November 4, 2002	Monday	Sha’aban 28,1423

The government has announced the policy for power generation projects that lays emphasis on promoting indigenous fuels and developing renewable sources of energy.

Coal is considered a significant low cost alternative to other fuels. Fortunately, Pakistan has coal resources to the extent of 185 billion tons, which can be exploited to the economic wellbeing of the country. Recently renewed efforts were made by the government to chalk out an action plan aiming at optimizing the use of indigenous coal for power generation. The policy thus encourages setting up of indigenous coal-fired projects of various capacities in private and public sector. Whereas over 20 MW capacity projects will be allowed by the federal government as an integrated coal mining and/or power generation complex, the smaller power plants of size up to 20 MW will be implemented through a one-window facility at the provincial level.

Global shift back to utilization of coal as a major source of energy is imminent as the worldwide coal share in energy is currently around 40 per cent and is sharply increasing. It is the most common fuel for utility and industrial energy generation as shown in the following chart.

Economic factors are in favour of coal utilization for power generation because of ever increasing furnace oil prices and depleting natural gas reserves the world over. World coal consumption in 1997 was 5.3 billion tons, and is projected to be 7.6 billion by the year 2020. The coal, primarily used for power generation, has applications in steel production, cement industry and industrial process heating as well. Utilization of coal as source of energy in Pakistan at the time of its creation was 60 per cent, which at present is only six percent. Similarly, the contribution of coal-based power plants to current power generation is hardly one per cent.

The policy document proposes to develop coal based power projects with cumulative capacity of at least 4,350 MW. The schedule of projects include 600 MW project based on Thar coal on which the Chinese are already working, and 150 MW project as expansion of Lakhra Project, both to be commissioned by December 2015. The long-term plan includes additional three projects based on Thar coal, each of 1,200 MW. It is thus evident that in future indigenous coal will be used as a major source of power generation.

Nonetheless, serious initiatives and strategy formulation are required, on the part of the investors as well as the government, to develop these power projects. First and foremost is the need for coal mining and infrastructure. Modern methods of coal mining are to be employed as Thar coal and Lakhra coal are economically viable for large scale mechanized mining. A 1,000 MW power plant would require about 4 million tons of coal annually. The prospective owners and operators of the power plants have to be confident of regular supply of coal. Neither the private investor nor the government alone can do this, as there are many risks involved for the private investors to undertake mining operations, besides involving huge investments. Recognizing this fact, the policy encourages public-private partnership for mega projects.

The other vital issue is that of appropriate technology for power generation. Various coal technologies have been developed and are in use the world over. In Pakistan, coal ranges from lignite to sub-bituminous having high volatility (26-45%), sulfur (3-6 per cent), high ash content (3-38 per cent), moisture (7-11 per cent), and a calorific value of 5,000 to 12,000 BTU/lb. The limiting factor for use of coal for power generation, besides the moisture and ash, is the content of sulfur, major source of environmental pollution. But high content sulfur is no longer a constraint, thanks to modern technology. Conventional boilers are used for coal with sulfur below 4 per cent whereas coal with 4 to 7 per cent must be consumed under fluidized bed technology, known as clean coal technology.

At present the following technologies are acknowledged worldwide:

i) conventional pulverized coal-fired boiler; ii) fluidized bed combustion—atmospheric; iii) fluidized bed combustion-pressurized; iv) integrated coal gasification combined cycle

Another important aspect is that of environmental considerations. It is mandatory that design of the Environmental Impact Aspects (EIA) of the plant should correspond to the environmental laws and the World Bank guidelines on the subject. It includes air emissions of sulfur dioxide, nitrous oxides, carbon monoxide, carbon dioxide, hydrocarbons and flash. The above technologies ensure that environmental concerns about these emissions are being well satisfied. A coal-fired power plant in the heart of Alaska’s Denoli National Park, a well-preserved nature park, installed in 1990s is a remarkable example of environment friendly plant. Although Alaska has plenty of water resources as well as oil and gas reserves but the preference to a coal-fired power plant has proved that coal is not only a cheaper way of power generation but also an environmentally friendly one.

In Pakistan, the most economical and reliable technology has to be adopted, evaluating our past operational experience in this field. The 3x50 MW power plants at Khanot, (Dadu) on Lakhra coal are based on the advanced technology - fluidized bed combustion, bubbling bed type. Yet, these units are not giving satisfactory performance in terms of economy, efficiency, pollution control and operating reliability, due to a number of factors. Firstly, there were no detailed investigations carried out in respect of quality and supply of coal, a pre-requisite for undertaking such a project. Secondly, a pilot power plant is required to be established before selecting the technology and module of the commercial unit.

