National Electric Power Regulatory Authority (Nepra) approved coal price adjustment mechanism in the determination of coal upfront in 2014 leaving a caveat for review proceedings to consider potential fresh indices contingent on the formula of country of origin, calorific value, marine freight calculation revolving around time chartering rates and bunker fuel rate

Echoing the views of environmentalists coal is the most dirty fossil fuel manifestoed in negative externalities such as CO2 emissions as a cause of global climate change. Yet it is astonishing to know that in 2018 production of coal was at its peak indicating global coal consumption pattern was likely to remain at this level for the coming two decades. Burning coal releases toxic gases, including sulfur dioxide, oxides, mercury and heavy metals. Generally production of electricity through coal can be replaced through costlier gas and nuclear fired power plant with emphasis on a clean environment with significantly reduced C02 emissions.

Coal consumption patterns

 

In Pakistan, we are quick to propose introduction of renewable energy in the overall energy mix without appreciating that on account of the intermittent nature of wind and solar back-up hydro/coal/fossil fuel based power despite established environmental concerns is available especially as storage of electricity from renewables is prohibitively expensive. The CO2 emissions are not visible nor felt. The consumption of coal stands constant and while decrease in coal consumption has occurred in the developed countries coal consumption in developing economies particularly Asia has been on the rise and Pakistan being no exception has embarked upon coal based power plants of Chinese origin or claims of indigenous Thar coal based electricity. Coal-based power projects in Pakistan have installed production capacity of about 3000MW and some 7890MW of coal-based power plants are expected to be operational by 2022.

Advantages of coal

The advantage coal enjoys worldwide over other forms of fuel energy is that on the whole it is less expensive than its alternatives, geographically well distributed and no region has a monopoly over the availability of coal production. Besides as the coal mining technology utilized is not complex technology with the finished product capable of being safely transported and hauled over long distances handled safely and politically is a good employment generation activity. What is euphemistically termed “Clean coal” by coal lobbies is still a relatively nascent technology involving carbon capture from coal, steel and cement plants however mining companies lack incentive to install costly scrubbers and pipelines in the absence of a regulatory oversight.

Energy security and health considerations

Energy security refers to any country’s capacity to ensure a steady and reliable supply of sufficient and affordable energy. The World Health Organization estimates that round 3 billion people worldwide have no access to electricity and utilise kerosene, biomass, and coal posing serious health hazards and reports indicate that exposure to coal can result in 4 million premature deaths. Market forces determine the edge coal retains against its substitutes and it is said in the geological world that coal deposits are democratic in its distribution than natural gas or oil resources. It is only in the US that coal is encountering competition from shale which has brought about cheaper energy from natural gas. The spectrum of countries reveal that those like Nepal use negligible amounts of coal as it is abundant in hydropower yet Poland, an East European country relies excessively on coal despite encountering tremendous pressure from the European Union’s anti coal campaign. In order to retain sovereignty political compulsions may force a country to rely upon coal rather than resort to fossil fuels monopolized by a cartel.

Population growth impact on coal

Pakistan is confronted with a high rate or unbridled population growth causing per capita energy consumption increase with no downturn in the foreseeable future and even now gaps exist between the highly developed US, the EU and China. As per the statistics of the International Energy Agency, achieving high income levels is not likely unless accompanied by high energy with electricity consumption in the US being at 13,000 kilowatt hours per person annually followed by China resting a notch above 4,000 kilowatt hours per person per year. Demand of coal in China may decrease as the nation battles an endemic case of air pollution, particularly in main cities.

Coal remains affordable

Affordability of independent coal fired power plants in Pakistan is centric around an emerging coal market and there is absence of any vibrant domestic or export market as exists in Indonesia and India which are major producers of coal. The electricity regulatory authority of Pakistan is Nepra, responsible for determining electricity tariffs in consonance with criteria of economic efficiency and service of quality based on the 1988 rules and procedures and recommended tariff standards and procedure rules 1998. In 2014, Nepra approved coal price adjustment mechanism in the determination of coal upfront in 2014 leaving a caveat for review proceedings to consider potential fresh indices contingent on the formula of country of origin, calorific value, marine freight calculation revolving around time chartering rates and bunker fuel rate. According to views shared by a US turbine manufacturer giant, renewables is not dependable nor economical compared to thermal derived electric power as gas fired or coal (imported) fired power generation tariff is around 5 cents/kWh while at the other end of the spectrum renewable levels around 20 cents/kWh. Additionally cross subsidies to renewable are in the range of USD 200 and USD 125 billion annually in the USA and Germany respectively. Pakistan cannot afford such costly cross subsidies and lacks a solid base load nor flexible installed capacity. This would cause recurrence of power outages and increase industrial productivity costs thereby diminishing Pakistan’s export competitiveness.

Transition from Coal to renewables at a cost

Germany once one of the world’s biggest consumers of coal, currently powering around 40% of its electricity needs, and through which it built its industrial base now plans to close all 84 of its coal-fired power plants over 19 years to comply with its international commitments in the battle against climate change. Germany however has an outlay of US $ 45 billion to manage the transition from coal to alternative forms of energy in its coal bearing and dependent areas. The need of the hour is for the Western economies to invest in crucial R&D which may substantially reduce the cost of coal alternatives and wean developing and coal dependent countries off whether by affordable natural gas extracting or liquefaction processes. The underlying need is to lower CO2 emissions. Another disturbing aspect of coal extraction is that coal workers are more susceptible to mine accidents and disabilities than are others . Developing countries like Pakistan desire to abide by international covenants on reduction in C02 emissions, have a versatile energy mix, reduce dependence on increasing fossil fuel including LNG imports and save precious foreign exchange on coal which is imported as even Thar coal has low heating and calorific value. A coal power based generation entity in Pakistan is utilizing air cooling technology in place of water cooling process albeit at slightly reduced efficiency levels to conserve water usage in water scarce region. Even if Pakistan resorts to enhanced generation from renewable energy sources from solar and wind it will have to maintain oil, coal, hydro and gas-fired power plants to offset any variation in daily or seasonal electricity production. The move towards renewable will have to be done in a researched and phased manner with a substantial fund being established to address transitory energy requirements.

 

By Nadir Mumtaz

Credit ;   Published in Business Recorder on 9th June 2019

https://fp.brecorder.com/2019/06/20190609484173/