August Issue 2009

Global warming, melting ice caps and increasing pollution have forced many countries to take a serious look at alternative energy options. In Pakistan, an energy crisis of different dimensions has the government examining new energy sources: too much demand and too little supply is forcing the economy to slow down and is putting citizens through hot days and dark nights due to long hours of loadshedding. And one-third of the country is still not connected to the national grid.

Several countries have successfully harnessed the power of the sun, wind and other resources, such as biomass and even municipal solid waste, to generate electricity. In Pakistan, the quest to implement alternative energy is still in its infancy. The Alternative Energy Development Board (AEDB) was set up a few years ago to get things moving along. Though plans have been made and a lot of paperwork has been done, little progress has been seen. As a result, expectations have been ratcheted down.
Research conducted by Hagler Bailly Pakistan, an energy consultant company based in Islamabad, claims that currently power generated through alternative means is “practically nil” in Pakistan. In recent years, Pakistan has started exploring the potential of its untapped natural resources, making some progress in the field of wind energy. On the surface, it seems like a smart move. The Gharo wind corridor in Sindh has the potential to generate upto 50,000 megawatts (MW) of electricity. Currently, the total energy output in all of Pakistan is around 20,000MW.

So is wind the answer to our energy prayers?

Last year, Hagler Bailly Pakistan and Mercados EMI of Spain undertook, for the first time, an economic assessment of the country’s renewable energy resources and pricing. According to a representative of Hagler Bailley, the study concluded that on strictly financial grounds, only small hydro-electricity and biomass conversion projects seem feasible, with some potential from sewage and waste. Solar and wind energy makes much less sense.

A consultant at Hagler Bailly says, “If seen purely from economic and social perspective (developmental and environmental benefits), wind becomes marginally relevant (to the extent of 11% of the total feasible renewable energy mix). This validates the point about the AEDB focusing on the wrong technology to begin with, at the expense of other low-cost and more feasible renewable resource options available in Pakistan — an error which remains unrecognised within many relevant government agencies.”

In its defence the AEDB says, “The nation must realise, perhaps it is time not to be so extravagant with electricity. True, some options are being invested in, especially thermal, but they are costly. Further we cannot afford to solely depend on our current options. We need to supplement these to provide proper maintenance to the functioning power generators. The hydro policies came in 1994 and since then how many dams have been built? In just four years since we initiated our plan, we have a 6MW wind farm generating power. We are also seriously investing in other options.”

In reality, though, the AEDB is mainly pinning its hopes on wind farms for power generation. According to original estimates, the Board expected to generate 9,700MW of electricity through future wind farms projects in the coastal areas of the country. But the estimates seem to have been revised. Now the AEDB chairman, Arif Alauddin, hopes to produce around 4,000MW from all alternative resources by 2030, and 2,500-3,000MW by 2011.

The Gharo project in Sindh was conceptualised in 2005 when Air Marshal (retd.) Shahid Hamid was heading the AEDB. A plan was announced for setting up wind farms to generate 9,700MW of electricity by 2030, and about 700MW by 2011. But this ambitious plan started hitting snags soon afterwards.

The wind farms were to be set up mainly in Gharo, Keti Bunder and adjoining areas and about 50,000 acres of land was to be acquired for this project. The area along the coast would allow the wind farms to capitalise on the Gharo wind corridor, which according to some estimates has the potential to generate up to 50,000MW of electricity. The Director-General of the Meteorological Department, Dr Qamar-Uz-Zaman, says the total calculated wind power potential in the area is closer to 45,000MW.

But not all of this potential can be harnessed. Some parts of the area are populated, while others are agricultural fields, which make it difficult to acquire land for setting up the wind farms. Zaman, therefore, believes that the exploitable power of the generation potential of the Gharo wind corridor could be around 11,000MW. But even 11,000MW would be no meagre contribution to the national grid.

Regrettably, this resource is not being tapped properly. So far, the Turkish company Zorlu is the only firm that has set up wind turbines in the Jhimpir area, generating 6MW of electricity. However, the AEDB remains hopeful that some agreements, still in the pipeline, will achieve the financial target by 2010. These include the expansion of the Zorlu wind farm and the establishment of projects by FFC, Beacon Energy and Green Power. One would think that a resource free from many of the drawbacks and costs associated with other means of generating power, such as furnace oil, would be a plausible solution to controlling the country’s ever-swelling foreign debts while keeping the international community happy by keeping carbon emissions low.

It’s not turning out that way. Hagler Bailly holds both the AEDB and the government responsible. Years have been wasted as “AEDB, for its part, went about learning its business on the job,” says a Hagler Bailley consultant. In the process, thousands of acres have been tied up, and are now potentially up for grabs to the land mafia. According to news reports, by early 2008 over 23,000 acres of land had been handed over to 15 investors. With little work done on this land to set up wind farms, many people are concerned that unscrupulous businessmen are only claiming to get into the wind power business in an effort to grab land. Also, detractors say that unattractive policies to foreign investors have slowed implementation further. But the prevailing security situation in the country is also one of the reasons, says Mustafa Tapal, director of Green Power, why the process is taking so long. Foreign suppliers from whom the turbines have been purchased are reluctant to send their teams for installation of the plant.

