HomeNewsTwo thermal plants hint at converting to Thar coal

Two thermal plants hint at converting to Thar coal

ISLAMABAD: The country’s two thermal power plants of 700-MW generation capacity have indicated interest in converting themselves to Thar coal, which will bring their generation tariff from Rs 46 to Rs 8 per unit, sources close Managing Director PPIB told Business Recorder.

The company’s representatives held a meeting with the MD PPIB on September 25, 2023 wherein concept paper on the conversion of both complexes, i.e., Lalpir and Pakgen from RFO to Thar coal were discussed in detail for inclusion by both the plants in Indicative Generation Capacity Expansion Plan (IGCEP) document.

According to the concept paper, Lalpir Power Limited (Lalpir) and Pakgen Power Limited (Pakgen) are Residual Fuel Oil (RFO) based conventional thermal power plants established under Power Policy 1994 with a nameplate capacity of 362-MW and 365-MW, respectively. Both have been demonstrating operation over last 25 years. Located in the centre of transmission network, they are a support to system stability.

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Their high ramping rates have always been helpful to the system operator meeting the load and supply gap, quickly.

The concept paper says that due to unprecedented increase in RFO price pushing these plants down in economic merit order and in line with the GoP’s objective to use indigenous resources, Lalpir and Pakgen intend to replace both or at least one (preferably Pakgen) existing RFO fired boiler with Thar coal fired boiler. Power evacuation will remain the same, i.e., connection with Muzaffargarh grid station through existing 220kV transmission lines. It will be a low CAPEX project as compared to adding 700-MW new green-field project. It involves only boiler replacement cost with some necessary upgrades in existing systems which makes the project even more attractive and offers best utilisation of the paid off assets for next 20-25 years.

Power Purchase Agreements (PPAs) of both projects are valid till end of 2028. Latest IGCEP has envisaged almost 0% capacity factor for these plants till 2028. In such scenario, according to the current PPAs, the GoP will be paying off estimated Rs.90 billion for idle capacity till the end of PPAs. Both the plants are connected at 220kV transmission system and located in mid-country. They not just provide dispatch flexibility but also play a vital role in steady state and transient grid stability. Being large synchronous machines, located in a geographically strategic location, stability and flexibility will remain in the system for another 25 years in case of fuel conversion to Thar Coal.

The expiry of existing PPAs will leave a generation gap of 700MW in MEPCO region. Installing a green field project of the same capacity shall result in more CAPEX and time requirements, thus, more capacity payments. On the contrary, the proposed coal conversion is a brown-field project, CAPEX requirements shall be less, as compared to setting up green-field project on same grid location. PPIB has been apprised that in line with the GoP’s objective to use indigenous resources to curb increasing financial burden on account of imported fossil fuels, it is in the best interest of consumers to use Thar coal for the proposed conversion project to lower energy price which will significantly benefit the masses.

The proposed conversion is unique and first of its kind in Pakistan. It envisages decreasing the current Fuel Cost Component (FCC) from Rs46kWh to Rs.8kWh by using Thar Coal.

The power companies have claimed that major benefits include substantial reduction in generation cost (resulting in decrease in basket price), use of indigenous fuel, huge savings in capacity payments, best use of existing transmission infrastructure, grid stability and flexibility, etc.

They have also claimed that by allowing the fuel conversion, an estimated Rs.90 billion, on account of idle capacity payment, can be better utilised to get cheaper electricity.

Sindh Engro Coal Mining Company (SECMC) is potential coal supplier willing to enter into negotiations provided LoI is available from concerned authorities for the proposed project. Their mine expansion plans are in line with the conversion project timelines which can fully cater plant coal needs. Concerning coal logistic arrangements, a plan for rail connection from Thar Coalfield to Chore Cantt is already in place. For proposed conversion project, coal will be transported through railway network which is available less than one km from plant site.

Copyright Business Recorder, 2023



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