ISLAMABAD, July 16: A rare opposition from the National Electric Power Regulatory Authority (Nepra) to an increase in tariff allowed to a wind power project has triggered a debate whether all the demands of investors are being accepted in finalisation of new energy contracts amid acute energy shortages.

With the energy crisis deteriorating, Nepra has revised tariff for a wind power project by allowing about 10 per cent increase in a divided decision.

Informed sources said there was growing sense among Nepra and government officials that non-development of sufficient power generating capacity in eight years or so was resulting in an emergency situation and now forcing the government to accept reasonably higher rates.

Senior Nepra member Abdul Rahim Khan in his dissenting remarks has also called for the need to review the priority of induction of various technologies for urgent acquisition of firm generating capacity from 2007 to 2010.

A senior Nepra official told Dawn that the government was now according highest priority to ensure capacity addition at all costs with the growing gap between demand and supply.

He said Nepra approved the revised higher tariff for Win Power Limited through an unusual 2-1 majority vote.Nepra comprises five members including a chairman. A member who is away on a foreign trip could not become part of the decision while the post of member Sindh is lying vacant for more than 15 months.

The wind project of Win Power Limited (WPL) to be set up near Karachi would now cost 10.5 US cents per unit, instead of 9.5 US cents per unit levelized tariff approved in the last week of April to Wapda’s National Transmission and Dispatch Company, compared with 4.7 cents per unit of hydel projects that currently face resistance.

The revised tariff would now be almost 13 cents (about Rs8 per unit) for first 10 years and 3.9 cents (Rs2.4) for the next years. As such, the levelized tariff or 20 years of the project would now come to 10.5 cents. After allowing carbon reduction emission credits, the sponsor would get a total of about 11.2 cents per unit. The earlier tariff was 11.75 cents (about Rs7.05 per unit), for the first 10 years and 3.7 cents (Rs2.2) per unit for the next 10 years, resulting in a levelized tariff of 9.5 cents for 20 years of the project life.

Mr Abdul Rahim Khan, therefore, opposed the tariff increase by writing a separate decision. He said the earlier determination had been reached by allowing each item of cost. “No substantial change in the above assessment is expected within a short interval since the determination of April 27, 2007,” he said.

“The incentive of increase in tariff by one cent per kWh in addition to the allowed tariff can translate into increasing the return on equity from 15 per cent to 22 per cent and the incentive may be in variance with the policy of the federal government in this context,” said Mr Rahim.

He said the project cost per kilowatt for wind power projects of more than $1900 of installed capacity has reached a level where it surpasses the threshold of project per kW for run-of-the-river hydroelectric projects which are equally desirable renewable energy projects.

“Moreover the pressing problem of inadequate generating capacity to meet peak demand has to be met through sources providing firm generating capability in the peak during years 2007 to 2010”, he said and called for reviewing the priority of induction of various technologies for the “urgent acquisition of firm generating capacity during 2007-2010”.

He said that the original Nepra order should be maintained but if the objective was to consider engineering, procurement and construction on the basis of firm (non-reopenable) competitive price, Win Power be asked to provide the firm price supported by evidence of a credible and cogent process of competitive procurement carried out by the sponsor. He also demanded that the Alternative Energy Development Board (AEDB) should verify the revised feasibility study of the wind turbine because the model and make of the turbine had also been changed.

Nepra had originally approved 9.5 cents per unit tariff for wind power projects to be set up in the Gharo and Keti Bandar corridor near Karachi. The same tariff was later offered to all under the Alternative Energy Policy announced a few months ago.

Most of the power projects lined up by the government for completion by 2009 are based on much costly thermal technology instead of much cheaper hydel projects despite the fact that the country has about 28,000mw of non-dam hydro power generation capacity that could be developed on run-of-the-river basis or minor storages. If the power from mega dams is also included, the total hydro power capacity surpasses 40,000mw.

On the other hand, a tariff of more than eight cents has been offered for gas-based projects, 13 cents for furnace oil-based plants and 15 cents for diesel-based projects.

The government announced the hydel power policy in 1998 and offered a tariff of 4.7 cents per unit to hydel power producers but later asked them to sign agreements at 3.3 cents per unit. This forced many investors to close their offices in the country. Resultantly, no hydel project could make reasonable progress till such time the country once again plunged into darkness this year.

This forced the government to allow a number of thermal projects at a tariff as high as 14 cents per unit and once again invited hydel producers for a maximum tariff of 4.7 cents per unit. The hydel producers now claim that 4.7 cent tariff was not feasible and they could start projects at a tariff not less than 6.5 cents which was far below the thermal tariff of 14 cents since natural gas was not available.