Thar, Lakhra and Sonda-Jherruk coalfields.
The feasibility studies for all these projects, which are scheduled to commence commercial operations by June 2012, are currently at various stages of preparation, though pace of work is slow. These studies are required to be credible bankable documents of an internationally acceptable standard, in accordance with the Power Policy 2002, ensuring advanced technology to be employed.
But the fear is that obsolete technology may be employed in the coal-based power projects resulting in environmental degradation. In a bid to avoid procedural formalities and financial commitments, the sponsors are obtaining approval from the government, routing their projects through other agencies, like the Board of Investment, that have no jurisdiction whatsoever on processing such projects. In fact the government mandates the PPIB as a single-window facility for implementation of power projects of above 50 MW capacity in the private sector, which has the requisite capacity, capability and specialised expertise.
The major issue is that sponsors of such projects have not established their financial and technical credentials and are not willing to prepare independent feasibility report for the project, in accordance with the Power Policy 2002. This way they also save arranging a bank guarantee for an amount at the rate of $1,000 per MW to the government, a pre-requisite for issuance of the Letter of Interest (LOI) as per Power Policy, besides avoiding a project fee.
In fact, the prescribed feasibility study is essentially required to be undertaken before launching the project of this nature, which would conform to the requirements of the government, the power-regulator, the power-purchaser, the lender, the environmental control authority as well as the investor himself.
Such sponsors, in violation of the applicable rules and regulations, are not conducting any feasibility studies that would principally allow them to negotiate a tariff with the power purchaser and the National Electric Power Regulatory Authority (Nepta).
These sponsors are currently lobbying for hypothetical determination and announcement by the Nepra of an up-front tariff for the proposed power plants based on indigenous coal.
This however is being resisted by Nepra, on its merit, as in the absence of any feasibility study on the respective project, or for that matter of any such project, the proposed tariff will be unrealistic and consumers will have to pay higher price for the electricity.
On the other hand, such a hasty decision on the part of regulatory body may hamper further investment, particularly foreign, in the power sector. The feasibility study has to define the parameters of technology, machinery, cost of project and other economics that obviously vary from project to project and form the basis for determination of the power tariff in each case. For tariff determination, it is also of prime importance to take into consideration various provisions, particularly related to the incentives, benefits and concessions, of the National Coal Policy, which is not yet in place.
Of late, the domestic investors have shown interest in developing integrated coal mine-cum-power generation projects. Habibullah Energy plans to establish a 150-MW capacity mine-mouth plant, whereas Fateh Textile will develop a 200-MW plant, both based on Lakhra coalfields. Lakhra coalmines, with total mine-able reserves of 305 million tons, are well developed and mining is in progress since 1960, though under-capacity. It is a major potential area for establishing an associated power plant by the private sector.
Various studies undertaken by the USAID, JICA and the Chinese and the Polish firms during different periods from 1986 to 1996 have confirmed techno-economic viability of a series of 250-300 MW capacity power plants based on Lakhra coal. Yet such a project remains a pipedream so far, in spite of existing infrastructure. Wapdas plan to set up additional three units of 50 MW each was dropped many years ago so as to encourage private sector.
Likewise, Dadabhoy Hydrocarbon is setting up a 200-MW power plant based on Sonda-Jherruk coalfields, which are the second largest coalfields in Sindh with reserves of over seven billion tons, and a 1,000-MW project by Hasan Associates on Thar coal, the countrys largest coal resources.
In addition, Idrees Steel Co propose to develop a 300 MW capacity plant based on Thar coal. Descon Group has plans to develop 125 MW mine-mouth project at Naukot, Distt Tharparkar and another 125 MW project at Golarchi, Badin. Also, Olympia Chemical Co plans to establish an integrated project to generate 76 MW electricity. It is yet to be seen as to how many investors are really serious to develop the respective integrated projects.
Here, one may recall a project sponsored by Associated Group/Smith Co-generation Management Inc. for which mine-lease area of Lakhra coalfields was allotted by the provincial government in 1996. In spite of obtaining repeated extensions of the LOI until 2003, the sponsors could not even prepare a feasibility report for the project. Instead of imposing a penalty for the opportunity that the nation lost for almost a decade, the sponsors were recently favoured to takeover Wapdas Lakhra power station on lease, without any bidding.
