Rental Power Plants Not Suitable For Pakistan

Posted on 17 January 2010 by Ibrahim Sajid Malick

The Asian Development Bank told Pakistan Finance Minister Shaukat Tarin last week
rental power plants will not be cost efficient and advised that even if the country wanted
to proceed with the plan it should reduce project size in half, Dawn reports Monday.

Only 65 per cent Pakistanis have access to electricity and still demand has outstripped
supply; the country is currently facing peak power shortages of approximately 4,000 –
4,500 MW.

To address the present electricity demand-supply gap, coupled with consistent growth in
demand (7-8% per annum), Zardari government had proposed Rental Power Plant as an
intermediate measure.

In August last year presided over by Prime Minister Yousuf Raza Gilani the federal
cabinet approved installation of 14 rental power plants to generate 1,500MW to
partially offset the overall deficit of 2,700MW. The remaining 700MW will come from
the existing system. A total of 2,250MW of rental projects was approved.

The opposition politicians had described it as ‘a source of kickbacks’.

Pakistan government had asked ADB to analyze prospects of Rental Power Plant projects
sponsored by the water and power ministry. According to reports, the ADB said is of the
opinion that the government should execute only eight RPPs with a total generation
capacity of about 1200MW.

Even at the reduced level tariff is likely to increase by 24 per cent, in addition to about 30
per cent increase in electricity rates as required under IMF loan agreement. About 18 per
cent tariff increase has already been notified by the government under the IMF
program.

Pakistan has 19,420 Megawatts (MW) of total installed generation capacity from
hydroelectric, thermal, and nuclear sources.1 Electricity is supplied mainly by
conventional thermal plants, with oil and natural gas being the primary fuel sources.
Thermal power plants account for around 66% of total capacity. A further 32% of the
capacity is accounted for by hydro-electric plants, with the remaining 2% supplied by
nuclear power stations.