power, electricity
“The recommended project configuration provides flexibility without constraining future options and is economically viable under very conservative assumptions. Sensitivity studies show that even under adverse assumptions, the project remains viable”, said a final report of the Montreal-based SNC-Lavalin – one of the world’s 10 largest engineering firms. - Illustration by Abro.

Pakistan’s electricity demand is projected to more than double in 10 years to 42,000mw but enough investment is not expected for timely corresponding addition of domestic generation capacity. This has led a World Bank sponsored study to conclude that import of 1300mw of electricity from Central Asian countries is viable and beneficial, despite associated risks.

“The recommended project configuration provides flexibility without constraining future options and is economically viable under very conservative assumptions. Sensitivity studies show that even under adverse assumptions, the project remains viable”, said a final report of the Montreal-based SNC-Lavalin – one of the world’s 10 largest engineering firms.

The study has, however, not touched upon the Turkmenistan’s opposition to the project which has raised questions over its lower riparian river water rights and environmental issues, because the subject was outside its terms of reference and to be discussed at political level.

As one of the lead sponsors, the World Bank had commissioned SNC-Lavalin in 2006 to prepare a feasibility study for the Central Asia-South Asia Regional Electricity Market (CASAREM). The final report submitted to the lenders and participating countries last week was prepared in two phases – in December 2007 and January 2009 – and updated last month.

Pakistan, Afghanistan, the Kyrgyz Republic and Tajikistan have been pursuing the development of electricity trading arrangements and the establishment of CASAREM, starting with supply of 1300mw to Pakistan in five years (2016) and going up to 2800mw in the subsequent years. The economic analysis of the project suggests that the levelised cost of transmission would be about 4.97 US cents per unit (kwh) for a period up to 2035.

However, an additional transmission line would be required if more than 1300mw electricity is to be supplied.

In Pakistan, the price that the state-owned utility (NTDC) is paying for the recent long-term power purchase agreements with private producers is about 13.2 cents per unit for firm supply and 9.2 cents per unit for non-firm, while generation cost in Afghanistan is about six cents per unit. Afghanistan has to get 300mw from the project.

The project cost, excluding interest during construction (IDC) is estimated at $873 million based on market conditions which may change overtime in response to market volatility. The IDC is estimated at another $80 million. The project is economically viable based on a 10 per cent discount rate with a benefit-cost ratio of 1.3 per cent and an expected internal rate of return (EIRR) of 15.6 per cent.

This cost includes laying of 500kv, 750 kilometer high voltage direct current (HNDC) interconnection link with conversion capacity of 1300mw at Sangtuda in Tajikistan, 300mw at Kabul and 1300mw at Peshawar besides the relocation of existing 220kv lines, cost of ground electrodes at Sangtuda, Kabul and Peshawar and 500kv 477kilomter interconnection between Kyrgyz republic and Tajikistan and costs of environmental and social mitigation measures, security, technical and operational/routing issues.

“The biggest risk to the project viability is delays in the completion of the project, since most of the benefits are linked to the available surplus power” in Tajikistan and the Kyrgyz Republic. Given that there are many active stakeholders, agreements need to be in place to facilitate the process of moving forward in an efficient manner, the final report said.

In addition, there will be challenges in coming to an agreement on operational and contractual issues. Some of the operational and contractual issues that need to be addressed in subsequent studies include risk of non-payment, accounting of energy transfers and dispatch services, tariff and transit fees in addition to finance of the project, according to the study.

Security is a key issue for the project, both during construction and operations. The primary security issues are related to landmines, sabotage and theft of equipment, which may be addressed with proper contingency but never eliminated. Construction of line will have to take place on land cleared of landmines. However, during the construction of the 220 kV line, it was found that not all landmines were properly cleared, even though they were officially certified as clear. For quick supply restoration in case of sabotage, the O&M costs have been put at three per cent of the capital cost to ensure huge inventory. These costs are normally taken at two per cent.

The underlying driver for the project is that both Tajikistan and Kyrgyz Republic have surplus energy from their hydropower plants that could be used to  offset severe shortages in Pakistan. The key criteria for determining the viability of the project is based on the export of surplus power without new generation. The study was conducted for a scenario where no new generation will be added during the study period in Tajikistan and Kyrgyz republic. “Thus, if the project is economically viable for this most pessimistic condition, it will be viable for all other scenarios as well”.

The study said, the two countries – Tajikistan and Kyrgyzstan – have close to 6,000 Gwh of surplus, almost entirely available in summer months, which reduces to less than 900 Gwh by 2035. With no generation expansion and increasing demand, the Kyrgyz surplus is expected to drop from 2,150Gwh of annual surplus in 2010 to less than 400 Gwh by 2035. Similarly, the Tajik surplus is expected to drop from 3,750 Gwh now to about 500Gwh in 2035.

The historical water flows show that over the years there were a number of months of severe water shortages. During these dry months, the historical data show that even with minimal flows, most of the demand at peak hours can be supplied even if the full energy is not available on a 24-hour basis. During the initial years of the project, 1000mw can be guaranteed with 95 per cent probability for the peak hours during summer, even in a dry year.

The proposed route for the transmission line originating in Sangtuda in Tajikistan has to pass through highly insecure region of Salang pass to Kabul and terminate at Peshawar. This has, nevertheless, been found most suitable given security considerations as de-mining, and operation and maintenance requirements around access to the line for repair and maintenance.

The consultants understand that in view of huge capital requirement and institutional issues, it might be difficult to build all the generation capacity as planned. In particular, for the large capacity coal-fired and hydro plants a significant investment will be needed which will be difficult to obtain.

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