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Power sector achieved another milestone under CPEC complement

Published on 26th Dec, Edition 52, 2016

 

Energy generation and transmission projects are in different stages of execution

The power sector achieved another landmark when the total electricity generation reached to record 17272MW for the first time in the country’s history. The hydel generation contributed 6080MW while the IPPs and GENCOs contributed 11192MW. A large number of power generation and transmission projects are already in different stages of execution which will ultimately lead to end of power load shedding in the country by 2018.

Electricity outages will come to an end in 2018 as production capacity will rise above 33,000 megawatts, easily surpassing estimated demand for 25,961MW that year. In the total production, hydroelectric power will have a 28 percent share, followed by furnace oil-based electricity at 17 percent and liquefied natural gas-based power at 15 percent.

Local natural gas-powered electricity will contribute 12 percent; imported coal 10 percent, renewable energy sources and nuclear power 8 percent each and local coal 2 percent.

Recalling the difficult situation about three years ago, in 2013-14 there was unforeseeable load-shedding, higher unemployment of industrial labour, fuel shortage at power plants, excessive overbilling, years of delay in issuing letters of support and a weak transmission network that was not capable of carrying more than 15,500MW.

In that year, industrial and domestic consumers were facing power blackouts for 12 to 16 hours a day, which was reduced to six hours for urban and eight hours for rural regions in 2015 and the summer of 2016 with no outages for industrial units.

To another report load-shedding hours would come down to four hours in urban centres and stand at eight hours for rural areas in December 2016, which would be further cut to two and three hours for urban and rural areas respectively in June 2017.

Later, outages would come to an end in January 2018. Regarding the expected gradual increase in power production, it is claimed that production capacity would be 19,917MW against demand for 23,107MW between June and November 2016.

From December 2016 to April 2017, the capacity will rise to 21,599MW and further go up to 25,080MW in June 2017. In December 2017, the capacity will stand at 27,600MW and in June 2018, it will be 30,938MW whereas demand will be 25,961MW and availability at 26,590MW.

Electricity transmission and distribution losses had come down to the lowest in the past 10 years at 18 percent in 2015. Its positive financial impact has been estimated at Rs10 billion.

On the other hand, bill recoveries, which were 92.3 percent in 2007, rose to 93.4 percent in 2015 with a beneficial financial impact of Rs51 billion.

Apart from these, the circular debt, which stood at Rs320 billion in October 2014, had been restricted to Rs329 billion.

Electricity production in Pakistan increased to 7487 Gigawatt-hour in March from 5895 Gigawatt-hour in February of 2016. Electricity production in Pakistan averaged 7555.95.

Gigawatt-hour from 2003 until 2016, reaching an all time high of 11083.00 Gigawatt-hour in July of 2014 and a record low of 4195.00 Gigawatt-hour in December of 2010.

There are four major power producers in country: WAPDA (Water & Power Development Authority), KESC (Karachi Electric Supply Company), IPPs (Independent Power Producers) and PAEC (Pakistan Atomic Energy Commission). WAPDA’s total hydel and thermal capacity is 11,272MW.

Most of the country suffers scorching heat, national power shortfall soars beyond 6,000MW, necessitating loadshedding of over eight hours throughout the country and even more in the rural areas of the country stoking protests in some areas.

The government concedes merely 3,614MW deficit even during peak hours. According to its figures, total national demand, excluding Karachi, peaked at 19,500MW against the generation of 15,886MW.

As per its details, thermal sector generated some 9,900MW, hydle 4,850MW and wind 175MW.

The ministerial claim has three loopholes; exaggerated thermal generation, reduced demand and additional loadshedding in areas of high losses. It has historically been around 7,500MW. Where from 2,500MW have been added to the tally needs some explanation.The normal demand during such a high temperature is well over 21,000MW, which has been recorded in last few years, even if yearly increase is not taken into equation.

