ASIA BUSINESS AND ECONOMICS ENVIRONMENT

Coal-fired Power Generation in Pakistan: Assessing the Current Situation and Future of China-Pakistan Economic Corridor’s (CPEC) Energy Projects

By Zihao Xu, Mengjia Luo, Junyan Tian, Zhaoji Xu

Pakistan, located in South Asia, holds 3,377 million tons (MMst) of proven coal reserves as of 2016, ranking 20th in the world. However, approximately 97% of the coal reserves in Pakistan are lignite, which is also known as brown coal. As Figure.1 showed, lignite is one of the lowest ranks of coal because it needs more quantity to produce the same power comparing with other kinds of coal. In this regard, it’s crucial for Pakistan to own advanced technology to transform coal and to make a better utilization of coal.

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Figure 1: Ranks of Coal. BTU is British Thermal Unit. 1 BTU is approximately 1,055 joules. IB is British imperial pound. Source: https://sites.google.com/site/coalusage/background/the-process

Due to the low quality of coal resources, power shortage has become a severe problem in Pakistan, which remains firmly on the agenda for scholars and policymakers. Many people in Pakistan still have limited access to electricity. According to the World Development Indicator (WDI), in 2017, only 70.8% of Pakistan’s population had access to the electricity grid, and around half of the people live in rural cannot use electricity. Solving this problem could continue to be a concern if Pakistan’s population keeps growing at the current speed. One recent ambitious effort to cope with this issue is the China-Pakistan Economic Corridor’s (CPEC) energy project. CPEC is an indispensable part of the Belt and Road Initiative (BRI). China’s Belt and Road Initiative (BRI) has been launched since 2013, aiming to enhance China’s economic power and promote friendly relationships with other countries through strengthening the infrastructure construction of participating countries. CPEC was launched in 2015 to strengthen the bond between China and Pakistan and to promote regional economic developments. Currently, the total value of CPEC projects reached $62 billion after five years’ investment from China. The most critical part of CPEC is power generation in Pakistan, as more than $33 million planned to invest in energy-related projects. The energy projects under the framework of CPEC attempts to help Pakistan overcome its long-standing power shortage.

Specifically, according to the data of Global Coal Plant Tracker, there are currently 25 coal power plants in Pakistan. Nine of them are CPEC projects, which are defined as priorities in the CPEC official website.

Table 1: CPEC-Energy Priority Projects

Project NameEstimated Cost (US$ M)MWEnergyCurrent Status
Sahiwal 2x660MW Coal-fired Power Plant, Punjab1912.21320Imported CoalOperational
2×660MW Coal-fired Power Plants at Port Qasim Karachi1912.21320Imported CoalOperational
HUBCO Coal Power Project, Hub Balochistan1912.21320Imported CoalOperational
Engro 2x330MW Thar Coal Power Project| Surface mine in block II of Thar Coal field, 3.8 million tons/year995.4 630660Local CoalOperational
Quaid-e-Azam 1000MW Solar Park (Bahawalpur) Quaid-e-Azam520 781400 600Solar600MW Under construction
Hydro China Dawood Wind Farm(Gharo, Thatta)112.6549.5WindOperational
UEP Wind Farm (Jhimpir, Thatta)25099WindOperational
Sachal Wind Farm (Jhimpir, Thatta)13449.5WindOperational
Three Gorges Second and Third Wind Power Project150100WindOperational
SSRL Thar Coal Block-I 6.8 mtpa & Power Plant(2×660MW) (Shanghai Electric)1912.121320Local CoalUnder Financial Closing
HUBCO Thar Coal Power Project (Thar Energy)497.70330Thar CoalConstruction
ThalNova Thar Coal Power Project497.70330Thar CoalUnder Financial Closed
Karot Hydropower Station1698.26720HydelConstruction
Suki Kinari Hydropower Station, Naran,Khyber Pukhtunkhwa1707870HydelConstruction
Matiari to Lahore ±660kV HVDC Transmission Line Project1658.34N/AN/AUnder Financial Closed
300MW Imported Coal Based Power Project at Gwadar, Pakistan542.32300Imported coalConstruction
Thar Mine Mouth Oracle Power Plant ( 1320MW) & surface mineYet to be determined1320Thar CoalShareholding agreement on new equity partners in process.
Source: http://cpec.gov.pk/energy

Table 2. Comparison between Renewable Energy Power Plant and Coal Power Plant in Priorities of CPEC

 Total Investment (US$ M)Total Generation(MW)
Coal Power Plant10811.848220
Renewable Energy Power Plant5352.912888
Note: The result does not include Thar Mine Mouth Oracle Power Plant ( 1320MW) & surface mine and Matiari to Lahore ±660kV HVDC Transmission Line Project two items.)Source: http://cpec.gov.pk/energy

Table 1 and Table 2 showed that coal power plants take up to 67% of the total investment in energy under the current CPEC situation. These coal power plants could produce up to 74% of the electricity among the CPEC projects. Moreover, with these coal power plants, 52% of the generated electricity is using imported coal. 

