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Methodology for strategic projects: PD asked to consult provinces

  • Cabinet Committee on Energy directs Power Division to hold consultations under National Electricity Plan within two months
Updated 02 Sep 2021

Islamabad: The Cabinet Committee on Energy (CCOE) has directed Power Division to develop methodology and criteria for strategic projects in consultation with the provinces under the National Electricity Plan within two months, official sources told Business Recorder.

The Committee which approved Indicative Generation Capacity Expansion Plan on August 26, 2021, has not given any decision on category-III RE projects and directed Law & Justice Division to finalize its advice regarding category-III RE projects before next Cabinet meeting.

The Committee which was presided over by Minister for Planning, Development and Special Initiatives Asad Umar was informed that summary of Power Division on assumption inputs for preparation of IGCEP was earlier discussed in its meeting held on August 23, 2021. The CCoE desired that Power Division held consultation with provinces and AJ&K in next two days and come up with: (i) revised demand estimates; (ii) cut-off date for the projects to be considered as committed projects; and (iii) principles on which projects will be included to IGCEP if not on “least cost basis”. Therefore, it was decided that the summary shall be re-considered in next meeting of CCoE.

IGCEP: Long-term expansion plan approved by CCoE

Accordingly, Power Division stated that while consultative session was held with all provinces/AJK, the forum was informed as follows: (i) assumption for GDP growth rate revised to 4.8 per cent for year 2021 -22 and taken as 5 per cent for all years from 2022-2030; (ii) cut-off date/inclusion of RE projects with tariff to be advised by the Law Division; and (iii), least cost principle as the basis of all future generation would be maintained. However, provinces/AJK demanded exceptions.

On the basis of update, the Power Division submitted the following additional proposals: (iv) original set of IGCEP assumptions approved by the Federal Cabinet on April 27 2021 form the basis of preparation of IGCEP and submitted to CCI for consideration; (v) projects under provincial public sector with secured financing may be included in ‘committed projects’ subject to agreement of the Planning Division; (vi) IGCEP is a yearly iterative process. The concerns of the provinces regarding their projects would continue to be discussed for the next iteration of IGCEP; (vii) methodology and criteria for strategic projects will be finalized in consultation with the provinces under the National Electricity Plan within two months; and (v) criteria for inclusion of transmission costs in generation costs will also be finalized in consultation with the provinces within two months.

On August 26, 2021 the CCoE discussed the issue threadbare. Provinces also participated through video link. Minister for Science and Technology Senator Shibli Faraz stated that the assumptions should be based on sound data analysis in order to assess the demand estimation. He also stated that the assumptions should also include a break-up of energy mix, i.e., hydel, thermal, RLNG and solar, etc.

Minister for Finance and Revenue Shaukat Fayyaz Ahmed Tarin stated that projection for demand estimation must correspond with the correct estimation of GDP growth. In this regard, the relevant sources of the Ministry of Finance may be consulted by the Power Division.

The Minister for Energy Hammad Azhar was of the view that the CCoE assumptions were prepared on the basis of under-stated demand estimation and not over-stated.

CCoE likely to approve ‘IGCEP’ today

Umar opined that extensive and thorough consultations had already been undertaken on this issue by the Power Division with all stakeholders including the provinces. Moreover, the issue has also been discussed many times in the CCoE, as well, the Cabinet.

He maintained that this was an established fact that the assumptions would never be 100 per cent correct, the difference of opinion among various stakeholders shall continue on the academic aspects. Moreover, this will be a continuous process and will be iterated after intervals. Therefore, while the final decision has to be taken by the CCI in this regard, the discussion must be concluded by devising broad/standard principles providing a general framework.

After a detailed discussion, the CCoE took the following decisions: (i) till the expiry of contractual term of corresponding PPA and GSA, existing RLNG and imported coal based projects will be given minimum dispatch as per contractual obligations which are to be revised downwards as per Federal Cabinet decision on the matter; and (ii) approved private sector projects which have obtained LoS as of December 2020. For Federal and provincial public sector projects, the PC-I has been approved and funding secured (as of March 2021). However, M/s Jamshoro Unit-2 and M/s Chashma-5 nuclear plants shall be modelled as candidate projects to be evaluated under least cost principle.

The CCoE also decided that: (a) GDP projections for the IGCEP input assumptions shall be obtained from the Finance Division;(b) subsequent iteration of IGCEP may be expedited and completed as per timeline provided under grid code; (c) Power Division shall develop the methodology and criteria for strategic projects in consultation with the provinces under the National Electricity Plan within two months;( d) Power Division shall develop the criteria for inclusion of transmission costs as a part of generation costs in consultation with the provinces within two months; and (e) Law & Justice Division shall finalize its advice regarding category-III RE projects before next Cabinet meeting.

Copyright Business Recorder, 2021

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