KESC on the way to improvement.

KESC is on the way to improve its performance.On February 26,201o P.M.Gilani inaugurated its 220 MW Combined Cycle Power Plant(CCPP) at Korangi,replacing the existing old and thermally inefficient power plant.The old Plant was a simple gas turbine with a heat rate of 16000 Btu per Kwh.The new plant, would be having a heat rate of less than 8000 Btu per kwh.This would reduce production cost tremendously, and will also reduce consumption i.e. more than double production with the same amount of gas.Part of the load-shedding is due to shortages of gas also.

Today ,the newspaper supplement announced the arrival of gas turbines for a 560 MW CCPP, termed Bin-Qasim-2.The Thermal efficiency of this plant is also very high(50%).The existing power plant is Steam Turbine based with a heat rate of 10,000 btu per kwh.The new plant is at least 25 % more energy efficient.The new plant configuration is 3 GT(129 MW) +3 HRSG=1 + ST(200 MW)= 560 MW.The plat ,however,would be commissioned gradually and would come on full steam by March 2012.Gas turbines are usually installed fairly quickly.However the steam cycle including Heat Exchangers and steam turbine consume quite some time.By continuing with this kind of BMRE,there is a potential to achieve energ efficiency improvements of around 30-60%. %.In today's energy economics,fuel cost has a predominant share ,often exceeding

60-70% of the total generation cost.If one saves even 1% fuel,one is able to save a lot of costs.

This is the kind of (thermal ) efficiency improvement that consumers and every body elase want KESC to acquire to reduce its losses and start making reasonable return on investment and not through unnecessary demands for increase in Tariff.Current losses are an opportunity. Convert these into profit.

KESC's Tariff system is different than what is applicable on other public sector utilities like LESCO ,FESCO and others.KESC works on a fixed multi-year tariff system with provisions for charging escalations in fuel and O&M costs.Thus any cost saving or increase on account of thermal efficiency improvement or changes are not passed on to the customers.Without such improvements KESC would and continues to run into losses which have passed beyond a level of Rs 100 billion, jeopardizing the financial viability of the company.Thus such improvements in KESC's operations indirectly benefit the users.Elsewhere,it is a cost-plus formula.Utilities are paid what they spend plus a fixed rate of return.NEPRA quarterly makes determinations in that respect.The freedom of charging all costs to the customers have not been given to KESC.It was feared that a private party may charge all kind of costs to the consumer,if it was given a free hand.Although there are comparable ratios,and extra-ordinary benefit cannot be extracted out of cost-plus tariffs.

KESC has also reported reduction in Transmission losses from 4.2 % in 2008 t0 2.4% now,which is again a good omen.There are obvious difficulties in reducing distribution losses which have a high degree of theft and pilferage.This has political and social dimensions.Still utilities own employees are reportedly in league and even force theft on the poor user.It is the middle man(KESC mafia) which makes bulk of the money. Fortunately Smart Distribution transformers have begun to be manufactured in Pakistan,installation of which would significantly help in cutting down on both technical and as well as theft losses.

Rental Power controversy

Rental Power :What went wrong ?

Load-shedding :why? when there is ample capacity

Current Installed capacity of Electrical power generation is 21000 MW.We seldom see in the summer,Maximum demand to be exceeding 17000 MW.And the load shedding is to the tune of 2-3000 MW. And still more astonishing to a lay person may be that there is load shedding in winters as well,when the demand is several thousand MW lesser. What is the problem then.Firstly the installed capacity is not always put to use for a vareity of reasons such as the following:

1)A considerable capacity is of outdated old plants,which run as and when these are not sick or broken down. At least 2-3000 MW of capacity is in that category. In most countries such plants would be replaced by new.It costs only 50-60% of green field project costs and is always the most advisable investment.

2)Hydro capacity goes down to 10% of the installed capacity in winters due to low discharges in the river and possibly lower water requirements as well.So although demand goes down, supply goes down as well in the winters.