Overall, the entrance of CPEC would significantly impact the energy mix of Pakistan currently and in the future. According to National Electric Power Regulatory Authority(NEPRA) estimation in 2018, the share of local and imported coal is projected to be 30% in the country’s generation mix (MW) by 2040, which is approximately three times higher than the ratio of coal use in 2015. The academia in Pakistan indicated different views on the issue of future coal usage with the entry of CPEC. For instance, Fatima and Nasim (2018) argue that coal power generation is beneficial for economic development and could be a reliable option in the short term, even considering the environmental cost. Abuzar and Hassan (2017), on the other hand, assert that the utilization of coal in electricity production would seriously harm the environment in Pakistan. It is still an ongoing and debatable issue for the usage of coal in Pakistan.

Therefore, this article attempts to evaluate the impact of coal energy projects under CPEC through case studies and provide suggestions on Pakistan’s sustainable development in the energy sector. Specifically, the article would first discuss government’s efforts on minimizing the environmental damages from coal projects and meeting energy and political demand. Next, the analysis from different perspectives like environment, and economics will focus on the impact on current and future coal usage. Finally, based on the finding that because of the reliability and political factors, coal resources would still play an essential role in energy sector in the short run, the article would provide policy recommendations and concluding remarks for future coal development under the CPEC framework.

Minimizing Environmental Damages from Coal

Pakistan’s primary environmental concern is linked with its emerging coal-fired power generations. The coal-fired power plants are the dominant contributors to air pollution, which can cause a wide range of health effects, including heart and lung diseases. However, it is hard for the current government to get rid of coal since most existing coal power projects have long-term contracts signed by the previous government that have strict financial liabilities for non-compliance. Besides, many coal projects have long construction period (3-4years), and many of them are still ongoing. The only choice left for the current government is to minimize and control the environmental damages from coal-fired power plants rather than shut them down.

First, the government needs to ensure strict environmental controls by implementing Environmental Impact Assessment (EIA) provisions within the contract of coal projects. EIA is a legal requirement for projects that likely to have adverse environmental impacts and provides environmental evaluations and monitoring arrangements to coal projects prior to the start of the construction. Therefore, the government oversees coal projects to fulfill the provision of EIA to establish a pollution monitoring system. For example, Sahiwal coal power plant installed pollution monitoring systems inside and around the station and accepting the supervision by certified third-party environmental monitoring agencies. Nevertheless, Zeenia Shaukat, an independent consultant in Pakistan, criticizes that the EIA fails to achieve a satisfactory effect on both evaluating and monitoring of coal projects. The environmental assessment reports are so late that coal projects continue even it is filed against their environmental impacts. Moreover, the monitoring “doesn’t get exercised in a systemic manner” because of the “weak governance and weak bureaucratic structure”, explained Shaukat.

Second, the Pakistan government pushes the clean-coal technologies and sticks to the CPEC coal projects for importing clean-coal technologies from China. The government certainly has an incentive to reduce air pollution by promoting supercritical and ultra-supercritical coal power plants. Supercritical and ultra-supercritical power plants improve the energy conversion efficiency of the steam turbine cycle by increasing the main steam pressure and temperature, and they have the best available pollution control technology (see Figure2). The improving efficiency of supercritical technologies corresponds to fewer greenhouse gas emissions than subcritical technologies, as well as pollutants like NOx, SOx, and particulate matter. Thus, since 2017, the Pakistan government only approves the front tariff for projects that use supercritical technology or above. It is worth noting that although the supercritical power plants emit significantly less SOx, NOx and Particulate Matter than subcritical power plants, it curtails CO2 by roughly the same amount (see Table3). In the long run, the supercritical technologies will not contribute to Pakistan’s Paris nationally determined commitment (NDC) to reduce projected CO2 emissions.

Figure.2: Supercritical Coal Generation Process

Table.3: The Estimated Emission Value of Three Power Plants in Sindh Province, Pakistan

Power Plants NamesTypeCapacitySOx (mg/NM3)NOx (mg/NM3)Particulate Matter (mg/Nm3)  CO2 (Mt/year)
ThalNova Power Thar Limited (TNPTPL)Subcritical330<850<510<1001.64
Thar Energy Ltd (TEL)Subcritical330<850<510N/A1.64
Siddiqsons Energy LtdSupercritical330<450<400<501.58