One of the projects not being routed through the PPIB, and thus not following the Power Policy, is reported to be sponsored by TASAQ International (Pvt) Ltd, in association with China National Machinery Import and Export Corporation (CMC) of China. They are going ahead with the implementation of an integrated mining-cum-power generation project of 2x300 MW capacity based on Sonda-Jherruk coalmines. The project is to be constructed on BOO (build, operate and own) basis, and has not yet obtained the LOI from the PPIB, as required. The initial agreement (MOU) was signed in August 2002 and the CMC has concluded an agreement with the government of Sindh on November 12, 2006 for conducting coal geological investigations.
Pakistan is emerging as an important market for coal-mining equipment and coal-based power generation equipment. Not surprisingly though, such sponsors plan to develop coalmines and install a power plant with the assistance of the Chinese, ignoring the latest technological developments.
This may precisely be the reason why they would be reluctant to seek approval of the project through proper channel, where technology, plant efficiency, plant availability, energy consumption, capital cost, competitiveness, environmental control and other parameters of the project are duly verified and monitored.
The development of an integrated mining-cum-power generation project is a complex and arduous process posing a number of issues, problems and challenges, which should be dealt with professionally in the feasibility study. First and foremost, comprehensive survey, exploration and investigations are to be conducted in the leased area to identify and verify suitable quality and quantity of coal resources on a long-term basis, say 30--40 years.
This is crucial for project implementation but unfortunately not taken seriously by the sponsors. Also, the geo-technical investigations and hydrological studies have not been carried out satisfactorily by the sponsors of these projects. The government of Sindh, which is responsible to allow exploration license or mining lease to the sponsors, has repeatedly shown its concern over the unsatisfactory situation, even sometimes threatening to cancel their lease, but to no avail.
Though China has the largest coal mining industry in the world, the technology employed is conventional and obsolete, and the mining management remains outdated. This results in low productivity, higher power consumption, poor mining conditions and higher pollutant emissions. A large number of accidents occur in coalmines in China, causing more than 6,000 deaths each year. These represent almost 80 per cent of total number of deaths in mine-accidents worldwide. For these reasons, China is currently closing down as many as some 7,000 coalmines, whereas coal-fired power stations with capacity up to 200 MW were closed down in January 2007 as these were heavily polluting the atmosphere.
The Chinese government has banned, on March 6, 2007, the construction of coal-based power plants in future with capacity below 300 MW. Realising that larger capacity would result in higher efficiency with less energy consumption and less pollution, the newly adopted policy allows installation of 600 MW to 1,000 MW coal-based power plants.
Simultaneously, China is seeking collaboration with the West to acquire latest coal-mining methods and technology .China has imported large-scale coal-mining equipment from the USA, UK, Germany and Japan worth $4.5 billion during the last seven years.
The only experience Pakistan has is that of 150 MW capacity (three units of 50 MW each) power station at Khanot, District Dadu in public sector using Lakhra coal. The Chinese have supplied the machinery, said to be of advanced technology of fluidized bed combustion but it is in fact first generation technology, which was already outdated when the power station was installed.
These units are not giving satisfactory performance in terms of economy, efficiency, pollution control and operational reliability, due to a number of factors including that of the obsolete technology. Currently, only one unit, at de-rated capacity of 30 MW, is operational, whereas the other two units are not functional for quite sometime. We need to learn from our experience, rather than repeating the same, time and again.
The government needs to review its strategy, curbing back-door investment in power sector, as it shall be disastrous, unfair and discriminatory to allow setting up of coal-fired power plants, without conducting a detailed project feasibility study as per PPIB rules. As regards technology, the Chinese companies should be asked to seek strong collaboration with the consultancy companies in the Western countries specialising in the latest technology for implementation of identified projects in Pakistan.
The government should ensure that, for future projects, modern technology for mining as well as power generation is acquired. Couger Energy UK have shown interest to develop a 400-MW power plant based on Thar coal, introducing latest underground coal-gasification technology. One hopes the proposal of the British company is considered seriously on its merits.
Fears about discarded technology -DAWN - Business; October 22, 2007
