Engineer Sibte Ahmed Jafri, FIEEE (Pak.), FIE (Pak), PE
- WAPDA, IPPs and Privatization of existing assets
In early 80’s Pakistan saw induction of the Private Sector in the field of Electrical Power Generation. This phenomenon was new to Pakistan of the post WAPDA (Water and Power Development Authority) era, where conventionally there were always two parties, the Power generator and the Power users. Before WAPDA, many Industries used to have their own Power Generation facility and indeed there were town based Power generators such as REPCo (Rawalpindi Electric Power Company) MESCo (Multan Electric Power Company) and the like. By far the largest and best run was KESC (Karachi Electric Supply Company).
Additionally there were Hydel Projects in the North and some thermal projects controlled and operated by the GOP. With the formation of WAPDA, the Power Generation on a large scale started in real earnest, with the inevitable introduction of major Transmission and Distribution Network.
The performance of WAPDA at the time was exemplary to the extent that slowly and gradually all the town based Power generators and Supply Companies got merged into WAPDA in one form or the other and most of the Industrial units in sixties and seventies never considered having captive plants, except such process industries as Dawood Hercules and Sugar Mills where there was proportionately very large use of Heat and where Co-Generation was considered to be the only sane option.
But in eighties a reversal in trend took place. It was considered necessary by the International lenders (such as World Bank and Asian Development Bank) that the Private sector must invest in:
- Power Generation Projects in a big way (this DID NOT cover Captive Plants)
- Transmission and Distribution Systems.
- Distribution of Electrical Power by regions.
It was decided to take up Power Generation first; to be followed by privatization of T&D. Then came the famous 1991 Power policy, covering essentially the Thermal Projects (the policy covering the Hydel Projects is presently in the offing) and a number of IPPs came into being.
The induction of Private sector as Power generator was at the time a new experience in Pakistan. However it was quite common in many Western Countries (in USA for example all Utilities are privately owned), and since our own IPP policy similar activity has been undertaken in a big way in India and Bangladesh, our two very close neighbors. The experience of both India and Bangladesh with their IPPs has been different compared to ours. But that part is not in the scope of this paper. However it is very important to make a few observations for the benefit of record.
- When the 1991 IPP policy was being conceived and implemented, interested parties considered it necessary to paint WAPDA as an in – efficient and incompetent set-up. This way WAPDA could be kept away from having its legitimate say in the formation and/or implementation of that policy.
As one having been actively involved in the energy sector since last 30 years, may I respectfully point out that those who have thought it fit to malign WAPDA were ignorant (and probably insincere). You have to see just the following examples of WAPDA International level Competence
- MANGLA DAM
- TARBELA DAM
- KOT ADDU POWER PLANT
- TARBELA FAISALABAD 500 KV TRANSMISSION LINE AND ASSOCIATED SUBSTATIONS
If WAPDA had been allowed to play its due role in the IPP policy formulation and implementation the things would have been different.
1.1.2 The burden of the IPPs is eating WAPDA away as surely as a rot and unless some thing is done fast, things may go wholly out of control. For example from Annexure III it would be seen that last year WAPDA purchased 23,283 million KWH from the IPPs (this is 52% of total Energy that WAPDA sold) at approximately Rs. 4.70 per KWH and sold the same at an average price of Rs. 4.19 per KWH, thereby losing Rs. 12,000 million, WITHOUT the consideration of T&D costs and losses that has to be added to the cost of purchase, since the units are purchased at IPPs busbars.
1.1.3 Continuous emphasis on the Privatization of existing assets is perhaps not the cure-all of all actual or perceived evils, as is being made to look at present. This has been amply shown by the privatization of Kot Addu (at one time considered to be the crown jewel of WAPDA Thermal Power Plants.)
1.2 The Captive Co-Generation and Self – Generation Plants
When WAPDA was denied the financial recourses to build and/or augment its Power Generation and Transmission facilities, whereas demand continued to grow, slowly and gradually electrical power supply was unable to meet the demand. Load shedding started, firstly occasionally, but slowly as a regular feature. Load shedding was then developed as a fine art; priorities were framed and on top of this list were large (probably non-process) Industries whose load was shed as soon as there was shortage of Power. This was in 80’s specially the later years.
