Last chance for Thar coal

Coal power used to be opposed earlier due to pollution reasons. Now climate change has been added as another factor. Coal has been declared the number one enemy for the climate among all fossil fuels. Notwithstanding Trump's recent statements against climate issues and lobbies, the climate movement is moving onwards as indicated by the successes of the Paris Agreement and the recent conference at Marrakech. Although, there is no explicit ban on coal power, there are signals that installation of new coal power plants would meet stiff resistance from powerful institutions and lobbies in the West. Already, several countries' financial institutions have stopped considering financial applications for new coal-power plants. Even though the Asian Development Bank is financing a coal-power plant in Jamshoro, it is highly unlikely that the ADB or any other IFI would entertain financing for new coal projects. Coal power plants of 1000MW cost around $2 billion. So where will the money come from? China can be that source, but we would return to it a bit later.
The government has launched an extensive coal-power development plan. Two such plants are at an advanced stage of completion, one in Sahiwal and the other at Port Qasim. One coal-power plant is also being installed at Thar, together with the development of a mine. It is being built by an Engro-led consortium with equity partnership with Sindh government. Another coal-power plant is being pursued by Hub Power in Thar. Hub Power is also building a coal-power plant at its oil-fired power plant built some 30 years ago. There are other proposals for smaller coal-power plants being promoted by local entrepreneurs to be installed at Port Qasim. Except for Thar-based plants, all coal-power plants use imported coal.
The world's existing coal-power plant capacity is a tremendous 1,627 GW. More coal-power plant capacity is coming up, although only in Asia, particularly in China and India. Lately, China has issued a circular to its provinces reportedly restraining new coal power plant permissions. China has asked international institutions to slow down on coal. It has also signed and ratified the Paris Agreement, undertaking to cut emissions. India may also slow down for two reasons: its local coal supplies cannot support any new coal-power plants and if the nuclear supply agreement with the US follows through successfully, India may also start inducting large-scale nuclear power. RLNG and renewables are other options that India is building. Indeed, recently India has cancelled its 16,000MW of coal-power plants projects that were based on imported coal, in an attempt to improve its image in terms of climate change, at least partly. Concluding, India's reliance on coal may be going down in future. Although, there is no explicit ban on coal-power at this moment, other than the financing restraints, it appears that further international restrictions may come on new coal such as carbon tax and others.
Pakistan has a coal resource of 185 billion tons and is able to support 50,000 MW of electricity generation for centuries. However, some studies have shown that Thar may not be able to sustain more than 10,000 MW due to input constraints, such as water. Thar coal may have to be moved to the Sindh coast to be able to install more than 10,000MW. The Sindh government has proposed the development of Keti Bandar where more power plants could be built on Thar coal by transporting Thar coal from mines to the port by rail or trucks. However, the long-term prospects for export may not be bright for a variety of reasons.
Export to India may be possible for coal-power plants located in Kutch. It may be attractive for India, if it comes out to be competitive. It may add to India's energy security due to lower transport risks. However, there may be technical difficulties in using Thar's lignite due to its lower heat content (CV). The same may be true for utilisation of Thar's lignite in Pakistani coal-power plants being built. There was some decision in the past to design these plants so as to be able to utilise Thar's lignite. I am not sure whether the Chinese have found this technically feasible and that such a decision is being implemented. My hunch is that at least 10-20% of Thar lignite can be mixed with imported high CV coal.
The point to which I wish to draw the attention of stakeholders is that the window of opportunity for coal power and thus of utilising Thar coal is limited to only a decade or so, 2030 at the most. After this period the international coal industry may die its own death due to lack of market and bad economics caused by international climate movement. Even China and India may remain in the arena with the prospects of monopoly power and its impact on commercial terms.
An unintended but bad consequence of present power policies, as critics suggest, is that it would have telling consequences on balance of payment, as both fuel and capital is imported and will have to be paid and paid back in foreign currency. Perhaps in the short-term there was no other alternative as the government had to do everything in its power to resolve the prevailing energy crisis. However, by next year, there would be an addition of 10,000 MW of generating capacity. The crisis would be over, or at least the lack of adequate generating capacity will be. Thus, after 2018 there would be some respite. Already, there is strong sentiment in the Ministry of Water and Power against installation of any more power plants on imported fuel. Ministry of Petroleum thinks that RLNG, which is imported, is a long-term option. We may revert to RLNG later. Suffice it to say that 3 RLNG power plants of 1,300MW each are at an advanced stage of implementation and are to be commissioned in Punjab, one financed by the government of Punjab and the other from the federal government. A total of 5 RLNG terminals are being planned, of which one by Engro at Karachi is already built and is functioning. The contract for another one at Port Qasim has been awarded recently and is expected to be commissioned in 2017 or in early 2018.
Coming back to coal, there is an issue of ambitions of the powerful Punjab government, which wants to install many more coal power plants within the boundaries of the province. Obviously, all of these would be on imported coal. There are many sceptics, and many opponents, of coal-power projects in Punjab. Many of them argue that the projects would impose a heavy load on the Railways and pollute rail tracks and stations in addition to usual chimney pollution. Punjab is an energy-scarce province and may have energy sufficiency concerns in the light of the 18th Amendment. However, the excess and problems of 18th Amendment may eventually be done away with. Electricity is still a federal subject with some concurrency with the provinces.
There are many other problems with Punjab government plans. Excessive concentration of power projects in Punjab under the CPEC may create problems for inter-provincial harmony. For Thar coal, Punjab coal projects may prove to be a death knell. There are limitations on how much coal power can be invested in due to other goals and objectives of important hydro projects such as Bhasha. However, both Punjab's energy sufficiency issue and Thar coal utilisation objectives can be reconciled if the Punjab government agrees to install coal power plants at Thar having JVs with IPPs in collaboration with the Sindh government. The Sindh government should welcome this, as it may be the last decade for coal-power plants. The difficulty may be that a large number of parties have prepared projects and submitted them to the Punjab government. But those parties can be diverted to Thar.
We are always late. There was a time when coal was in vogue. Now that we seem to be ready, the coal age is coming to an end. We longed to utilise Thar coal and squandered the opportunity, first through shear complacency and later through control issues. There is nothing sacrosanct about Thar coal except that it is sheer economics and self-reliance and energy security argument. It would save us foreign exchange, which may become a serious issue in the short- to medium-term, as prospects to increase exports concomitantly appear to be slim.
The government of Pakistan should announce a firm policy that no imported coal-power plant will be built within or outside CPEC. All new coal-power plants should be built in Thar. It is the CPEC attraction that is creating the stampede and pressure, which the government of Punjab has to deal with.
(The writer has been a member of Planning Commission until recently)