Long have the sugar mills in Pakistan been criticized for exploiting the power they jointly possess, but times have changed as the government is now looking to the same millers to produce more power for the nation.
Yes, the good old plan of cogeneration is back in the reckoning again as both PSMA and Nepra are negotiating terms and conditions for bagasse based electricity generation.
Bagasse is the fibrous residue remaining after sugarcane stalks are crushed to extract their juice and is currently used as a renewable resource in power generation.
According to a report issued by World Alliance for Decentralized energy (WADE), bagasse based cogeneration can deliver 25 percent of the power requirements of cane producing countries including Pakistan.
Private Power & Infrastructure Board (PPIB), however, has slightly conservative estimates, which they believe to be more realistic. The government body eyes on exploiting 3000 MW from bagasse based cogeneration in the next five years.
PPIB had laid the national policy for power cogeneration by sugar companies back in 2008. But complacency and lack of serious follow up led to no activity. It is now when the power woes have gone from bad to worse; Nepra has decided to incentivize the sugar companies in order to add more electricity in the system on fast track basis.
The power regulator has decided to offer an attractive incentive of a comparatively higher internal rate of return (IRR) at 18 percent for sugar companies, which is about three percent higher than what is being offered to the thermal based IPPs.
However, the issue of tariff determination may still take some time to settle as some sugar firms have demanded tariffs as high as 11.11 cents/kwh. Nepra, on the other hand had previously determined a tariff structure of 8.28 cents/kwh for bagasse based power generation.
There are indications that a mid way would be sought as Nepra is believed to have struck a deal with a sugar company at 9.28 cents/kwh, for an 80 MW power plant to be completed on fast track basis. This rate could serve as a benchmark, given the higher IRR offered as an incentive which could attract more sugar companies to the power grid.
Moreover, these projects provide a long-term tariff for thirty years based on 28 percent thermal equivalent efficiency levels. But the fact that these projects are on a fast track basis and do not require letter of intents, the regulators are advised to keep a strict check on the proceedings given the controversial episode of RPPs.
A trade mission comprising Pakistan government officials and representatives of sugar industry is due to visit the US to get themselves oriented with bagasse development. Industry officials will get the chance to have a look at technical and technological facilities used in the project.
Given, Washingtons increasing interest in reviving countrys energy sector, financial assistance and technology transfer cannot be entirely ruled out either.