Some Industries were quick to see what was coming, for example Crescent Faisalabad and Globe Textile Karachi who put up their self-generation plant fairly early, but slowly gradually many industries went for Captive Plants. When load shedding started, most of the industries started with High Speed Diesel sets as “standby”. However slowly and gradually a substantial number went for total self– Generation set up during late 80’s and 90’s.
Statement of “DISCO wise” generation capacity of CPPs is given in Annexure I, but this needs updating.
Those who went for their captive plants, found the self-generated Power reliable, having steady voltage and frequency; and as a bonus, cheaper than the rates on which WAPDA was supplying them Electricity. In fact many claim to have recovered their investment and paid off the loan in a matter of 3 to 4 years, based on the savings in the Electricity cost.
What was started at the time to fight “ load shedding” is now a trend, not so much for quality of power but also as an economic factor. Presently gas is available as fuel for the captive plants. The cost of electricity produced is reported to be cheaper than that available from WAPDA, even when there is no use of Waste Heat Recovery. For Projects where Waste Heat Recovery is a distinct possibility, the cost of self produced Electrical Energy becomes still more attractive.
For those who are interested, a summary of a case study is enclosed under Annexure II, showing efficiencies savings and payback periods, covering all the three options; i.e. Steam, Gas Turbine and Gas Engine Generator.
1.3 Push towards privatization of existing assets of WAPDA
For many years there has been a push towards privatization of all remaining assets of WAPDA, (the first one in line was Kot Addu Power Plant). For this purpose WAPDA has been split up in 8 apparently independent entities; viz.
That way it would be easier to obtain bids, the piece of cake being not too big for any one party.
The first one in the line is FESCo, Faisalabad Electric Supply Company, the most paying Division of the lot.
Apparently so far there have been no serious buyers, but if there were, one wonders what would be the fate of consumers, because a purely commercial entity would hardly be expected to absorb the losses the way WAPDA is doing i.e. buying energy at Rs. 4.68 per unit transmitting and distributing it at its own cost, and selling it at Rs. 4.19 per KWH!!
1.4 Present Status
The present status can be summed up as follows: –
1.4.1 There is WAPDA with its own Generation Plants and the Transmission and Distribution facility.
- There is IPPs making guaranteed profit on the Electricity it produces and feeds into the T&D network owned and operated by WAPDA.
- There are large number consumers who have captive Power Plants, with or without Co-Generation, meeting their entire need of Electricity through their own recourses. They have high load factor and their cost of generation is lower than what WAPDA would charge them and lower than what IPP charges WAPDA.
- There is the average consumer who depends upon WAPDA for its Electrical Power needs, whatever its cost and/or reliability.
- The financial picture of WAPDA leaves much to be desired. It will surely further deteriorate if high load factor clients continue to leave its fold and go for Captive Plants. The semi – coercive efforts by WAPDA has not succeeded to stem this tendency and it is doubted that it would.
1.5 The Solution
The Solution would be some sort of get – together between the large number of Captive Plant operators and WAPDA; the IPP factor having come to stay.
That is basically what this paper is about.
2. Distributed Power
Distributed Power or Distributed Recourses is a term not commonly visible in Pakistan. But is today considered to be a thing of future in the USA, where profit making and reliability rules over all other considerations in the infrastructure sector.
So what is Distributed Power? “Distributed Power is Modular Electric Generation or Storage located close to the point of use”. These could be UTILITY OWNED as well as PRIVATELY OWNED very brief and over – simplificatally, the benefits are as follows: –
- Summary of benefits to the Utility
- Possible integration of the Renewable energy sources into the system.
- Peak Load support.
- Helping the harmonics and/or voltage sag.
2.2 Summary of benefits to the Distributed Generator
- On site efficiency
- Increased reliability
2.3 Summary of benefits to the Nation
- Can delay or totally eliminate:
- Large Central Generating Plants.
- Large and heavy duty Transmission and Distribution Network (these can be replaced by simpler networks)
2.4 Benefits to the small Consumer
- Ray of hope for affordable and reliable energy.
2.5 Benefits to the future generation
- Increased efficient utilization of heat energy in fossil fuel.
- Environmentally friendly power plants.
