ISLAMABAD: Sindh government has expressed reservations on approval of “one sided” Indicative Generation Capacity Expansion Plan (IGCEP) by the Council of Common Interests (CCI), maintaining that giving preference to hydel projects over wind and coal projects will increase total basket with stimulated potential impact of billions of dollars over the life cycle of the project.
These apprehensions were conveyed by Minister for Energy Imtiaz Shaikh in letters to Minister for Energy Hammad Azhar and NEPRA Chairman Tauseef H Farooqi.
On September 6, 2021, the CCI had approved the IGCEP on the basis of need (demand-supply projections) and least cost basis (open competitive bidding).
However, on September 12, 2021, Sindh Minister for Energy raised questions on the IGCEP, which Minister for Energy stated that it has been approved.
Imtiaz Shaikh stated that in the 47th meeting of the CCI held on June 21, 2021 it was observed that the provinces were not consulted by MoE (Power Division), CCoE while finalising the Input Assumptions of IGCEP. Accordingly, it was decided that the CCI shall approve Input Assumptions, to be prepared based on consultation with provinces. In compliance with the CCI decision, the MoE (Power Division) conducted various consultative sessions with provinces and finalized the IGCEP Input Assumptions. Those Input Assumptions were approved by CCoE in its meeting on August 25, 2021.
Subsequently, a summary was forwarded for the 48th CCI meeting presenting CCoE recommended Input Assumptions for approval.
The letter states that the fact is MoE (Power Division) had not taken into account the comments and concerns of the Sindh province. For instance, the local coal and renewable projects initiated by Government of Sindh (GoS), which actually complies with competitive and least-cost principle, are not considered for the revised IGCEP. Instead, relatively higher cost projects have been picked as Committed Projects.
In this regard, an analysis has been performed which shows the potential financial impact for not choosing the cheap projects on least cost principle: (i) 10 hydroelectric power projects having cumulative capacity of around 5,247MW have been added in the committed category of the IGCEP of 2021, when compared with IGCEP iteration of 2020. In those 10 projects, five are large hydro projects (ranging from 48MW to 4500MW) having cumulative capacity of 5093MW. As per the latest determination of NEPRA, the lowest levelized tariff of large hydro projects is around US Cents 7/kWh ;(ii) Five wind IPPs had been awarded tariff by NEPRA before the formal notification of ARE Policy 2019 with a cumulative capacity of 275 MW; these projects had been awarded the average levelized tariff of around US Cents 3.40/kWh. These projects have not been considered in the IGCEP on the pretext that they were placed in Category III of the CCoE decision. Leaving aside these least-cost wind projects and prioritizing the hydro projects, there would be an increase in the generation cost of total basket with stipulated potential impact of approximately $35 million per year and approximately $875 million over the life cycle of the projects;(iii) IGCEP assumptions affirms the criteria that the projects, whose PC-Is are approved and funding secured (as of March 2021), shall be taken as committed projects. However, a World Bank-funded project of Sindh titled “Sindh Solar Energy Project” (consisting of a component of 400MW solar power projects) whose PC-I is approved by ECNEC is not completely included in IGCEP, i.e. only 50MW is reportedly being considered and remaining 350MW has been ignored, despite GoS submission of data information to NTDCL on December 17, 2019. Not including these solar projects (US Cents 3.5/kWh) over hydro projects, there would be an increase of the generation cost of total basket, with stipulated potential impact of approximately $21 million per year and approximately $525 million over the life cycle of projects and; (iv) the sponsors of M/s Oracle which is a Thar coal project at block-VI undertakes to develop its 7.8 MPTA mine at a coal tariff of $36/ton for the first 15-years followed by $27/ton in the next 15 years. With this coal price, Block-VI will generate electricity by establishing 1320MW power plant at a proposed levelized tariff of US Cents 5.45/kWh - calculations and financial modelling are proposed in writing by the sponsors and submitted to GoS, MoE (Power Division).
Copyright Business Recorder, 2021