The governments plans to set up Rental Power Projects (RPPs) as a stop-gap arrangements to resolve power crises seems wanting as there are serious doubts about these infrastructurally hampered, cost inefficient, furnace oil operated plants wont work.
Shipping and storage issues are its key impediments as there are constraints at the port to handle ships, which currently transport about 0.6 to 0.9 million tons of imported furnace oil per month. And if RPPs were to work at full capacity (to generate 3000-3500 MW), they would require 3 to 3.5 million tons of oil per annum - implying an extra import of 275,000 tons per month. This means choking the ports - already clogged with handling 14 to 15 ships per month - with an additional 4 to 5 ships.
Even if the shipment is handled smoothly, there are storage shortages at Port Qasim, which has a capacity of 750,000 tons, where as PSOs storage facilities are also limited to 500,000 tons. Industry experts believe that this storage is barely satisfying current needs, raising a question as to how would additional furnace oil required for rental powers would be stored.
If one opts to build additional storage to cater the requirement of RPPs, it would take two years to complete the project at a total cost of around Rs 10-11 billion. Thus two out of five years of salvaged life of these rental plants, at the time of desperate need, would be left under-utilised.
At this junction, it is pertinent to note that owing to circular debt crises, IPPs are maintaining substantially low oil inventory levels - equalling just 30 percent of their storage capacities. This, therefore, occupies 66,000 tons of storage space both at port and PSO terminals. Cost inefficiency is another regretful dimension of rental power plants, as their cost of generation at full capacity is estimated at Rs 15/ KWH - double of what is incurred by thermal IPPs.
The need of the hour, therefore, is to address circular debt issue to ensure that power generation and distributing companies operate at optimal levels. Secondly, storage and handling must be streamlined before looking for additional FO-based power generation. Another solution could be to utilise the idle power generation capacities within the industrial units - such as that run by textile, cement and sugar companies.