Rpps in Pakistan

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RENTAL POWER PLANTS: PANACEA FOR ENERGY NEEDS OR LIABILITY FOR PAKISTAN

(K Raza Gardezi)
30 December 2010

EXECUTIVE SUMMARY
Pakistan is currently facing a power deficit estimated at 4000 MW - 5000 MW. To tide over the significant electricity shortages in the country, the Government of Pakistan planned to add 4,225 MW of generating capacity in 2009 against which the achievement was a meager 151 MW. There were many reasons for the failure of the 2009 capacity addition plan e.g. delays in Independent Power Projects (IPPs) due to a local and global financial crisis, security and terrorism related issues etc. Competitive bidding by 9 companies for new IPP projects under Private Power and Infrastructure Board's (PPIB) Fast Track process (Package A) was 'agreed in principle' by the Bid Evaluation Committee of PPIB in August 2008. Tariff was approved by NEPRA on 9th October 2008 and as of 6th December 2008 and the Cavalier IPP project was at stage 16 (notice for submission of Performance Guarantee and processing fee) out of 21 stages in PPIB’s Fast Track process. It was however reported in January 2009 that the project would not materialize because foreign investors were unwilling to provide financing due to recent increases in Pakistan's country risk premium.

This paper therefore intends to explore reasons for Pakistan to increase its power generation capacity through various new measures and incentives to private and foreign investors. The negative fallout of power shortages resulted in closure of industries, low production capabilities leading to unemployment and price escalation. This put a lot of pressure on the new government which was forced to take short term measures for filling in the power gap till its mid-term and long term power generation plans came on ground. The “Vision 2020 Program” of the government was initiated to address the power shortfall over the medium and long term with a view to add around 20,000 MW into the system by 2020 at an estimated cost of over $32 billion. The Government of Pakistan had therefore decided to resort to Rental Power Plants (RPPs) as a quick-fix (short term) solution to meet this crippling energy crisis. The aim was to acquire 2,250 MW of RPP capacity by end-2009. Unfortunately, most of the RPPs have not been commissioned. Rather the old RPPs (GE and Alstom Rental Plants) scheduled for 2006-07 could not get gas resulting in loss of 286 MW. RPPs have been delayed due to persistent controversy on transparency and irregular bidding process related issues highlighted by the media and opponents. The Supreme Court of Pakistan was force to take suo motto notice in the matter forcing the government to request the Asian Development Bank to look into the RPP programme. An analysis has been carried out on the role of rental power plants in Pakistan’s energy crisis while some strategic options have been discussed to find a way forward in the matter.  

GLOSSARY OF TERMS
ADB Asian Development Bank
AEDB Alternative Energy Development Board
BOO Build-Own-Operate
DISCO Distribution Companies
EPC Engineering, Procurement, and Construction
FSAFuel Supply Agreement
GENCO Generation Companies
GoB Government of Bangladesh
GoI Government of India
GoP Government of Pakistan
GSA Gas Supply Agreement
GW Giga Watts
HUBCOHub Power Company
HVDC High Voltage Direct Current
IA Implementation Agreement
IPP Independent Power Producer
KV Kilo Volt
KWh Kilo Watt Hour
LIBOR London Inter Bank Offered Rate
LNG Liquefied Natural Gas
Mb/d Millions of Barrels Per Day
NEPRA National Electricity Power Regulatory Authority
NTDC National Transmission and Dispatch Company
O&M Operations and Management
PEPCO Pakistan Electric Power Company
PKR Pakistan Rupee
POL Petroleum, Oil and Lubricants
PPA Power Purchase Agreement
PPIB Private Power and Infrastructure Board
PPP Public-Private...
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