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Mills for new policy on bagasse fuelled power cogeneration

Published Sep 02, 2012 08:02pm

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THE government’s efforts to exploit the potential of bagasse-based cogeneration power projects have not yielded positive results so far.

Seeking more incentives than offered, the country’s sugar industry has failed to meet committed target of adding 2,000MW to the installed capacity. And the government has virtually been forced by the sugar barons to formulate a new more-attractive policy for bagasse-fired power generation, which is to be announced shortly.

Pakistan produces more than 12 million tons of bagasse (crushed residue of sugarcane), as an industrial waste, which has potential of generating 3,000-MW electricity. Almost all 80 sugar mills have in- house bagasse-based cogeneration power plants, mostly to meet their own requirements. Only a few mills have surplus electricity to sell to the utility company.

In November 2005, the ECC of the Cabinet approved plans for increasing existing capacity of these co-gen power plants to 700 MW, in the first phase, so that more surplus power could be ‘exported’. The response of sugar industry however was lukewarm.

In January 2006, the National Policy for Power Co-Generation by Sugar Industry (Co-Gen Policy) was notified, offering attractive incentives to sugar mills as were available to the IPPs under Power Policy. Only Fatima Sugar Mills showed interest in constructing a dual-fuel power project of 125-MW using natural gas as secondary fuel. The LOI was issued in June 2007, but project did not see light of the day.

The Co-Gen Policy was revised in January 2008, in consultation with the Pakistan Sugar Mills Association (PSMA) that committed to set up a series of 60-MW or above projects to generate 1,000 MW on commercial basis by 2010, doubling the combined capacity by 2012.

Subsequently, NEPRA announced in June 2008 an indicative tariff of US cents 8.286 per kWh levelised for a period of 30-years of project life, but it was not accepted by mills. Later, NEPRA agreed to offer upfront tariff of cents 9.28. Again, PSMA demanded even a higher tariff—-a minimum of cents 11.1.

In India, the maximum tariff for similar co-gen power is cents 7.5 per unit. There is no rationale to allow PSMA any further increase, as currently, energy is being delivered by mills to PEPCO/DISCOs at about cents7.5. Having analysed tariff petition, the NEPA could not agree to a higher tariff. As a result of deadlock on tariff issue, no progress could be achieved on proposed projects(except one).

These are Fatima Sugar Mills (100MW), Ramzan Sugar Mills (100MW), JDW Power/JDW Sugar Mills (80MW), Chishtia Sugar Mills (65MW), Janpur Energy/RYK Sugar Mills (60MW) and Dewan Energy/Dewan Sugar Mills (120MW).

Currently, seven sugar mills sell their surplus power to government. Layyah Sugar Mills, with an installed capacity of 9.2MW, exports 4MW. Hamza Sugar Mills operates 23.6MW plant, whereas Shakarganj Energy/Shakarganj Sugar Mills operates a 20MW co-gen power plant. Al-Noor Sugar Mills generates 21.8MW, and now plans to increase capacity to 36.8MW. RYK Sugar Mills (Rahim Yar Khan) generates 18MW and sells 10MW. Likewise, Al-Moiz Sugar Mills generates 27MW and exports 15MW. JDW Sugar Mills generates 22MW, with a surplus of 10MW electricity.

JDW Group owns three mills, namely JDW Sugar Mills, JDW-II Sugar Mills (United Sugar Mills) and JDW-III Sugar Mills (Ghotki Sugar Mills). JDW Power is the only project that has taken-off among the six identified projects. Compared to upfront tariff of cents 9.28, NEPRA has determined cents 9.9 tariff for JDW Power.

The company is constructing three co-gen power plants, in phases, of a cumulative capacity of 80MW. The project will be completed by 2014 at a cost of $123.5 million. These power plants, which will be based on state-of-the-art high-pressure high-temperature boiler technology, will be dual-fired plants using coal as the other fuel.

The fate of remaining projects is linked with the upcoming new Co-Gen Policy, which is expected to compensate the industry by extending improved fiscal and financial benefits in lieu of their demand for higher tariff.

The upfront tariff is based on a feasibility study submitted by PSMA for a notional 60-MW capacity co-gen project using bagasse and coal as fuels, involving capital investment of $96.67 million. Given the project parameters, even the feasibility is questionable. First, it is no more a co-gen power plant, and energy-from-waste, as bagasse mixed with coal will be used during crushing season and coal during off-season. Ironically, only 25 per cent bagasse will be used and 75 per cent coal as fuel.

Second, imported coal will be used, depleting foreign exchange earnings, and the project will no more be environmental-friendly. Third, infrastructure for coal transportation from Karachi to rural areas of mills’ locations will be required.

Fourth, only a small part of existing infrastructure of co-gen facilities will be utilised as green-field projects are proposed.

Last, and most important, this electricity will not be inexpensive. Globally, capital cost and tariff of waste-based and/or co-gen power is much lower than conventional power plant, but in this case, both are extremely high. Bagasse, which is of zero price, is to be charged almost at par with coal price. Again, bagasse availability is worked out only for 100 days while crushing season in Pakistan is of 120-165 days.

In final analysis, the PSMA proposed projects are neither economically viable nor technically feasible.

The government will be well-advised not to promote these projects, and instead, adopt policy measures to encourage construction of small 25-30 MW co-gen plants using bagasse as primary fuel.—Hussain Ahmad Siddiqui

The writer is former Chairman of State Engineering Corporation.

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