PTI govt abandons K-Electric’s coal project

Power project of 700MW designed to operate on imported, local coal

ISLAMABAD: The Cabinet Committee on Energy (CCOE) has approved the abandoning of the proposed 700-megawatt Datang coal-based power project of K-Electric.

The power project had been designed to run on local coal, once it is commercially available.

Sources told The Express Tribune that in its letters written to the Ministry of Energy, the power utility had requested for a notification of the tariff approved by the National Electric Power Regulatory Authority (Nepra) on August 11, 2016 and November 7, 2018 in respect of Datang Pakistan Power Generation (Private) Limited.

K-Electric said the delay in tariff notification was impacting the project’s commercial operation date and consequently the power demand-supply gap within the company’s service area. In addition to managing the demand-supply gap, the 700MW project was supposed to diversify K-Electric’s fuel mix and help move away from using furnace oil, which was significantly more expensive than imported coal, it said.

Accordingly, the project would enable K-Electric to offer affordable power to consumers along with ensuring sizable fuel cost savings to the national exchequer.

Furthermore, K-Electric said it was pertinent to mention that imported coal was approximately 70% cheaper than furnace oil and 33% cheaper than regasified liquefied natural gas (RLNG) on a fuel cost comparison basis.

Since it was a power project that would sell electricity directly to K-Electric, without involvement of the Central Power Purchasing Agency-Guarantee (CPPA-G) and no role of the Private Power and Infrastructure Board (PPIB) in the issuance of Letter of Intent or Letter of Support, the implementation agreement and the power purchase agreement would be signed with K-Electric exclusively.

The Datang power project was not covered under any power policy. Therefore, no concessions under any policy were allowed. However, the tariff was supposed to be notified by the Power Division and electricity had to be provided to K-Electric consumers at the basket price.

However, the energy ministry was of view that the imported fuel-based power plant would be covered by the ban on imported fuels. A meeting was held on October 24, 2019 wherein demand-supply position in K-Electric’s service areas and the possibility of additional power supply to K-Electric from the national grid was discussed.

During the meeting, it was agreed that the National Transmission and Despatch Company (NTDC) would supply additional 500MW to K-Electric from K2/K3 power project subject to necessary approvals and would conduct a joint study with K-Electric to increase total supply from the national grid to 1,400MW from FY23.

Furthermore, it was agreed that the 700MW coal-power project was critical for K-Electric in managing the demand-supply gap despite availability of 1,400MW from the national grid and hence the same should be pursued by the company on a fast-track basis. It was also agreed that the Ministry of Energy would table a case before the CCOE for the notification of project tariff.

For further assistance, convenience and understanding, a meeting was held on January 14, 2020, regarding supply of 500MW to K-Electric from K2/K3 project, related transmission infrastructure and supply of RLNG to K-Electric’s 900MW Bin Qasim Power Station-III (BQPS-III) based on RLNG.

First unit (450MW) of BQPS-III is expected to come on line in April/May 2021 and the second unit will come on stream by September/October 2021.

Total fuel requirement for the 900MW RLNG-based plant is estimated at 150 mmcfd. However, fuel supply will be required from January 2021 for testing and ensuring timely commercial operations.

The CCOE has approved the abandoning of coal-based power projects and approved additional supply of 500MW from K2 and K3 power plants.

It has also approved supply of 150 mmcfd of RLNG till December 2025 at Oil and Gas Regulatory Authority’s (Ogra) notified rates for RLNG-based power plants of K-Electric.

During a recent meeting of the CCOE, the power shortfall of K-Electric till 2023 was discussed and it was noted that it would face 330MW shortfall. The government approved additional allocation of 350MW to K-Electric from the national grid.

Talking about the matter, K-Electric spokesperson said, “Datang Coal Power Project was set up for K-Electric in 2015 to reduce its dependence on the national grid as K-Electric was asked by stakeholders to reduce reliance on national grid.”

He said that it also was a considerably cheaper option as compared to furnace oil and RLNG based generation. However, the tariff was not notified for more than three years, as a result of which power deficit continues in K-Electric service area, he added.

“As of now, the national grid is in surplus power, so this project is being put on a hold position and K-Electric is being asked to pursue additional power from the national grid for which three years’ time would be required for construction of interconnection facilities.”

The officials shared that to bridge the power shortfall in its service area, K-Electric is already working on state of the art BQPS-III 900MW power plant in Karachi, which is expected to start operations in 2021 and would provide major relief.

“However, still there will be shortfall in K-Electric service area hence it is important that the PPA for additional supply of power is finalised at the earliest and related regulatory approvals are provided in timely manner.”

Published in The Express Tribune, June 25^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.