The supply of re-gassified liquefied natural gas (RLNG) had eased the situation a bit, but hike in temperature in May and drop in hydle generation (against its peak contribution of 6,600MW, it is now generating only 4,800MW) have neutralized the RLNG impact.

Pakistan’s current energy generating capacity is 24,830MW, though the country currently faces energy shortfalls of over 4,500MW on a regular basis with routine power cuts of up to 5 hours per day, which has shed an estimated 2–2.5 percent off its annual GDP.

Energy generation will be a major focus of the CPEC project, with approximately $33 billion expected to be invested in this sector.

The energy projects under CPEC will be constructed by private Independent Power Producers, rather than by the governments of either China or Pakistan.

The Exim Bank of China will finance these private investments at 5-6 percent interest rates, while the government of Pakistan will be contractually obliged to purchase electricity from those firms at pre-negotiated rates.

China’s Zonergy company will complete construction on the world’s largest solar power plant – the 6,500 acre Quaid-e-Azam Solar Park near the city of Bahawalpur with an estimated capacity of 1000MW is expected to be completed in December 2016.

The first phase of the project has been completed by Xinjiang SunOasis, and has a generating capacity of 100MW. The remaining 900 MW capacity will be installed by Zonergy under CPEC.

The Jhimpir Wind Power Plant, built by the Turkish company Zorlu Enerji has already begun to sell 56.4MW of electricity to the Government of Pakistan, though under CPEC, another 250MW of electricity are to be produced by the Chinese-Pakistan consortium United Energy Pakistan and others at a cost of $659 million.

Another wind farm, the Dawood wind power project is under development by HydroChina at a cost of $115 million, and will generate 50MW of electricity by August 2016.

SK Hydro Consortium is constructing the 870MW Suki Kinari Hydropower Project in the Kaghan Valley of Pakistan’s Khyber Pakhtunkhwa province at a cost of $1.8 billion, SK Hydro will construct the project with financing by China’s EXIM bank.

The $1.6 billion 720 MW Karot Dam which is under construction is part of the CPEC plan, but is to be financed separately by China’s Silk Road Fund.

 

Pakistan and China have also discussed the inclusion of the 4,500MW $14 billion Diamer-Bhasha Dam as part of the CPEC project, though as of December 2015, no firm decision has been made – though Pakistani officials remain optimistic at its eventual inclusion.

The $2.4 billion, 1,100 MW Kohala Hydropower Project being constructed by China’s Three Gorges Corporation predates the announcement of CPEC, though funding for the project will now come from CPEC fund.

Despite several renewable energy projects, the bulk of new energy generation capacity under CPEC will be coal-based plants, with $5.8 billion worth of coal power projects expected to be completed by early 2019 as part of the CPEC’s “Early Harvest” projects.

The Shanghai Electric company of China will construct two 660MW power plants as part of the “Thar-I” project in the Thar coalfield of Sindh province. The facility will be powered by locally sourced coal, and is expected to be put into commercial use in 2018.

Near the Thar-I project, the China Machinery Engineering Corporation in conjunction with Pakistan’s Engro Corporation will construct two 330MW power plants (having initially proposed the simultaneous construction of two 660MW power plants) as well as developing a coal mine capable of producing up to 3.8 million tons of coal per year as part of the first phase of the “Thar-ll Project.”

The first phase is expected to be complete by early 2019, at a cost of $1.95 billion. Subsequent phases that will eventually generate an additional 3,960MW of electricity over the course of ten years.

As part of infrastructure required for electricity distribution from Thar power plants, the $2.1 billion in Matiari to Lahore Transmission Line, and $1.5 billion in Matiari to Faisalabad transmission line are also to be constructed as part of the CPEC project. The Matiari to Lahore transmission line is to be built on an “urgent basis” by the China Electric Power Equipment and Technology Company.

