The federal government is switching three power plant units to coal through working on a proposal to convert the existing furnace oil-based steam power plants including Muzaffargarh, Jamshoro and Guddu into coal firing to save two-third cost.
The 1350 megawatts thermal power station (TPS) Muzaffargarh (Unit1-6), 850 megawatts TPS Jamshoro Units (1-4) and 640 megawatts TPS Guddu is now being converted on coal with multilateral financial assistance.
According to a ‘Concept Paper’, developed by the Planning Commission of Pakistan, had estimated in 2011 that conversion of 12 steam power plants fired by furnace oil on imported coal could save more than $8 billion or almost four per cent of gross domestic product annually.
The savings estimate is based on the prices of furnace oil and coal and exchange rate of that time. The project will help save two-third cost of the ongoing power generation through the conversion to coal medium, the paper said.
“The generation proposed to be converted on coal constitutes almost a quarter of the country’s total derated and dependable capacity. It, therefore, can substantially cut the overall electricity production costs, bringing relief to both the domestic and industrial consumers,” argues a senior executive of a gas fired independent power producer (IPP) put up under the 2002 power policy during a recent briefing on power sector.
“Another substantial amount of $1.5-1.6 billion a year on fuel can be saved by providing gas and oil to the power producers according to their position on the order of merit based on their fuel efficiency,” contended the executive seeking anonymity. If his argument was accepted, then the government should prefer eight IPPs with a cumulative generation capacity of 1,700 megawatts set up under the 2002 policy in the supply of gas and oil for generation.
Further, he said, the savings in fuel costs should help the government eliminate power subsidies, considerably cut its inflationary borrowings from banks, bridge the budget gap, spare funds for new investment in hydropower projects and lift some pressure off the country’s weakening balance-of-payments position.