Gwadar coal-based power plant impasse

For Pakistan, imported coal is bad recipe, especially with current account deficit, huge price rise

ISLAMABAD:

The Gwadar coal-power plant has reached an impasse. The project is being implemented under CPEC by a Chinese company. It is an important project affecting the progress and economics of projects in Gwadar.

The project promoter company has designed and proposed a power plant of 300MW based totally on imported coal. Nepra and other relevant stakeholders rightly require the use of local coal in the backdrop of government’s decision not to install any power plant on imported fuel due to the current account deficit crisis.

Nepra has asked the promoters to come up with a solution in three weeks to enable the regulator to award a tariff. We will examine the issues, difficulties and possible solution to the impasse.

The project has been delayed by several years on account of many reasons. The Gwadar power plant is being discussed since 2015. Various concepts have been discussed and evaluated.

Originally, IC engines working on diesel were considered which appear to be still working. However, it is expensive and cannot possibly meet the requirements of such an ambitious project area. Later, a combined cycle power plant on RLNG was conceived. The idea was to ultimately connect it to the IP pipeline. The concept was dropped due to the mounting difficulties and sanctions on Iran.

Ultimately, the coal-power plant was selected as an option. In the meantime and very recently, a 150MW solar power plant has also been proposed.

Indeed, solar option would have been the best. However, it had to be in hybrid form – solar-wind-storage, some IC engine coupled with electricity from Iran. This would have been the cheapest and the most secure and reliable option.

There is a good solar and wind resource around the Gwadar region. The project could have been implemented phase-wise matching the demand and saving the undue capacity payments of the initial period when demand would be much lesser.

From the promoter’s point of view, it would have been difficult to accept as they argue that they have already invested a lot of time and money in the current concept based on imported coal.

Candidly speaking, for project promoters, the imported coal projects are much simpler to implement and have many possible revenue streams.

Gwadar is a port town which would be easily supplied from the Indonesian and South African ports. Often there is more income from buying coal under long-term contracts or even booking the whole mines for 30 years. It is very difficult for a promoter to eschew the imported coal option.

For Pakistan, imported coal is a bad recipe, especially under the current account deficit and the recent experience of a huge price rise for imported coal going up to $400 per ton or even more.

The existing imported coal-power plants had to be run under-capacity and even had to be closed down.

Another imported coal-power plant in Jamshoro is already close to commissioning and cannot be switched to local coal readily and would need major changes in design.

The concept of Gwadar project can be changed without any c-cost or loss except for the additional work in redesigning the plant.

However, the major issue is where is the local coal? It is argued that Thar coal is being used at the mine mouth. It could not yet be transported outside Thar.

From Thar to Gwadar, it would be the longest distance among all imported coal-power plants. Even the Lucky Coal-Power Plant, which has been licensed on Thar lignite, is relying on imported lignite. There are logistics issues. Truck transport from Thar to the Lucky plant is feasible but is expensive and may damage the road system, it has been argued.

There is a rail-link project that has been found feasible but is being delayed due to a tussle with Pakistan Railways, which wants to benefit from the revenue generated out of the link project.

The issue should be resolved and the project implemented under public-private partnership. It is quite possible that the rail link would be completed by the time Gwadar coal-power plant is ready for commissioning.

However, the promoters are insisting on a design that may make the use of Thar coal impossible; use of API4 coal and boilers designed on that coal.

Fortunately, there is a working model in the form of Lucky power plant, which is currently working on the imported lignite API3. It is a super-critical power plant based on lignite coal but has specialised coal-crushing facilities which dewater the coal simultaneously with crushing and have larger boiler furnace designs required for low CV coal.

The Lucky power plant is a good example of how private sector can solve difficult problems and implement projects that are acceptable to all.

The Gwadar coal-power plant can be modeled on Lucky Power. It can be allowed to initially work on imported lignite until Thar coal logistics are completed. Under no circumstances, it can be allowed to proceed with a design that almost completely seals the fate of the local coal.

There can be flexibility in the time schedule and the remission of delayed fines and perhaps additional provision of capex for the changes that are required, although the capex is already too high if compared with international projects or similar projects implemented under CPEC.

Thinking long term, which should be done by the Thar Coal Energy Board, logistical arrangements should be studied for the transport of Thar coal to Keti Bandar.

It can be a rail link or a water canal. Already, there is talk of bringing water from sea to Thar for expanding the Thar coal capacity utilisation, which has been estimated at an upper maximum of 8,000MW.

From Keti Bandar, Thar coal can be transported to Gwadar through small sea vessels. On a more practical scale, Thar coal can be transported from Port Qasim to Gwadar by sea-going vessels. It may be much cheaper both in terms of opex and capex.

Thar is at a higher elevation. Coal slurry pipeline of 150 km can be laid up to Keti Bandar. There are coal pipelines working in the US and China.

One may, however, ask why this fuss on a 300MW coal-power plant at Gwadar, which is 10% or less of more than 4,000MW imported coal-power plants?

It is a genuine question. Something must be done in this respect as well. However, it is much difficult to make changes in the existing plants and relatively simpler in the new ones.

By the way, there is a large potential market for Thar coal in the industrial sector, especially cement, tiles and other extractive operations. However, industries would require dewatered and dried coal.

Power plants have arrangements for drying but industries generally cannot. Besides, it costs more to transport wet coal. TCEB may like to pay attention to this aspect and open up new mines with drying facilities.

Concluding, the plant is to be designed in a flexible model ala Lucky Power. It may initially run on imported lignite and later on the availability of logistics and others may be able to shift it to Thar lignite.

The writer is former member energy, Planning Commission and author of several publications on energy sector

 

Published in The Express Tribune, June 19^th, 2023.

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