• ADB says Jamshoro plant deal allows only 20pc local lignite, explains conversion plan doesn’t meet requirements of safeguard policy
• Energy ministry official agrees conversion to 100pc lignite coal will be a breach of legal covenants

LAHORE: The government’s ambitious plan to persuade coal power plants to substitute imported coal with 100 per cent Thar lignite as their fuel has hit the first major snag due to the Asian Development Bank’s refusal to support such a conversion at the Jamshoro Power Plant Unit I.

Since ADB is the largest creditor of the project, its consent is a prerequisite for making any critical structural changes in the plant design.

“No, we don’t support the conversion of the Jamshoro Power Plant to 100pc local lignite coal,” an ADB official associated with the project told Dawn through a written response to the questions emailed to him earlier this week.

“ADB loan and project agreements with Pakistan’s government have been signed based on a specific fuel mix of 80pc imported sub-bituminous coal and 20pc local lignite.”

An energy ministry official, who spoke on condition of anonymity, confirmed ADB’s opposition to the proposal to convert the plant to Thar’s coal. “In fact, the bank has formally conveyed its opposition to the plan through a letter some time ago,” he said, refusing to share the contents of the letter.

The 1,320-megawatt Jam­shoro project is a supercritical coal-fired power plant comprising two units of 660MW each. The total Unit I cost is $1.5 billion, with the ADB and Islamic Development Bank (IDB) lending Pakistan $900 million and $220m, respectively. The government’s contribution to the project stands at $380m.

The first unit is almost complete but yet to be commissioned. Its commercial operation date (COD) has been revised more than once mainly because Pakistan suffers from a serious shortage of foreign exchange required to import sub-bituminous coal.

Another reason for the delay is that the construction of a 105km-long railway track from Thar coalfields in Islamkot to Chhor in Umerkot, where this line can join the existing national railway network required for transporting lignite coal from Thar, around 270km away from the project site, has not even started yet. The construction of the line is a necessary condition for transporting Thar coal to Jamshoro plant (and to other parts of Pakistan).

The government plans to convert the Jamshoro plant on local coal in collaboration with a private investment firm with operational assets in Pakistan and Hong Kong that claims to own the majority shareholding in K-Electric.

The ADB official said that post-ADB Energy Policy 2021, the Manila-based lender does not fund fossil fuels-based power generation. Thus, he made it clear, “We neither support the fuel conversion plan nor will finance it”.

He explained that the conversion plan also did not meet the objectives and requirements of ADB’s Safeguard Policy Statement.

“The Environmental Imp­act Assessment (EIA) and the Environmental Management Plan (EMP) conducted for the designed fuel mix will no longer be valid (if the plant fuel is switched to 100pc Thar lignite. Lignite generally has lower heating value and higher emissions compared to sub-bituminous coal.

“This could lead to increased air emissions of pollutants like sulfur dioxide and nitrogen oxides potentially exceeding national and international air quality standards,” he argued in support of the bank’s policy to not support the fuel conversion.

The energy ministry official also agreed that if 100pc lignite coal were to be utilised at the plant, the present EIA and the EMP undertaken for a specific fuel mix of 80pc imported sub-bituminous coal and 20pc local lignite would no longer be valid and ADB safeguards requirements would no longer be met. A conversion to 100pc lignite coal would also lead to a breach of legal covenants.

Serious implications

“The proposed conversion to local lignite involves several structural changes in the plant’s design, machinery and operations — each with serious policy, socio-economic and environmental implications,” said an Islamabad-based environment activist.

The government expects the transition of five major imported coal-fired power plants — Sahiwal, Port Qasim, Hub, Lucky and Jamshoro — to local lignite would slash the basket price of electricity by Rs2.5 per unit (kilowatt-hour) and save the country $700m in annual energy imports at the current coal prices.

The 660MW plant set up by Lucky Cement is already designed on local lignite, but is using imported coal due to delays in Thar mining capacity expansion.

“The proposal to re-calibrate and reconfigure the Jamshoro project by shifting it entirely to Thar’s lignite coal goes against the original loan agreement between the ADB and the government,” the environment activist argued.

“Thar’s lignite coal is dirtier than imported sub-bituminous coal, and the proposed shift, therefore, will lead to a substantial and unaccounted-for increase in the pollution to be caused by the project. Additionally, lignite coal requires significantly more water than sub-bituminous coal before it can be used for power generation.

“The extraction of either groundwater or river water for this purpose will exacerbate water scarcity already being faced by communities living next to the power station as well as those living downstream in the Indus Delta,” he concluded.

Published in Dawn, September 21st, 2024