3)There is a gas shortage as well.So some capacity is not utilized due to gas shortage.

4)Finally there is a shortage of liquidity in the power sector and oil sector.GOP is not able to pay the subsidy promised by it.Provincial governments do not pay the bills.KESC has been suffering from low liquidity due to its accumulated losses exceeding Rs 100 billion.Oil cannot be purchased and refined to be used in the power plants.In the last NEPRA meeting two of the members were so annoyed with KESC's inadequate capacity utilization,that they did not sign the KESC determination.PEPCO did the same.

5)Rental Power could not come on stream due to long debate and protestation in the media and the parliament with accusations of corruption.ADB was called in which more or less supported the government position and the go-ahead was give belatedly.Benefit of the rental power was partly washed away due to the inordinate delay.

What is to be done.Most of the required steps have already been taken by the government.I would be narrating and critically evaluating those and offer one or two of my own thoughts.

1)Drastic steps have been taken to manage the demand,which has caused a consuderable reduction of Peak Demand by 1000-1500 MW.Similarly steps have been taken to manage gas load to supply more gas to the power sector.

2)Tariffs have been raised already and additional increases would be gradually made to reduce the subsidy requirements and the consequent circular debt.GOP has taken steps to inject money into the system.Provincial governments have been asked to pay their dues.

3)Steps are under way to undertake BMR(balancing, modernization and replacement).Assistance of USAID has been sought in this respect as well.

Perhaps this is all that was required except that implementation of the decisions be made seriously and swiftly.The outdated plants should be maintained for peak loading purposes and should be run on oil rather than gas.Rental Power which has been discussed elsewhere should ha ve been acquired for peaking purposes which would have cost lesser in fixed costs.

Gas fired IC engines should be installed in IPP or Rental mode or by PEPCO itself on stranded gas fields and wells.Also there are a number of Low Btu gas fields that should be utilized for these purposes.Some adjustments and arrangements should be made with companies like UCH power whose expansion project has not moved as per expected schedule, and thus gas resources remain unutilised.A good inventory of stranded gas should be taken to identify possibility of extra gas and implement gas based I.C.engine power projects on fast track basis. Reorganize and rejuvenate PPIB.They also need a BMR.A closer liaison and coordination between Ministry of Petroleum and Ministry of Water and Power is required.

Are Energy Prices high in Pakistan ?

It depends on what are you comparing with.If compared with the purchasing power of people, energy prices are way too high.Unfortunately energy is generally priced at international level,which is generally high ,but with some exceptions.I n most of the oil producing Middle East ,petrol is literally free: only perhaps distribution cost is charged.In venezuella,even there is a subsidy on distribution cost.That is why perhaps that people are so happy with President Chavez

and he challenges the mighty US so often and can afford to fraternise with Iran's Ahmedi Nejad.

Even domestically produced petroleum has to be priced at international prices:firstly its share is too low and secondly most inputs are imported .Lower labour costs are usually compensated by lower efficiencies not of the labour only but of the larger energy market's inputs and supplies.There is taxation on oil retail in Pakistan,almost 45%.In the US also petroleum prices are lower than in Pakistan due to lower taxation and more efficient oil industry.In India,petrol prices are almost the same as in Pakistan.In Europe, as a general rule petrol/diesel prices are twice as high as in Pakistan:major reason is heavy taxation,which has deep ideological routes in Europe.

Gas prices have remained generally quite low: lower than India, Europe and USA.Middle-east and Iran obviously have much lower prices.Gas prices are expected to rise as a result of rationalization of royalties and Gas Development Surcharges.

Electricity prices used to be low in Pakistan due to cheap hydro electricity.These days one-third

of electricity is being produced with imported oil which has become more expensive locally due to heavy devaluation of Rupee.Government has been subsidising electricity for the last several years,costing it Rs 100 billion per year.Governments capacity to pay such heavy subsidy has been going down which has resulted in accumulated circular debt.Besides there are IMF conditionalities now. Electricity Tariffs are to be raised as a result.Even after the increase,electricity tariff would remain comparable with other countries.