Also in Sindh province, the 1,320MW $2.08 billion Pakistan Port Qasim Power Project near Port Qasim will be a joint venture of Al-Mirqab Capital from Qatar, and China’s Power Construction Corporation – a subsidiary of Sinohydro Resources Limited.

Liquefied natural gas power LNG projects are also considered vital to CPEC. The Chinese government has announced its intention to build a $2.5 billion 711 kilometre long liquid natural gas pipeline from Gwadar to Nawabshah in province as part of CPEC.

The pipeline is designed to be a part of the 2,775 kilometre long Iran – Pakistan gas pipeline, with the 80 kilometre portion between Gwadar and the Iranian border to be connected when sanctions against Tehran are eased; Iran has already completed a 900 kilometre long portion of the pipeline on its side of the border.

The Pakistani portion of the pipeline is to be constructed by the state-owned China Petroleum Pipelines Bureau. It will be 42 inches in diameter, and have the capacity to transport 1 billion cubic feet of liquified natural gas every day, with an additional 500 million cubic feet of additional capacity when the planned off-shore LNG terminal is also completed.

The project will not only provide gas exporters with access to the Pakistani market, but will also allow China to secure a route for its own imports.

The project should not be confused with the $2 billion 1,100 kilometre North-South Pipeline liquified natural gas pipeline which is to be constructed with Russian assistance between Karachi and Lahore with anticipated completion by 2018.

Nor should it be confused with the planned $7.5 billion TAPI Pipeline, which is a planned project involving Turkmenistan, Afghanistan, Pakistan, and India.

Other LNG projects are currently under construction with Chinese assistance and financing that will augment the scope of CPEC, but are neither funded by nor officially considered a part of CPEC.

The 1,223MW Balloki Power Plant is currently under construction near Kasur, and is being constructed by China’s Harbin Electric Company with financing from the China’s EXIM bank, is one such example.

Prime Minister Nawaz Sharif also inaugurated construction of the 1,180MW Bhikki Power Plant near Sheikhupura, which is to be jointly constructed by China’s Harbin Electric Company and General Electric from the United States. It is expected to be Pakistan’s most efficient power plant, and will provide enough power for an estimated 6 million homes.

In Punjab province, the $1.8 billion Sahiwal Coal Power Project is an under construction project in central Punjab that will have a capacity of 1,320MW.

It is being constructed by a joint venture of two Chinese firms: the Huaneng Shandong Company and Shandong Ruyi Science & Technology Group, who will jointly own and operate the plant.

Other coal-based projects in Punjab province include a $589 million project to establish a coal mine and a 300MW coal power plant to be built in the town of Pind Dadan Khan by China Machinery Engineering Corporation in Punjab’s Salt Range.

In Balochistan province, a $970 million coal power plant at Hub, near Karachi, with a capacity of 660MW to be built by a joint consortium of China’s China Power Investment Corporation and the Pakistani firm Hub Power Company as part of a larger $2 billion project to produce 1,320MW from coal.

A 300MW coal power plant is also being developed in the city of Gwadar, and is being financed by a 0 percent interest loan.

As part of the “Early Harvest” scheme of the CPEC, over 10,000 megawatts of electricity-generating capacity is to be developed between 2018 and 2020. While some “Early Harvest” projects will not be completed until 2020, the Government of Pakistan plans to add approximately 10,000MW of energy-generating capacity to Pakistan’s electric grid by 2018 through the completion of projects which complement CPEC.

Although not officially under the scope of CPEC, the 1,223MW Balloki power plant, and the 1,180 MW Bhakki powerplants are also under construction, which along with the under-construction 969MW Neelum-Jhelum Hydropower Plant and 1,410 MW Tarbela IV Extension Project will result in an additional 10,000 MW being added to Pakistan’s electricity grid by 2018 by a combination of CPEC and non-CPEC projects.

A further 1,000 MW of electricity will be imported to Pakistan from Tajikistan and Kyrgyzstan as part of the CASA-1000 project, which is expected to be completed in late 2018.

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