Electricity production: need for indigenous fuel – Editorials

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EDITORIAL: Summer arrived earlier this year with unannounced power outages which then became scheduled. The moment coincided with the rise to power of the PDM (Pakistan Democratic Movement). From day one, the new government started blaming the outgoing government for not providing fuel to many power stations.

The problem was to be resolved within a few weeks. However, power shedding has only increased since then. Now the previous government is to blame for delaying the commissioning of some power plants designed and planned during the tenure of the PML-N (Pakistani Muslim League-Nawaz) (2013-18).

The media strategy is to pass the buck to others as the PTI (Pakistan Tehreek-e-Insaf) government did for the rise in circular debt during its tenure by accusing the PML-N government of not initiating more than necessary number of plants. The fundamental problem today is not capacity as there is enough base load generating capacity in the system to achieve near zero load shedding. This was also the case last year because there is little or no load shedding. However, the problem is quite different today.

The question is not about the competence of PML-N or PTI. Anyone who ruled today would have a similar outcome. The problem is financial. International prices for coal, RLNG and fuel oil are too high for the country to afford, given its precarious balance of payments situation. With such a high cost of fuel, the government is unable to pass it on proportionally in the increase in prices. Failure to do so would put pressure on the budget balance. Moreover, at such a high cost, producers (independent power producers) are also reluctant to produce at full capacity as they struggle to finance the growing circular debt.

These are the fundamental reasons for the high shedding scenario today. Had there been additional capacity available on imported fuel, the fate of power generation would be no different. For example, the government claims that the PTI government delayed the Punjab Thermal Power Limited (on RLNG) by 26 months. And that leads to greater load shedding. However, the load generation shortfall on RLNG by the three existing power plants was 785 MW as of June 30, 2022. This is due to not purchasing LNG at exorbitant spot rates. It’s a good decision.

The net capacity of four plants based on imported coal – Sahiwal Coal, Port Qasim Coal, China Hub Power and Lucky Electric – shows a deficit of 34,283 MW. Three of these four plants are operating at a sub-optimal level because the government has decided not to use incredibly expensive imported coal for power generation, as it would not be able to recoup the cost.

Moreover, it cannot afford to exert additional pressure on the current account deficit. Last year, these plants were operating at full capacity because coal prices were only a fraction of what they are today. Some transmission constraints hamper the ability of the China Power and Port Qasim plants to operate at full capacity simultaneously. Lucky Electric, which runs on lignite coal (the price of which is lower), was however closed for technical reasons. He is now back on the grid.

The same goes for oil-fired factories, like Hubco. A nuclear power plant (K2) is closed due to a refueling outage. Thus, the overall deficit of large reliable power plants was about 7,000 MW as of June 30, 2022. The “woes” of the majority of them are due to the non-availability of imported fuel. Some have been closed for technical reasons. The government argued that the shortage was due to the failure of the previous government to bring five power stations of around 4,000 MW into operation on time.

Well, last year the thorny issue was capacity payments and the government of the day deliberately delayed some projects to reduce the burden of the capacity payment. And there was no load shedding as such. The case would have been the same today if fuel prices had remained low. These plants should be online by next summer. In other words, if fuel prices normalize by next summer, there will be no load shedding.

And there would be less load shedding during the rest of the summer this year. Our hydel capacity is close to 10,000 MW and half of this is not obtained (end of June) due to non-availability of water. It’s a seasonal problem. With the onset of the monsoon and the melting of the glaciers, the availability of water would be better in the coming months. In addition, the load on the national grid would be less due to lower temperatures.

The hard time may be past; the problem lies in long-term planning, as the majority of power plants in IPPs established under the 1994, 2002 and 2015 policies were envisioned with imported fuel. The lack of reliance on local coal and other fuel options has created this systemic problem, especially at a time of high global fuel prices. The need is to solve this problem and focus on local fuel to generate electricity.

Copyright Business Recorder, 2022


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