M/s Hub Power Company (Hubco) is likely to carve out two units of the Hub plant from the Power Purchase Agreement (PPA) and novate them to Karachi Electric (KE), well informed sources told Business Recorder.
M/s Hubco has written a letter to CPPA-G regarding conversion of two Residual Fuel Oil (RFO) based units of Hub plant to coal. The power company approached K-Electric for the off-take of power from the converted units as a result KE would be able to replace its inefficient capacity with much more economical power supply from Hubco.
The sources said National Electric Power Regulatory Authority (Nepra) and CPPA-G, a subsidiary of Power Division are looking into the offer of Hubco to KE.
The coal conversion of two units of Hubco (2x323 MW) would be running for 8 months in non-winter months, with total tariff including incremental EPP and CPP of approximately $ 6 cents per unit, displacing the engine based RFO IPPs (Narowal, Atlas, Liberty, Nishat etc) with an EPP of approximately 9 cents per unit, resulting in annual savings of approximately Rs 14 billion for GoP. The total CPP of the converted units for remaining four months would be around Rs 4 billion which would result in estimated net annual savings of Rs 10 billion for GoP.
M/s Hubco had also submitted a plan to the government to convert furnace oil-fired plant into a coal-fired power plant prior to expiry of Power Purchase Agreement (PPA) in 2027. Hub Power Plant is a RFO-fired thermal power plant, situated at Hubco in Balochistan. The plant was built in 1997 with a Power Purchase Agreement (PPA) of 30 years and supplies 1200MW (net) electricity to the national grid. It employs four units - each has a gross capacity of 323MW with a designated boiler, stream turbine and generator.
The plant is being operated and maintained with a world-class maintenance regime along with the highest standards of Health, Safety & Environment (HSE) practices. Considering the world-class maintenance regime, Hubco is expected to operate well beyond its expected lifetime of 30 years.
Due to the imported mix with the addition of coal and Re-Liquefied Natural Gas (RLNG) based thermal and combined cycle power plants respectively, cheaper power is now available in the NTDC system. The supply of power is also higher than the demand, resulting in low dispatch of RFO-fired power plants. The load factor of Hubco plant has fallen below 10 percent in 2018-19 from a historical average of more than 65 per cent. In future, considering the demand and supply forecasts, RFO based plants would get minimal dispatch.
Currently, Pakistan has combined power generation capacity of approximately 27,000 MW. According to NDTC, the computed peak demand in 2018 was 25,717MW, which indicates current surplus power generation of over 1000MW. Moreover, demand and supply forecast for 2025 suggest that there would be peak demand of about 36,000MW - 43,000 MW at GDP growth rate of 4.3 per cent to 7 per cent. On the supply side, after incorporating the planned new projects which are currently under execution, the country would still have a supply surplus capacity at a GDP growth rate of 4.3 per cent. However, Energy Purchase Price (EPP) of plants dispatching lower on the merit order would be expensive in the range of $ 9 cents / KWh (on Brent at USD 60/ barrel). By adding cheaper power generation capacity, the government can achieve significant saving in the EPP. At 7 per cent GDP growth rate, the demand would increase significantly causing a supply deficit. In this scenario, it would be beneficial for the government to increase the base load power capacity at an economical tariff.
In 2013, the Government of Pakistan signed MoUs for the conversion of several oil-fired power plants, including Hubco, to coal to improve the generation fuel mix. However, at that time there was no provision for downtime as there was a supply deficit. In 2015, three coal conversion tariffs were issued by Nepra to K-Energy, Saba Power and AES Lalpir. These plants are of a similar size to Hub plant. The current scenario shows that the supply of power in the NTDC is greater than the power demand which implies that Hub power plant can be shut down for conversion.
Hub was developed on Build Operate and Own (BOO) model and started its commercial operations in 1997, on a 30-year PPA which will expire in 2027.
Hubco, in its offer to GOP argued that it aims to create a win-win solution which would be beneficial for the country. According to Hubco, post conversion the EPP would be reduced due to cheaper fuel, whole brownfield advantage would allow the completion of the project in significantly less Capex and shorter execution period as compared to Greenfield projects resulting in significantly low CPP. This would allow the government to benefit from this plant post 2027 at an extremely competitive power tariff.
The company maintained that RNLG and coal conversion were considered as part of the initial screening study. RLNG is a cleaner source of energy with a better environmental footprint. RLNG based power plants also have significantly higher efficiencies compared to RFO and coal based thermal power plants. However, RLNG is an expensive imported fuel.
On the other hand, coal is a cheaper fuel and even with lower efficiency, the coal plants are more economical in their overall tariff. With Thar coal on the horizon, there is an incentive to move toward indigenous coal-fired power plants to reduce import bill in the long term.
There are two possible conversion options: (i) Pulverized Coal (PC) boiler with imported sub-bituminous coal; and (ii) Circulating Fluidized Bed (CFB) boiler initially with imported sub-bituminous and eventually moving to Thar coal when it is available.
Post conversion of plant on coal in 2021, the 10 year levelized incremental tariff (including CPP and EPP) would be approximately 5.6 to 6.2 cents KWh for a 10 year project life and will be placed significantly higher on the forecast merit order.
Although CFB boiler would result in a higher tariff however, it would enable the use of Thar coal when available.
The company further states that to convert Hub power plant to coal the existing RFO-fired boilers will need to be replaced by new coal-fired boilers. The existing stream turbine and generator will be utilised along with other machinery and equipment of balance of plant. The new plant equipment that will be needed includes: (i) coal-fired boiler; (ii) coal handling/ conveyance system; (iii) limestone handling system; (iv) ash handling system; and (v) flue gas treatment system.
In addition, a coal storage yard, and ash yard, for proper disposal, will be needed. A sub-bituminous coal with a net calorific value of 4,500 kcal/ kg will be imported for use until Thar coal becomes available.
Approximately 6,000 tons per day of this coal will be consumed. Hubco intends to utilise the integrated jetty that has recently been constructed for the new CHHGC 2x660MW coal-fired power plant. This will allow the reduction of coal transportation and handling costs. Any modification need in jetty will be made. The jetty currently handles approximately 12,000 tons of coal per day and has a total capacity to handle 18,000 tons of coal per day. The increase in volume will allow jetty to achieve economies of scale for port handling, thus reducing the jetty tariff for CPHGC as well. The conversion would take 24 months to complete and 6 months of outage would be required for boiler replacement.
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