Friday, August 6, 2010

Local manufacture of wind Turbines

A conference was held the other day on this subject at a local hotel the other day under the aegis of AEDB/UNDP project.Regrettably,I could not attend despite registration due to the extra ordinary law and order situation in Karachi.Normally the hotel areas and where I live remain calm despite disturbances,I was too scared to come out.More daring would have participated and those from outside the city who were already staying in hotels.I take this opportunity to share my thoughts on the subject with the readers.

The subject is of extra-ordinary importance , as no wind power capacity,except a few MWs of Zorlu could be added despite interest of entrepreneurs and support of AEDB/GOP.Some 100+ LOIs were issued and required tarriffs approved by Nepra for several projects.In the meantime the Wind Turbine market was very hot and no foreign supplier would supply the equipment to Pakistani projects despite earlier agreements.The lead times used to be inordinately long even for foreign projects abroad.The situation is changing.Inventories of some wind turbine manufacturers are building up.Last year was particularly bad for the international turbine industry.Stampede to wind power has perhaps ceased to exist,however sustained and stable interest does remain.Moreover,now possibly every able country and manufacture has started manufacturing turbines.Previously even companies llike Siemens were not into wind business.Siemens joined in much later.There used to be 5 or 6 manufacturers in Denmark,Germany and Spain.Now wind turbines are being offered by more than 20 companies in 10 or more countries.Even more may join in.The reason: it is not as difficult and sophisticated item as,let us say,Gas turbines and Steam Turbines are.

Wind turbines are in sizes/capacity of 1-2 MW running at 20-25 rpm as opposed to gas and steam turbines in 200+ MWs running at 1500 rpm.That makes it easy.In India there are 9-10 manufacturers,local and foreign with an aggregate capacity of production of several hundreds of MW PER YEAR.Almost every one is represented not by a sales agent but by a production venture.India is in this business for more than a decade now having a total wind power generating capacity of 11ooo MW with 1000 MW additions every year.One of its Manufacturer is SUZLON which is now a multinational producing and exporting from several countries including India itself.

Why does the limbo still persists in Pakistan.I have not spoken to the project promoters lately on the subject.I suppose bankers would be very reluctant to finance wind projects esp in the wake of circular debt issues laying bare the limits to financial capacity of GOP and as well as consumers to pay for the real and unreal costs of electricity.In India, Wind Power projects are being stalled at a price tag of 1200 USD per KW as opposed to the last NEPRA approval of 2600 USD per KW for a project.Some of the factors are easily understood and well known,but this extra ordinary difference is possibly also due to cheaper local manufacturing in India.It is true that there is no fuel cost in Wind Power,but that cannot be taken as a license for unreasonably high capital costs .It should be kept in mind that wind power suffers from a very low load factor of 25-30% as opposed to more than 80 % for thermal power, which would mean a capital cost factor for wind power as high as six times that of thermal power.Clearly Capital costs of Wind Power is to be brought down.The hypothesis to be examined is whether local manufacture can be cheaper.Evidence from India points that it should be cheaper.Local car manufacture does not possibly support that local manufacture would be any cheaper.But the two are probably not comparable.Car manufacture is a mass production issue and our market being too small for scale economies.Wind Turbine manufacture is a literal jobbing and at most a batch production.A batch size of 20 turbines may be optimal in our conditions for example.

Local manufacture may,however, be organised on the same lines of a deletion programme aiming at 80% local content in 5-7 years.There was a ready market for Suzuki car and ironically no competitor could emerge to SUZUKI.Those who tried to come in became bankrupt.Wind Turbine market and manufacture is a chicken egg syndrome.Some kind of guaranteed lifting/sales have to be given to a local or foreign party or most probably a JV.Some 200 MW of approved projects would have to place their orders through a PEPCO/GOP demand aggregation and guarantee programme.Several nucleus already exist at Karachi Shipyard,Heavy Mechanical Complex and DESCON.May be a few more details on this subject have been provided in my book:Pakistan's Energy Development.I may further dilate on the subject a little later when sufficient data is completed at my end.

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