In Pakistan and India differential tariff is charged:very low rates for the poor smaller consumers.The lower rates are passed on to be charged to the larger consumers.What is the way forward then?

In Pakistan,electricity losses are phenomenal: 25% + as opposed to an average of 4% in advanced countries.More than half of these losses are composed of theft and pilferage and about half or slightly less are technical losses which could be brought down.Very poor or very powerful are involved in electricity theft.Utility employees are usually partners in such a process.Electricity theft used to be more rampant and has been brought down somewhat recently.Electricity theft is very high in Karachi, interior Sindh, KP,and Balochistan.Amazingly ,it is much too lesser in most Punjab.In Punjab, Gas theft is higher than elsewhere.Why these peculiarities?Textile sector in Punjab is notorious in gas theft.

Thar Coal and Hydro electricity offers a good opportunity for cheaper and domestic and affordable energy. In both we must be on a fast track.

bio-mass and bio-diesel:some caution required

Biomass is generally agricultural residue coming out of plants and shrubs or waste from agro-food industry like sugar mills and rice mills.Biomass is burnt in boilers to generate electricity.Also ethanol , a petrol like bio-fuel , is made out of sugar industry by-products like molasses.Bio-Diesel is made from the fruit of a plant called Jatropha.It contains an oily material which is squeezed out of Jatropha,refined and used as a Diesel substitute.

These are good alternatives to the fossil fuels like oil and gas which we are short of.They are also environmentally friendly.However,following factors should be considered before adopting a wider development of these energy sources;

1)Pakistan is a populous country short both of water ,land and food. Bio-mass and Bio-fuel compete with food chain.

2)Biomass is a fuel of the poor.Natural gas or LPG network is not available every where.Poor people use plants and shrubs and other agricultural residue as a cooking fuel.Bio-mass base projects would commercialize this almost free source of energy for the poor.

3) In western countries there are large plantation and forest resources and thus large surplus and residue is available.Besides it is not used as a cooking fuel by any body.We are an arid country and are not blessed with such massive bio-sources.

Process waste such as bagasse and rice-husk and corn-cob coming out of agro-food processing industry does not divert away the poor man's fuel and thus may be welcome.Similarly Ethanol production as a bye-product of sugar industry only would not compete with food chain.

However the widely dispersed plant material and agricultural residue should not be allowed as an input for upcoming biomass based power plants,Similarly the ultimate impact of Bio-diesel and Jatropha plantation on water and land should be carefully considered before major initiatives are launched.Studies should be commissioned on these issues by AEDB and Planning Commission.

4

Bio gas and Fertilizer from food and vegetable waste.

When I pass near Boat Basin Clifton,there are two types of bad smells and air that I inhale: stink of untreated sewerage that stagnates in Nehre-Umar Khayyam and its outfall into the basin and stink of putrefying food waste.Similarly in vegetable markets and Sunday markets , one comes across vegetable and fruit waste creating foul smell and degenerating the general environment and sanitation.The keepers complain that the waste is too much to be lifted away by the local municipality.The irony is that this kind of organic waste can be treated/composted at site.The space often spoiled and occupied by accumulated and spilled waste can be utilized or substituted.

The output of such treatment is biogas and fertilizer.Biogas can be bottled or consumed locally by the workers for cooking food and making tea.All it requires is two or more rather deep excavation of an area compatible with the waste stream volume.A rubber sheeting to cover and provide anaerobic conditions and a few suitably perforated pipes dug into the waste for collecting the biogas.

This is not a too difficult job .Local municipalities employees could be trained in Composting and services of a bio-scientists provided. The core municipality team could then go to the localities and train the local staff of the markets.One or two specialist malis could be hired and made incharge of the routine work.In Pakistan there should be several hundred such spots needing this kind of service and facility