The Faisalabad Electric Supply Company (Fesco) has signed a power purchase agreement (PPA) with the Shakarganj Sugar Mill for the round-the-year supply of seven megawatts of electricity per day. The deal between the state-owned distribution company and the private sugar producer was closed on February 23 at the headquarters of Pakistan Electric Power Company (Pepco) at the Wapda House in Lahore.

With the signing of the agreement, the Fesco won the distinction of being the first distribution company of the Pepco to purchase surplus electricity from a sugar mill to bridge the widening gap between the demand and supply of power for consumers in its area of jurisdiction. The distribution company intends to supply electricity to be provided by the sugar mill to its consumers in Jhang.

The Fesco is purchasing a total of 28MW from the textile sector.

The electricity being purchased by the distribution company from the sugar mill would cost it Rs5.14 per kilowatt per hour or per unit, Fesco chief executive officer (CEO) Ahmed Saeed Akhtar told Dawn from Faisalabad by phone. This included the per unit price of electricity – Rs3.88 – and O&M cost – Rs1.26, he said. “No capacity or fixed charges will be paid to the producer as is the case with other independent power producers (IPPs),” he said.

Shakarganj Sugar Mill is the first factory in the sugar sector to install a powerhouse to produce surplus electricity from molasses, a major waste product of sugar making process. “We have set up an environment-friendly biogas powerhouse with no emission of carbon dioxide. Ours is the first power generation plant in the world using molasses for electricity generation,” said Anjum Salim of the Crescent Group of Industries, the business group that owns it. “We will use molasses to produce biogas for electricity generation. The mill will not use any fossil fuel for generation as it is a fully Clean Development Mechanism (CDM) plant based on renewable energy.”

He said the power generation plant had cost the mill around Rs60 million. The sugar industry could produce 200 to 300 megawatts of renewable energy by using molasses to make biogas for firing the generation plants, he added. .

The Pepco officials are terming the agreement as a breakthrough and hoping that it would encourage other sugar factories to put up such plants and supply their surplus power to its distribution companies. They say the Pepco would encourage sugar mills planning to produce electricity from molasses because of cost-effective and environment-friendly technology. If more such plants based on biogas are set up, they say, it would help reduce the country’s dependence on imported fuel and pressure on the depleting gas reserves.

The Pepco – and the federal government – has decided to encourage and push its distribution companies to enter into power purchase agreements with mills in the textile and sugar sectors for the purchase of their power surplus in view of the increasing deficit between the demand and supply of electricity. The surging demand and dwindling supply of electricity saw domestic and industrial consumers go without power for up to eight hours a day from second half of December 2007 to mid February 2008. The energy shortage, which is blamed as one of the major factors for the pro-Musharraf Pakistan Muslim League’s rout in the February 18 elections, is feared to worsen in the coming summer.

The country is facing power shortages because of the more-than-expected rapid economic growth in the last five years during which the GDP growth averaged seven per cent and peaked to above nine per cent in 2005, the government claims. Its critics insist that the power deficit was more a result of the government’s failure to add even a single megawatt to the national grid in the last eight to ten years in spite of warnings of impending crisis. Not a single thermal or hydro power generation project was taken up during this period, they maintain.

The sugar industry has long been claiming that it could help the government in narrowing the power deficit to the extent of 3000 megawatts if the latter provided the mills with low-cost loans for replacing their existing boilers with high speed boilers. But the government has so far not responded to the proposal.

“If our proposal is responded positively, it will also benefit the sugar industry. We can also move on to renewable energy production. The sweetener is fast becoming a by-product and power generation the main product of the sugar-making process around the world. Pakistan also needs to move in that direction. It is not only crucial for the energy sector but also for the economic viability of the industry,” he said.