The proposed mega projects will therefore require detailed investigations with regard to feasibility and full preparations in respect of financial and technical resources before implementation. Besides the fact that mega projects can only materialize with foreign investment, these can be installed at or near big coal reserves that lack infrastructure facilities. For these reasons power plants based on Thar and Lakhra coal are scheduled to commission at the earliest by December 2015.

There is a need therefore that meanwhile, small capacity power plants be set up for which necessary infrastructure is already available. In Punjab, Sindh, and Balochistan, as well as in Azad Kashmir quite a good number of small and medium sized coal reserves are available, providing full justification to setting up a series of smaller sized coal fired power plants at the coal mine mouths. Earlier, in 1994, the Private Power and Infrastructure Board had issued LOS to two private companies to establish 6 MW and 10 MW power plants, based on Salt Range coal near Chakwal (Punjab). But due to intricacies in concluding fuel supply agreements (involving federal and provincial governments), power purchase agreements and financing problems, these projects were practically shelved. The measures have been taken in the policy to remove these impediments, and the provincial governments without strictly following the provisions of the policy will deal with projects of this size.

The proposed small units as envisaged in the power generation policy can be established at the mine-mouth in all the provinces and Azad Jammu & Kashmir. The major coal deposits in northern Pakistan occur in Makerwal and Salt Range coalfields near Dandot and Choa Saidan Shah (Punjab, coal reserves: 236 million tons), near Karak and Hangu (NWFP, coal reserves: 882 million tons) and Kotli area (Azad Jammu & Kashmir). The coal reserves in Balochistan are calculated to be 196 million tons, and coalfields at Dukki, Khost- Harnai, Pir Ismail Ziarat, Sor Range-Deghari and Much are well developed. Wapda has been satisfactorily operating a 15 mw coal-fired power plant at Sheikh Manda near Quetta for almost four decades. This plant has recently been shut down.

Balochistan already generates 1.7 million tons of coal annually. Due to inadequate transportation infrastructure and storage/handling facilities in the region however there has not been growth of coal-based industries. The proposed power projects will cater to the needs of far-flung areas, without any requirement to be connected with national grid. Again, the provinces and respective agencies in these areas are not required to follow the policy strictly for small units intending to serve locations not connected or not likely to be connected to the national grid. A power plant in the range of 6 to 12 mw is an ideal module for the provinces and local entrepreneurs. Higher generation can be obtained by installing multiple units. In China over 2,000 such small sized units are in operation.

Another important feature of the policy is promotion of indigenized plant machinery. For the purpose, local engineering industry will be encouraged to form joint ventures with foreign companies to develop power projects with total capacity of 2,000 MW by the year 2015. Import of only the plant and machinery that is not produced locally will be allowed at concessionary rates. Local engineering industry, such as Heavy Mechanical Complex, HMC-3 and Heavy Electrical Complex, have the necessary engineering and physical facilities and the experience to manufacture major items of the equipment, structure, accessories and spares for all type of power plants, including the precision (pressure) parts. In recent past Heavy Mechanical Complex has produced and supplied major equipment to power sector projects in public and private sectors, amounting to over 35,000 tons of equipment.

The requisite advanced technology, however, will essentially be required from abroad. HMC has already lined up technology for the indigenous manufacturing and supply of a 6 mw coal-fired power plant on turnkey basis. The cost of 1x6 mw unit is estimated to be $ 4 million, and it can be commissioned within 18 months or so. It is estimated that the payback period of the project is 4 to 5 years. A 6 mw power plant is sufficient to provide electricity to 1,000-1,200 houses in rural areas. To promote local investment, the SME Bank may arrange financing to the private investors for setting up feasible projects.

Once this technology is developed in Pakistan, it shall be assimilated, like sugar plants, boilers, cranes, cement plants, by other local manufacturing companies thus giving multifold benefits to national economy. Moreover, on commanding proper skills and technologies, such a power plant can be exported as well. Also, gradual conversion of existing oil-based power plants on coal can be undertaken. An added advantage of a coal-fired power plant is that of the bi-products from the spent fuel and ash refuses which can be utilized in industries such as brick making plant and raw material for cement plants. Coal briquetting can be undertaken for supply to consumers in process industries and for heating of industrial, commercial and residential buildings.

For an indigenously manufactured power plant operating on indigenous fuel, the spin of activities i.e. mining, transportation of fuel, supply of other consumables, manufacturing/ construction and operation of power plant shall give a boost to local economy.

Indeed coal can be the principal source of energy in Pakistan in the foreseeable future, playing a significant role in strengthening national energy sector. This however requires effective implementation of the Power Generation Policy 2002, along with a well thought- out plan encompassing sound technological and economic studies of the projects.