Meeting Energy and Political Demand

Even though the Pakistan government tries to reduce the environmental effect on coal, the government still considers coal power plants as the best option in the short and medium-term planning. First, the Pakistan government relies on coal to ease electricity shortages. Pakistan has faced severe electricity shortages, according to a survey by the World Bank, 66.7 percent of the businesses in Pakistan cite electricity shortages as a more significant obstacle to business than corruption (11.7 percent) and crime/terrorism (5.5 percent). Benefit from increasing coal projects, coal-based power generation will increase to about 30 percent of the country’s capacity requirement by 2021. Second, the Pakistan government needs to secure employment. It is estimated to provide a total of 73,728 jobs via power generation projects. Third, Pakistan seeks to reduce import furnace oil to save foreign exchange reserves to secure the macro and micro stability of the country, and coal is a cheap alternative. Lastly, the foreign direct investment of coal projects allows Pakistan to reduce the budget deficit and strengthen the nation’s currency.

Environment Impact of CPEC Coal Projects

Coal power plants under CPEC estimating $5.8 billion in scale will provide 7000 MW of electricity from 2019 to 2020. Consequently, emissions of GHG (Green House Gases), SO2, and NOx from coal power plants are creating severe environmental problems. The poor air quality will lead to asthma, lung damage, bronchial infection, and even heart attack. In Thar, a district in Sindh province, Pakistan with one CPEC power plant in operation,  3.28Mt of CO2 is released into the atmosphere each year. Additionally, an estimated rise of temperature for about 0.5℃ occurs surrounding areas annually.

Saeed Hussain, head of Pakistan Council of Renew Energy Technologies (PCRET), said that “coal-based electricity generation technologies would be a major source of emission and would contribute the highest amount of air pollution (in Pakistan).”

CPEC coal power plants are threatening water usage as well. Heavy-metal contaminated wastewater, containing boron, cadmium, mercury, and lead, will threaten local water usage. In Thar, Engro 2×330MW Coal Power Plant under CPEC is draining ground water at a rate of 990 L/s when producing electricity, and a drawdown of the groundwater level of around 3m is expected in next ten years.

Conversely, there are CPEC projects dedicated to minimizing the environmental impact. For example, Sahiwal Coal Power Plant, now fueling the national grid with more than 21.2 billion KW of power, is maintaining pollution well below the EU and World Bank standard. Specifically, the SOx emission of the Sahiwal Power Plant is only 90mg/Nm³, whereas the standard of EU is 200mg/Nm³. The adaptation of supercritical technology and desulfurization facilities, which utilizes alkaline sorbent, usually limestone or lime, or seawater to scrub gases, improved the emission status of waste gases.

Economic Gains from CPEC Coal Projects

From another perspective, CPEC’s coal power plants’ economic boosts are considered crucial. According to Hasan Raza, the Pakistani GDP growth rate substantially correlates with energy capacity.  With 10,400MW of capacity already created by 2018 and more capacity promised in the future, CPEC realizes a more consistent power supply for Pakistan. Power-caused inefficiencies are expected to decline 2.5% annually when power supply improves.

The increasing job opportunity is an obvious economic benefit. 1.26 employment production per MW is expected during installation and manufacturing for an average coal-fired power plant, and 0.16 for operations and maintenance. A typical CPEC project like Sahiwal Power Plant creates 1,100 direct jobs for locals. For the whole CPEC energy sector, till 2018, more than 50,800 jobs are created.

Furthermore, increased purchases from local businesses can be another driver for the economy. Less expensive and more reliable electric power supply will be an additional benefit in the long run when Pakistan can cover all energy shortage with CPEC assistance.

Policy Recommendation & Conclusion

This article attempts to evaluate the impact of coal energy projects under CPEC through two case studies. The analysis of case studies suggests that in the short run, coal resources would still play an essential role in energy sector, considering its reliability and political factors. However, in the long term, transformation marked by increasing use of renewable energy in Pakistan is necessary for reducing the environment pollution resulting from energy consumption.

In the short term, under the pressure of energy crisis and economic prosperity, coal resources should still be considered as a reliable option. As CPEC’s clean coal project is more environmentally friendly and economic efficiency, policies attracting foreign capital should be components of Pakistan’s sustainable development strategy. Desulfurization and supercritical technologies should be further developed and invested with CEPC assistance in order to obtain cleaner coal energy while ensuring fast capacity growth.

However, the Pakistan government should promote investment in renewable energy projects and clean coal projects that might contribute to the efforts of environmental protection in the long run. Currently, the technology utilized in clean coal projects in Pakistan are mainly from foreign countries, increasing R&D investment to energy sector would be recommended to reduce its reliance on other countries and enhance the competitiveness of its domestic coal. Government interventions such as constructing relevant infrastructure are strongly in need of facilitating the transformation of the power sector in Pakistan. Moreover, conducting training programs that aim to teach people the skills of utilizing advanced technology in energy sector would also be critical. 

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