ISLAMABAD, Aug 12: Despite the worst power shortage in the country’s history, it has taken a small 4.8MW hydroelectric power project more than 12 years since receiving a letter of interest to get its tariff approved by a regulatory authority, only to be declared as “practically unviable and unworkable”.
“That simply explains why the country is in such an extreme energy crisis,” a former secretary for water and power told Dawn. He declined to speak on record because still being a federal secretary he is bound by civil service rules not to speak about another ministry. More than anything else, it was the institutional apathy that discouraged investments by local entrepreneurs or overseas Pakistanis in small but cheap energy projects, he said.
In November last year, a group of small local sponsors and investors was granted permission by the National Electric Power Regulatory Authority (Nepra) to start operations (Riali-II project) at a 30-year tariff of 6.8 cents per kwh (about Rs6 per unit).
Compared with this, Wapda was claiming an average tariff of Rs13 per unit for its 6,500MW of hydel power despite the fact that its two major sources — Mangla and Tarbela with combined capacity of about 4,600MW — have long ago recovered their investments and now cost less than 30 paisa per unit.
On the other hand, the Central Power Purchasing Agency (CPPA) or National Transmission and Dispatch Company, that has found faults with Riali-II, was paying until recently over Rs39 per unit for some rental power projects before they were cancelled by the Supreme Court and still pays on an average about Rs18 per unit for thermal power projects.
“We do not concur with the decision and have serious observations,” wrote Abdul Rehman Tariq of the CPPA when two meetings presided over by the minister and secretary for water and power desired that it should purchase electricity from Riali-II and other similar projects to facilitate “in the national interest to tap every drop of hydro potential on a fast track basis especially in Azad Kashmir, Khyber Pakhtunkhwa and Punjab”.
It is a classic example of how bureaucratic, institutional and legal wrangling work around development of cheap energy resources in a country where rental power projects were processed in months and yet they failed to deliver, the former secretary said.The Riali-II project located near Muzaffarabad was granted tariff at the request of Peshawar Electric Supply Company but later the buyer needed to be changed to secure capital for the plan owing to Pesco’s poor financial health because of huge receivables
The local sponsors were issued a letter of interest by the AJK government in 2000 to conduct a feasibility study for the project.
As a major power purchaser, the CPPA should purchase electricity from all sources, but running a portfolio of over 17,000MW, it has no interest in 5, 10 and 40MW projects even though many of them do not even need investment for induction into national grid.
Riali-II is not the only a cheaper source of energy to face roadblocks. There are dozens of small (less than 50MW) hydropower projects in Azad Kashmir and Gilgit-Baltistan with a cumulative production capacity of 2,000MW which have been struggling to reach the construction stage.
The sponsors of Riali-II had even agreed to upgrade the system to provide its production to CPPA at 132kv transmission line at its own risk and cost -- a major demand of the CPPA.
The secretary for water and power recorded in minutes that “there are certain issues related to purchase of power from hydropower projects in AJK, like 4.8MW Riali, which are due to flimsy objections and hindering the implementation of these projects badly which need immediate attention to be resolved”.
A major stumbling block used to be the absence of a regulatory framework. Under the law, Nepra does not have direct legal jurisdiction over power projects in AJK and Gilgit-Baltistan because of their disputed status but this was overcome through a government decision to allow distribution companies of Wapda or CPPA to file tariff applications on behalf of project sponsors.
At the same time, there are many major projects with combined capacity of 10,000 to 15,000MW that have not been able to make progress because of huge investments required for their construction and institutional roadblocks that discourage international investors. No wonder then that the 70MW Khan Khwar project identified more than two decades ago in Khyber Pakhtunkhwa is the only hydropower project to come into production after the 1,450MW Ghazi Barotha project was completed in 2005 at a cost of $2.2 billion.
In its tariff request Pesco informed Nepra that Riali’s feasibility report had been approved by a panel of experts appointed by the government. Many other small hydroelectric projects have completed their feasibility reports but due to non-availability of purchasers not one of them has taken off except the New Bong at Mangla of 84MW which took 13 years to reach the construction phase.