Cost efficiency: Government to convert three power plants to coal

Plan aimed at reducing cost of production by two-thirds.

ISLAMABAD: The federal government is converting three power plants from oil to coal as part of a plan to rely less on furnace oil-based steam power plants, a move that is expected to cut cost by two-thirds.

The 1,350-megawatt thermal power station (TPS) Muzaffargarh (units 1-6), 850MW TPS Jamshoro (units 1-4) and 640MW TPS Guddu are now being converted to coal with financial assistance from multilateral institutions.

According to a concept paper developed by the Planning Commission tiled ‘Conversion of existing thermal power stations to cheaper fuels’, the conversion of 12 steam power plants from furnace oil to imported coal in 2011 could have saved more than $8 billion or almost 4% of gross domestic product annually.



The savings estimate was based on prices of furnace oil and coal and the exchange rate at that time.

The current project will help save two-thirds of the cost of power generation, the paper said.

“The generation capacity proposed to be switched to coal constitutes almost a quarter of the country’s total capacity. It, therefore, can substantially cut overall electricity production costs, bringing relief to both domestic and industrial consumers,” argues a senior executive of a gas-fired independent power plant set up under the 2002 power policy during a recent briefing on the power sector.

“Another substantial amount of $1.5-1.6 billion a year can be saved by providing gas and oil to power producers according to their position on the order of merit based on their fuel efficiency,” contends the executive who asked to remain anonymous.

If his argument is accepted, then the government should prefer eight IPPs with a cumulative capacity of 1,700 megawatts set up under the 2002 policy in the supply of gas and oil for power generation.

Furthermore, he says, savings in fuel costs should help the government eliminate power subsidies, considerably cut its inflationary borrowings from banks, bridge the budget gap, spare funds for investment in hydropower projects and lift some pressure off the country’s weakening balance of payments position.

Published in The Express Tribune, October 15^th, 2013.

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