111 510 510 libonline@riphah.edu.pk Contact

A refreshing breeze

Following a splendid lunch of char-grilled pomfret and chili crabs I was lying with our beach hut behind me on the sand facing the shimmering ocean. On one side the waterline gradually curves outwards to form the cape popularly known as the French Beach.

Beyond that, out in the distance, stands the Karachi Nuclear Power Plant. Kanupp was built by the Canadians and commissioned in 1972 as Pakistan`s first nuclear reactor designed to add 137 megawatts of electricity to the grid. However, because Pakistan refused to sign the Nuclear Non-Proliferation Treaty unless India also signed it, the Canadians discontinued support and the plant has barely ever run at a fraction of its capacity. Now, the Kanupp that lay before me had completed its 40-year design life and was to be decommissioned.

After Kanupp, it took 23 years before a new type of fuel was used to generate electricity for the grid, when the Lakhra coal power plant in Sindh was fired up. Conceived in 1986 it was commissioned nine years later in 1995. Eleven difficult years later, in 2006 it came to a grinding halt. Whilst there were said to be some technical issues relating to corrosion problems in the pipes, the main showstoppers appeared to be management and legal difficulties.

Since the plantran on local coal which is available in abundance from nearby mines, one cannot think of any insurmountable financial difficulties either. However, the project has not just languished but no other coal power plant has been built after 1995.

Coming from this perspective, the Jhimpir wind power projects that are starting to come on stream this year rep-resent the first drops of rain after a 17-year drought. Jhimpir is in a good neighbourhood 418 kilometres across a desert and a border in the Indian state of Rajasthan liesthe Suzlon Group`s 1,000MW Jaisalmer Wind Park, one of the largest wind farms in the world.

Based on satellite mapping of wind resources at a height of 50 metres above the ground, by the United States National Renewable Energy Laboratory, experts estimate the onshore potential of the Hyderabad-Gharo-Keti Bandar corridor at 50,000MW.

Estimates can vary on how much is exploitable. Experts talk about a 32 per cent `capacity factor` which basically takes into account the days the wind blows and the days it doesn`t. Nevertheless, thousands of megawatts can be generated. In particular, the hills and ridges between Karachi and Hyderabad are the sweetest spots for wind energy production.

Behind FFC and Zorlu, the two projects that come on stream in early 2013, there are another 30 with a collective potential of 1,800MW in progress and at various stages of the pipeline. Some are looking for land, others are conducting feasibility studies, and a few are waiting for generation licences from the National Electric Power Regulatory Authority.

Clearly this flurry of business activity is the result of some good work done by the Alternative Energy Development Board and the Sindh government, proof that good policy formulation and attractive incentives can produce results, even in an adverse political andeconomic climate.

In Pakistan, some economic sectors have attracted saturation levels of investment. The leading ones are banking, telecos, TV channels and independent power plants.

The IPPs would have attracted still greater investment had they not become plagued with circular debt. What was common across these sectors was the combination of a sound policy framework, transparency and an independent and strong regulator.

Wind-based power generation is just a sub-sector within the independent power production sector. The largest commercial impediment to investment in the power generation business in Pakistan today is the issue of circular debt and timely payments to IPPs. It may appear that wind-based IPPs are cushioned against this because late payments would not cause suspension of `fuel supply`. There is the risk that these IPPs may therefore be relegated to the bottom of the pecking order. This would be bad vision and even worse governance.

These projects are motivated by commercial considerations, backed by financial institutions and funded by shareholders that have reposed their trust in the project sponsors. In turn the project sponsors have reposed their trust in the guarantees given by the Pakistan government.

Moral principals apart, the journey from Kanupp to Lakhra to Jhimpir has been a long one and a new form of fuel, harnessing of wind potential, now appears within reach. On the other side of the Rann of Kutch, the Indian state of Gujarat alone is producing 3,000MW from similar wind conditions. Further south, Tamil Nadu is doing 7,000MW.

There`s no reason why Sindh cannot approach these numbers. Like a newborn child, the wind energy sector must be incubated against thecircular debt trap and other forms of risk. Good business sense would tell us that further encouragement to this sector sends out positive vibes to other investors and keeps the pipeline flowing.

As the projects come on stream one by one, each dollar of power purchased from the wind IPPs would offset 93 cents from the burgeoning import of furnace oil. The $700 million received in December under the Coalition Support Fund was immediately used up to import furnace oil which has been fed into the system and will be gobbled up in transmission losses, nonpayment and theft.

Of course there`s no running away from fixing the root causes of circular debt. Till that is done, payments to the wind IPPs must be kept current. An entrepreneur would tell you that when you hit upon a formula that works, repeating it over and over again; replicating it many times is the key to creating wealth and value. In that sense we must see more and more wind projects being created through this process.

The government must also replicate successful policy and regulatory frameworks that have worked in the past and adapt these for other economic sectors. • The writer is an international business strategist and entrepreneur.

moazzamhusain@yahoo.com.au

Moazzam Husain, "A refreshing breeze," Dawn. 2013-02-03.
Keywords: