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Govt drags feet on cost-effective coal-fired power projects

The government is yet to give go-ahead to conversion of 12 furnace oil-fired power plants into coal-combusted power plants that could result in net saving of over Rs790 billion per year.

The ministry of water and power admitted that 12 steam based thermal plants having power generation capacity of 4347 megawatts could be run on coal in about a year. The total conversion cost would be $1.565 billion and annual saving in fuel cost (which is borne by the government) would be $8.04 billion per year equivalent at current dollar rate to Rs790 billion. This saving could wipe out the total annual subsidy that the government pays to the power sector besides sparing over Rs400 billion per year for further investments.

The first proposal in this regard was initiated by a Sheikhupura-based independent power producer (IPP) in November 2011 that sought permission for converting of its furnace based plant to coal, which would reduce fuel cost component by Rs5.5 per unit. Since this plant had adequate area available, it was proposed to install coal-fired boilers at the other side of steam turbine, which would ensure regular supplies from the furnace oil boilers yea round.

The power generation would have to be stopped for six months only for connecting coal-run boiler with steam turbine.

The proposal suggested that during these six months government continues to pay the capacity payment charges to enable the sponsor to service its past debt. The payment could be recovered by the Water and Power Development Authority (Wapda) after operation of coal converted plant in 12 equal installments. The sponsors will make entire investment for the conversion and share the benefit of fuel cost in a ratio of 40:60, it said. The net saving to Wapda was calculated at Rs5.15 billion per year. The final approval from the government is still awaited.

The Private Power and Infrastructure Board (PPIB), operating under the ministry of water and power, after receiving this request carried out its analysis on conversion of existing thermal power stations on cheaper fuel.

It has identified eight public sector and four IPPs that could be converted from furnace oil to coal based steam generation. Its analysis is based on imported coal.

According to the board’s document, power generation thermal units in public sector include 205 MW Jamshoro unit 1, 470 MW Jamshoro units 2,3,4, 300 MW Guddu units 3, 4, 545 MW Muzaffargarh units 1, 2, 3, 320 MW Muzaffargarh unit 4, 420 MW Muzaffargarh units 5, 6 , 132 MW SPS Faisalabad, and 195 MW NGPS Multan units 1, 2, 3. The total available capacity of these steam power generation units comes to 2,325 MW. The total yearly savings from these eight units after conversion to coal would be Rs486.56 billion or $5.72 billion at dollar rate in 2011. Among the independent power producers, the projects that could be converted to coal include 1200 MW Hubco Karachi, 348 MW AES Lalpir, 348 MW Aes Pakgen, and 126 MW SABA Power.

The total fuel cost saving from these projects has been estimated by PPIB at Rs196.81 billion per year. The PPIB document further stated that each of these projects if converted into coal based technology would stop power generation for at least a year. It also recommended paying capacity charges to the idle units during the period when they are closed for technology up-gradation so that they could service their past debts.

Power sector expert Mohsin Syed said that currently about 4000 MW of thermal power generation capacity remains idle throughout the year. He said the government should shift 2000 MW projects in one-go. “The saving from these projects will be five times higher.”

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