Until the late 1970’s, Pakistan’s entire power generation was based on indigenous resources. Now, less than 60 per cent of power generation is from indigenous resources, which are depleting fast or getting out of use.

There are now no two opinions that after hydropower generation, domestic coal, in the long run, is going to be the cheapest source of power generation when compared with imported coal, LNG, furnace oil and high speed diesel. Domestic natural gas, although cheaper than coal, is fast becoming a scarce commodity, and is at the centre of political wrangling.

For example, an average 600MW power plant based on Thar coal is estimated to have a levelised 25-year per unit cost of less than 9.5 cents per unit (in domestic currency), compared with 10 cent per unit for imported coal; 13 cents per unit for LNG; 19 cents per unit for furnace oil and Rs21 per unit for diesel. As the size of the project goes up, the cost of Thar coal-based power project will be on a sliding scale compared with LNG, furnace oil and diesel.

Unsustainably rising electricity costs and limited foreign exchange reserves have forced policymakers to concentrate on a domestic resource that is in abundance and whose future cost is predictable. This makes sense given that power demand is forecasted to touch 45,400MW in 2019-20, and 134,800MW in 2034-35, according to state-run National Transmission and Dispatch Company.

The effort seems to be picking up pace. According to Shamsuddin A Shaikh, the Chief Executive Officer (CEO) of Sindh Engro Coal Mining Company (SECMC), the first Thar coal-based power project of 600MW is expected to come into commercial production by end-2017, as its financial close is now near.

According to his estimates, the cost of imported furnace oil-based power generation has increased by over 700 per cent in the last 15 years, while that of gas-based project has increased by only 39 per cent.

“Had we accepted Shenua’s [of China] Thar fuel cost of 2.7 cents per unit in the mid 1990s, it would have been 3.6 cents per unit [now], with an increase of just 35 per cent in 15 years. And there would have been no circular debt in the country,” he said.

The Thar Desert is estimated to have over 175 billion tonnes of coal. According to Mr Shaikh, this is about 50 billion tonnes of oil equivalent — more than Saudi Arabian and Iranian oil reserves put together. “This is equal to about 2,000 TCF of natural gas — about 68 times higher than Pakistan’s total gas reserves,” he said, while confirming similar estimates by nuclear scientist Dr Samar Mubarakmand.

He said the Thar Block II — now allocated to the company, which is jointly owned by Engro and the Sindh government — alone contains two billion tonnes of lignite coal, of which 1.57 billion tonnes are exploitable and can produce 5,000MW electricity for 50 years. The SECMC plans to set up a 3,600MW plant on its own, and feed excess coal to other plants being set up by the government and other private companies.

Separately, the government is currently in the final stages of awarding contracts to generate about 5,480MW of coal-based power projects in the public sector, apart from a private sector investment into the Gadani Coal Power Corridor.

After the recent approval of the $900 million loan by the Asian Development Bank (ADB), coal conversion and power generation has gotten a new hope. This would help convert an 850MW thermal power station at Jamshoro’s conventional oil-fired steam units to coal. Consultants are currently being hired for this.

Almost same is the case with conventional oil-fired steam units 1-6 at Wapda’s thermal station at Muzaffargarh of total capacity of 1,350MW. Simultaneously, the 640MW furnace oil-based project at Guddu is also being converted to coal.

In addition, two new coal-fired power projects of 1,320MW each are being taken in hand in the public sector. Along with ADB’s financial support, the Islamic Development Bank, China Exim Bank and other financiers are chipping in to finance a brand new coal-based power project at Jamshoro of two units each of 660MW, with supercritical technology of boilers.

The project feasibility study and environmental impact assessment studies have been finalised by consultants directly hired by the ADB, which is now waiting disbursements because of project engineering contract award.

To attract private investment for the 6,600MW (10 plants of 660MW each) Gadani Power Park, the government has decided to implement the first power project of 1,320MW (two plants of 660MW), for which bids have already been received and are being evaluated for contract award. The federal government would make arrangements for its funding from its own resources.

The National Electric Power Regulatory Authority has also now announced upfront tariff of 9.65 cents per unit for large coal-based projects for 30 years to encourage investment in power generation.