Pakistan: Dark Days Are Over

Pakistan: Dark Days Are Over

SAM Report,

Pakistan may in the years to come see some light at the end of what could only be described as darkness. According to recent media reports in Pakistan the average shortfall in the power sector is 4,000 MegaWatts, and nearly two billion cubic feet per day (BCFD) in the natural gas sector. The shortfall in the power sector can rise to around 7,000MW or 32pc of total demand for electricity, the Dawn newspaper said in a 05th August 2016 report. The same report pointed out that chronic power shortage, in the form of load-shedding and power outages, had cost the Pakistan economy Rs14 billion (7pc of GDP) last year.

According to the Dawn report over 140 million Pakistanis either have no access to the power grid or suffer over 12 hours of load-shedding daily. Pakistanis who do not have access to the grid are often poorer than those on the grid and the  household electricity consumption has grown at an average annual rate of 10pc yearly and where around 500,000 households are impacted with unemployment as businesses have been forced to shut down due to energy shortages.

Investment in the power sector has fallen to 0.7pc of the GDP in the last 10 years, from a high of 1.5pc during the 1980s and 1990s, and Rs30 billion is said to be the approximate expenditure by Pakistani households on UPS and battery chargers alone.

In this backdrop, the   China Pakistan Economic Corridor (CPEC) is a much anticipated initiative for Pakistan to  turn towards cleaner forms of energy, as China is a world leader in total wind and solar installed renewable energy, at about 140,000MW while also looking at diversifying its energy sector to include coal, gas, solar, wind and bio energy fired plants under the  CPEC project, in order to ensure a secure energy based future.

The energy projects under CPEC are being  constructed by private Independent Power Producers, rather than by the governments of either China or Pakistan. As reports point out, the Exim Bank of China will finance these private investments at 5–6% 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 has embarked on the construction of 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.

Three wind power projects under China Pakistan Economic Corridor with installed capacity of 200 Mega Watt would start their commercial operation this year, the Times of Islamabad said in a report published on 18 February 2017.

Under CPEC,  250MW of electricity are to be produced by the Chinese-Pakistan consortium United Energy Pakistan and others at a cost of $659 million while the Dawood wind power project is being developed by HydroChina at a cost of $115 million, generating 50 MW of electricity.

Citing official sources, the Times of Islamabad said that the  UEP Wind Power project with installed capacity of 99 MW likely to be completed by September. Similarly, the 50 MW Sachal Energy Development Wind Project is likely to be completed this June, it pointed out, stating that the Three Gorges Wind Farm Pakistan project with installed capacity of 100 MW is to become functional by next year. It further indicated that three more wind power projects of 100 MW each had already been completed and that they are producing the energy.

SK Hydro Consortium that is constructing the 870 MW Suki Kinari Hydropower Project in the Kaghan Valley of Pakistan’s Khyber Pakhtunkhwa province at a cost of $1.8 billion is being  financed by China’s EXIM bank while the  $1.6 billion 720 MW Karot Dam which is under construction is part of the CPEC plan is to be financed separately by China’s Silk Road Fund, the PakChina website on joint energy sector CPEC projects said.

In February this year reports from Pakistan indicated that Pakistan and China have signed a revised priority list of CPEC energy projects they plan to complete in the next two years. The adjustments had been made taking into account the progress of the past few years on the schemes envisaged by the program.

In a February 17 report in 2017, The Express Tribune stated that the Energy Expert Group had agreed to upgrade another 660-megawatt (MW) Hubco coal-fired power plant to the prioritised list but downgraded the 1,320MW Rahim Yar Khan Power project to its actively promoted list, which carries projects that will be completed in the next five years.

Other reports in Pakistan pointed to the Energy Expert Group (EEG) as stating that they had agreed upon a readjusted list of the projects, which ensures that the power generation is not less than 11,000MW.

The Energy Expert Group had signed the list following an understanding reached during a Special Meeting for China-Pakistan Energy Projects held in Beijing in December 2016 represented by Pakistan Prime Minister’s Secretary Fawad Hasan Fawad and Secretary Water and Power Younus Dagha.

In November 2014, when Pakistan and China had inked the Energy Framework Agreement, the priority-list projects that are largely expected to be completed by 2018 had 10,040MW generation capacities while the actively promoted list had a generation capacity comprised of 6,645MW.

Power projects having a cumulative capacity of about 5,000MW under CPEC would be operational by 2017 and 2018, Planning, Development and Reform Minister Ahsan Iqbal had stated despite some reports of delays and the actively promoted projects are to be made operational by 2022.

While the availability of power from the CPEC energy projects are cited as being crucial for the government to fulfill its promise to end power outages, reports stated that it has offered up to 34.5% return on equity to the sponsors of coal-fired power plants.

In the Balochistan province, a $970 million coal power plant at Hub, near Karachi, is to be set up with a capacity of 660MW 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. This plant is now added to the priority list.
In December 2016 Pakistan’s Prime Minister Nawaz Sharif  inaugurated the Chashma III nuclear power plant in Mianwali which is expected to add  340 megawatts of electricity to the national power grid, in a joint collaboration between the Pakistan Atomic Energy Commission and China National Nuclear Corporation that was initiated following the successful operation of Chashma-I and Chashma-II projects.

“We come to Pakistan, not for the installation of our equipment and gain profits. We pay more importance to improving the development of local high-end manufacturing industries so as to make the development sustainable,” Wang Binghua, who is participating in the Hub coal-fired power plant’s construction was quoted as saying by the Xinhua news agency in a 2017 March 28th report.

“We also try to group more and more local communities into our project to dispel their worries,” Wang  had reiterated and had promised to enroll a number of Pakistani graduate and provide them on the job skill based training.

“A country cannot rely on just one source of energy. Coal-fired power plants, gas-fired power plants, solar farms, wind energy, bio-energy, and other new energies should all be utilised in order to guarantee energy security. Therefore, it is necessary for Pakistan to build the coal-fired power plant,” Wang had pointed out reiterating the path for Pakistan to end its energy crisis.

According to Wang, the Hub coal-fired power plant is expected to be fully operational in August 2019, generating about 9 billion kWh of electricity to the Pakistani national grid annually while creating about 10,000 jobs for local people during its construction.

Meanwhile the Sahiwal coal power project as part of the CPEC megaprojects are  ongoing from Balochistan to Azad Kashmir where China is making investments amounting to $52 billion.

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 while the Thar II project will be aimed at generating 3.8 million tons of coal per year as part of its first phase.

In Punjab province, the $1.8 billion Sahiwal Coal Power Project  under construction in central Punjab is to have a capacity of 1,320MW and is being built as a a joint venture of two Chinese firms: the Huaneng Shandong company and Shandong Ruyi Science & Technology Group.

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.

With systematic implementation, the multi focused energy options charted out for Pakistan as part of the  CPEC energy projects will ensure that the country reaps the best it could in terms of corporate, entrepreneurship and domestic productivity to end completely an era of power shortage.