Of Pakistan’s biggest problems, energy crisis tops the list. The sub-list is topped by the incorrect fuel mix, resulting in expensive electricity and the menacing circular debt. The current government took another step ahead in an attempt to gradually correct the energy mix, as PM Nawaz launched the Karachi Coastal Power Projects K2 and K3.
What is termed as “the first step towards a load-shedding free Pakistan’ is indeed a welcome move as share of nuclear power in Pakistan’s electricity mix is a paltry 4 percent, paling in comparison to the global average of 11 percent?! Nuclear power is the second cheapest source of electricity after hydro, with a very low generation cost of Rs1.1 per unit. With a higher share of nuclear energy in the mix, the weighted average prices will surely go down.
And unsurprisingly, Pakistan has once again looked up to the big brother China for this nuclear-power set-up. The Coastal Power Project was planned back in 2005 as a part of the Energy Security Plan that had envisioned two reactors of 1,000 MW. But in 2007, China deferred the development of the CNP-1,000 type reactors (the only ones exportable to Pakistan). Earlier this year, China restarted developing the CNP-1,000s, and Pakistan needed no second invitation to pounce upon.
The construction is slated to start by end 2014 according to the World Nuclear Association (WNA), and should take five years before it starts generating electricity. The project is estimated to cost around $10 billion, which is massive by any standards. This level of financing and investment is unprecedented in the history of Pakistan. And this is the toughest cookie in the equation-–financing.
China had earlier financed 82 percent of Chashma nuclear projects 3 and 4-– to the tune of $1.5 billion. But, $10 billion is a different proposition altogether and it would be naive to think China would contribute that sort of share for such huge amounts. What are financing options of Pakistan then? Not many, unfortunately!
The Asian Development Bank as a policy does not entertain nuclear-power projects. The World Bank does not have an explicit policy guideline for this but the only time it financed a nuclear-power project was way back in 1959 in Italy. So, the chances with World Bank appear slim as well. Also bear in mind, that Pakistan is not a signatory to Non-Proliferation Treaty –-further reducing its chances to obtain sufficient financing.
Given India’s civil nuclear agreement with the USA, the hopefuls would imagine that Pakistan is fortunate enough to be treated similarly. That is only a remote possibility given the hot and cold nature of Pak-US relations. It took India ten years to reach an agreement; so even if it happens by any chance, it is not going to be anytime soon. So, while the idea is good, it needs execution and Pakistan needs to start today to look for financers rather than sitting back.
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