EDITORIAL: According to a Business Recorder news item, the government has decided not to change the location of 300MW coal-fired power plant from Gwadar to Thar.
The government is said to have taken this decision with a view to appeasing China. It may be argued that the country’s larger interest in the power sector is being sacrificed once again at the altar of foreign policy considerations.
Authorities in the past kept on adding power to the national grid in an IPP (independent power producer) mode and on imported fuel — a policy that is hurting the country today in terms of ballooning capacity payments and growing imported energy bill. The viability of the sector and affordability of the consumers have, therefore, kept on diminishing in the process.
In the past, for example, sub-optimal decisions led to the erosion of efficiency gains such as setting up of an imported coal-based power plant in Sahiwal, Punjab, where there are negative externalities of expensive transportation and its environmental impact that eat away the benefit of any lower fuel price. Then the most efficient LNG plants were not connected to the step-down grids at load centres, which elude full utilisation in peak season. The other issue is that these plants are bound to run on RLNG whereas domestic gas has been used in less efficient, old plants.
In the case of Thar coal, mining capacity is exceeding generation and that has been higher than evacuation of power capacity. A well thought-out integrated plan is conspicuous by its absence. We are, therefore, being ripped off left, right, and centre.
The decision to move towards coal was a few decades late; it was taken when the world had begun to move away from this environmentally messy fuel. And now when the realisation is to shift towards local coal, we are facing issues. In this particular case, the Chinese company is of the view that the shift in location would be treated as a new project. As a matter of principle, China has, therefore, decided not to undertake the execution of any new project that is based on coal. Hence, the project is slated to remain in Gwadar as originally envisaged.
This speaks volumes about our lack of negotiation skills and leverage with our foreign partners. Earlier, the government had successfully persuaded a local investor, Lucky Power, to use local coal instead of the imported one; but it is unable to convince foreign investors in the same way. Anyhow, another project with negative externalities is to be added to the system.
Another issue is that Thar coal is asking non-power consumers to come and set up their shop in the desert town as its generation capacity is steadily becoming stronger than its evacuation capacity. The idea of having non-power consumers in Thar is worth exploring, especially for greenfield projects.
The question is why these decisions are not being made ahead in time and why our authorities don’t invest in feasibility and strategic planning to have a balanced and optimal way of using the domestic energy sources and lowering the cost of energy through enhancing efficiencies. The love for projects and headlines is costing the energy sector a lot. The planning and execution of the energy sector should be carried out professionally. The sooner it is done the better it will be.
Copyright Business Recorder, 2023
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