When asked why Pakistan has been dragging its feet, the AEDB chairman said, “Things are changing. A lot of work and research was required. Plus, we had no support system. Originally we were dependent on the Met Department for data, which took a long time, plus negotiating tariffs and other issues took some time. But Pakistan is the first country in the region to have a commercial plant (Zorlu) already generating power within four to five years of a plan to invest in such options.”
On the other side are the investors, for whom acquiring capital is an uphill task.

Zeni Wind Power is a subsidiary of a Norwegian company that specialises in alternative energy options, specifically wind energy. Its chief operating officer, Malik Shahid Ahmed, says that Zeni is currently in the process of setting up a 50MW wind farm at the cost of $130-$150 million in Dhabeji, off the National Highway. It will start generation by the end of 2010.
Though Zeni has a sovereign guarantee from the government of Pakistan to buy the power it generates, matters aren’t as simple as that. For companies with no foreign backing (unlike Zeni) acquiring credit for this type of investment is virtually impossible. This has deterred many interested parties from investing in wind projects.

Green Power is one of the first companies to have decided to invest in the AEDB plan. Listing the problems faced by the investors, Adnan Tapal, director of Green Power, says, “Banks just aren’t willing to lend. The political and security situation is a major cause of concern sometimes, even with a sovereign guarantee.”

Now, though, the AEDB seems to be stepping up its game, having already invested a great deal of time and money into this project, it appears it is determined to see it through. After some negotiation the AEDB is bringing in the World Bank and the Asian Development Bank to further back Pakistan’s sovereign guarantee for loans required by the investors. To get the ball rolling a little faster and perhaps smoother, Mr Alauddin says that the AEDB may also be willing to chip in with a percentage (between 10-15%) of the equity amount. Currently, banks offer an 80-20 debt-to-equity ratio. For a $150 million project, that translates to an equity investment of $30 million. NEPRA is currently offering between 12c/kWh to 14c/kWh for power generated through 50MW wind farms.

For those who have their finances covered, several other aspects require attention and research, foremost among them being the turbine selection process. On average, 1.5MW or 2MW turbines are set up. (Therefore, for a 50MW farm, a combination of about 34 turbines will be needed). Each is about 80-90 metres high.

Installing these turbines is a highly specialised task, requiring the use of high cranes, which are currently hard to get in Pakistan. Investors have to import these cranes from abroad. Zorlu spent up to $250,000 to import cranes from Turkey. “But this wasn’t the end of the journey. Moving the cranes from the port to the site of the wind farm was another challenge,” says Syed Mumtaz Hasan, project manager for Zorlu Enerji Pakistan. “There were no proper roads, the labour wasn’t trained to set up the turbines, the engineering sector was very weak and there were numerous financial risks (theft), as well, to account for.” Further, NEPRA guidelines, aren’t very specific. But they do call for the use of the ‘latest technology’ in wind turbines. In this case, those would be Generation 3 wind turbines that would allow them to function at a wind speed as low as 2.5m/sec (the average for the older generation turbines is between 3.5-4m/sec). Apart from that, investors say NEPRA allows a 15% ROI (return on investment), which in most cases would apply a decade after a wind farm begins power generation.

Hagler Bailly says, “Many key government agencies still lack the required professional resources. Further, inter-agency coordination remains weak, and there is no overarching authority steering the sector and monitoring progress.”
These hurdles can be considered to be the growing pains of a young industry. Still, even with all these issues, some argue wind is essential to the overall energy mix. Its initial costs may be high, but operation and maintenance are low, as its only input, wind, is free.

So what about other options? One is called biomass gasification.

Biomass gasification is a process through which any biological scrap matter such as dead trees, branches, rotten crops, is gasified or turned into a synthetic gas. This gas can then be used to power a gas generator. Through gasification, power may even be generated using coal with zero carbon emissions and it will cost approximately the same as power generated through wind. This may be good for small rural communities off the grid. In cities, using biomass as fuel reduces the truckloads of garbage that are dumped in landfills.

Here in Pakistan, someone already has plans to use scrap to power Pakistan’s households. CareCo Pakistan plans to set up a 2MW plant in Lahore using municipal solid waste to produce energy via gasification. This new technology is being brought in by the company through a transfer of technology agreement. According to research conducted by CareCo, Pakistan has the potential to generate at least 2,000MW in waste energy. In this gasification process, 100 tonnes of municipal solid waste or 25 tonnes of coal would generate 2MW. CareCo Pakistan hopes that its 2MW plant will be operational by the end of 2010.

There are many interested in ending Pakistan’s worsening energy crisis. While few are proclaiming that alternative energy is the only solution, many experts admit its importance to the overall mix. Think of it as a good back up plan, especially in times of high fuel costs and depleting foreign exchange reserves.