Problems and prospects of hydroelectric power

Pakistan has installed capacity of 6,902 megawatts of hydroelectric power, which meets one-third of the country’s electricity needs.

However, there is a potential of more than 50,000MW. Hydroelectric power development has suffered due to prolonged Kalabagh Dam controversy on which national consensus could not be developed.

Sindh feared that Punjab would divert water depriving it of its share and that it required extra water to flow down Kotri to push the encroachment of sea into their land. Khyber-Pakhtunkhwa (K-P) feared that Nowshera would be inundated.

Dams are not a zero-sum game. Dams increase water supplies and are an insurance against drought. Every country that has a river, builds a dam.

Total river flows are to the tune of 179 km3 in Pakistan against consumption of 126 km3, leaving an excess of 38 km3 that goes into the sea. It has been established now that only 11 km3 is required for excess flow into the sea to prevent sea intrusion. It means excess water to the tune of 27 km3 is available to build dams.

The capacity of Kalabagh Dam is only 7.5 km3. So practically, four such dams can be built while having enough water to satisfy Sindh’s criteria and objections. Fortunately, there is no controversy over Bhasha Dam and Kalabagh Dam has to be postponed until there is water and food crisis?

It is the cheapest dam to build as it is close to plains and would have cost less than half of Bhasha Dam. It would have irrigated a million acres in Punjab and a million acres barren land in Sindh. A lot of time has been wasted in controversy with no final output.

Mangla Dam’s height has been raised to increase its storage capacity. Now Mangla is the largest storage dam of Pakistan in place of Tarbela whose storage capacity has gone down due to siltation.

Projects being implemented

Only lately some interest has been revived and many projects have been prepared for implementation. The World Bank has agreed to finance Dasu Dam – a 4,400MW project to be built in two stages of 2,200MW each. Bids are expected to be invited by 2018.

Tarbela Dam’s power generation capacity is being upgraded through two projects – Tarbela IV and Tarbela V with capacity of 1,410MW and 1,300MW respectively.

Tarbela IV is at advanced stage of construction and may be completed and commissioned in 2018. Tarbela V financing has been approved and is at initial stages.

Extension projects do not require much time to complete as compared to the traditional hydroelectric power projects.

Finally, Sukhi Kinari with installed capacity of 900MW has entered into the implementation phase due to being taken under CPEC. It is perhaps the first or second private sector hydroelectric power project.

Bhasha Dam of 4,500MW capacity is the most important project. It is a multi-purpose dam that will produce electricity as well as store water. There is no controversy surrounding it as there would be no canals and thus no water diversion. Neither is there any issue of a city being inundated.

Being free of internal issues, it is mired in external issues as it is situated in what India calls a disputed territory. International financial institutions have asked Pakistan to get NOC from India which is obviously quite unacceptable to Pakistan.

USAID has shown interest, but to the extent of scrutinising the design, which should not have been opposed, but a hue and cry was created by some circles and demands were made not to hand over the documents to USAID.

Any technical input should be welcome, while we are free to do what we can, if we have the money.

The government has, however, continued with the preparatory operations such as land acquisition. More than Rs100 billion has been spent in the process making many locals quite rich.

The project is ready for construction. Wapda has prepared a proposal for self and local financing arrangement according to which the project would have two stages.

Storage components would be built under public sector financing involving Wapda’s own income stream, PSDP funding and local bank borrowing. In the second stage, the power component would be implemented under the IPP regime.

The proposal is quite reasonable and if nothing happens, we may have to go along these lines.

Talks with China

There is a parallel stream of negotiations with the Chinese who have reportedly presented a very grand and ambitious plan of owning and operating the whole Indus cascade. It is a difficult issue and may involve a bitter debate in the political arena and thus may be time consuming.

It may be desirable to separate Bhasha Dam from the grand scheme for the time being and start its implementation with Chinese cooperation. They would be the most probable builders and EPC contractors in any case.

The grand scheme can be discussed and negotiated and if consensus reached, Bhasha can be retrospectively included. Pakistan should not delay Bhasha and should start on its own, as is the case of Ethiopia which has built a similar project in similar circumstances from its own meagre financial resources.

Problems and difficulties

First of all, all hydroelectric power plants do not have a water storage component. Except for a few, like Tarbela, Mangla, Bhasha and Kalabagh, no other projects would provide any significant water storage at all.

Apart from seasonal variations in water/electricity supply, there are long-term variations as well. Brazil depends on hydroelectric power to the extent of 64-80% and it has severe problems of power supply due to drought conditions recently. Brazil is now taking steps towards access to more non-hydro sources.

Due to climate change reasons, it has been projected that in Pakistan there would be large variations in precipitation and water supply, resulting either in extraordinary floods or drought conditions.

Having a large component of power supplies coming from hydro would compound our difficulties – no water and no power. Thus, there is an upper limit on the ratio of hydroelectric power in the total energy mix.

A large construction period, environmental issues and displacement of people have been the other reasons discouraging the increase in hydroelectric power. The advent of solar and wind power at 4-5 cents has created an altogether new situation in power markets. Large capacity projects requiring expensive transmission facilities would increasingly face tough competition from solar power.

One or two of the major fallacies based on which popular support for hydroelectric power has been built is that it is cheap and brings water also.

It is true that until recently, hydroelectric power tariff was Rs1 per unit. Now, it is Rs3.50 per unit, partly as a result of increase in royalty payments to K-P. It is still an attractive price compared to Rs5-10 per unit of fossil-based power tariff.

However, all recent projects are to produce expensive hydroelectric power. K-P government is developing expensive projects costing in excess of $2.5 million per megawatt, resulting in a tariff of around Rs10 per unit, approaching oil-based electricity.

Neelum-Jhelum has the same situation, although it has unique problems. There are issues of high re-lending charges which will result in a tariff of Rs14 per unit. In any case, the tariff cannot fall below Rs10 per unit, whatever financial restructuring is done.

In China and Canada, hydroelectric power is priced at 4 cents, which is its average price internationally. In India, capital expenditure on hydroelectric power is not so high. On the average, it is $1.5 million per megawatt, resulting in a tariff of about 5 cents per kWh, which appears to be quite reasonable.

There is something terribly wrong or deficient in our hydroelectric power sector – $2.5 million per megawatt vs $1.5 million elsewhere and a tariff of 8-10 cents plus vs 5-6 cents elsewhere.

There is a difference of more than twice. May be there are design and engineering issues, or the monopoly of contractors coming from only one country, perhaps due to law and order situation.

As there is a long gestation period, there might be issues of escalation formulae which are normally understood with difficulty and the multi-currency issues as well. There could be contract management issues as well.

As billions are involved, it may be worthwhile spending some money to investigate the issue through credible international advice and a third-party input.

The writer has been until recently member energy of the Planning Commission

Article by SYED AKHTER ALI, published in Daily Times on September 5th, 2017

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