3. What broadly would need to be done
3.1 Modify T&D System
Present Grid Systems are built around large centralized Power Plants. A new set of Criteria shall have to be developed for moving towards the merging of the Distribution Recourses into the system; the system may need modification and in future totally new approach might be indicated.
3.2 New concept of Management
Even the management and operating of the Utility system shall have to look towards innovative approach, not looked kindly upon by the conservative planners; operators and managers.
4. Problem Areas
In the preceding lines “over – simplification” has been mentioned. This is however the stark truth, not just put in as a cache phrase. Where there are definite benefits in adopting the Distributed Resources option, there are some areas that would need very careful and professional attention to avoid serious upsets and surprises.
It is therefore necessary to take care of one or more of the following problems:
4.1 Desire of Utility to directly control the Generation Facility feeding its System. The Utility might need to have, not – unreasonably, the option to control any one of the Units for safety reasons, including during periods of forced or planned outages. At that point in time, the Unit shall go in Island mode. Therefore the support from Utility, as emergency and/or back-up Power, a key element in favor of Distributed generation, shall not be available to the Unit.
4.2 Emergency/standby support from Utility at a cost
Referring to the issue of support from the Utility for emergency and back-up Power that the operator of each of these facilities shall expect, as an incentive of entering the system, this may not be so welcome to the Utility because;
- The Utility shall have to maintain round the year surplus capacity to meet these situations.
- The extent of support needed by Utility would heavily depend upon the reliability level of the Technology adopted by each of the operators. Looking at it from the view point of the traditional Utility managers, ANY tidly widly 2 to 5 MW plant, would not be worth considering any thing more than a toy compared to, say a 300 MW Conventional Steam Turbine plant. Nevertheless this is an issue and shall need to be resolved.
- What if one of the operators decides to walk away? For genuine reasons or otherwise a situation that cannot be considered emergency. How does the Utility handle this situation? Perhaps an “Exit Fee”? But how can it be enforced?
- A very complicated situation might arise when we move to the next logical phase of the Distributed generation network. The wheeling of Power to a third party by the operator, through Utility Network. An Industrialist having surplus capacity in his Captive plant in, say Kotri, might like to “sell” it to his Plant in, say, Chunnian, (rather then adding to his generation capacity there), through the Utility network.
The procedure would look simple on paper but the financial calculations shall be complex, specially if consideration for the Utility maintaining a reserve to provide for peaking/emergency use for either of the two units, has to be kept in the formula (and if there is no such consideration how does the Utility finance that part?)
- Central Control Concept – Technically translated
- Purely from the viewpoint of system protection, the entire network shall have to be considered as one unit, and the facilities available in the individual operation and control panels shall have to harmonize with that of the system. Perhaps these control panels, along with the protective relays shall be standardized by Utility, and supplied to the operator as a part of the interconnecting deal. The control panel would most probably be remotely monitored, if not controlled.
4.3.1(a) The areas that would need careful review and uniform application are:
- Voltage and Frequency disturbances
- Voltage flicker
- Waveform distortion.
- Specifications relating to:
- Power Quality
- Local Distribution system operation and control
4.3.1(b) Some of the actions that may be needed to be taken are:
- Engineering Reviews
- Design Criteria
- Operating limits
- Technical inspections by the distribution Utilities.
4.3.2 The most serious concern of the Utility in adopting the Distributed generation option is “Islanding” a situation where a particular generation facility continues to supply power to a portion of grid when the balance of the Grid has been de-energized (a power outage). This situation may result in the facility feeding into a short circuit, or bodily harm to the maintenance personnel. However, islanding has its benefits and cannot be all that bad. At this point an example may be quoted. Whilst running the RRT (Reliability Run Test) on JAPAN POWER GENERATION, a 135 MW IPP, we were faced with the night of horror, electrically speaking. Owing to fog and mist and extreme cold, there were trippings in the system. The Power Stations around Lahore (SEPCOL and KOHINOOR) were shutdown by their operators owing to heavy voltage fluctuations. Japan Power Generation a 135 MW Facility was heroically trying to correct the system, but obviously could not. We could not shut the station down for it would have meant stoppage of RRT, something that was not permitted under PPA; we prayed, which was the maximum we could do and hopelessly looked at the voltage needle which was looking more like a swing. Inevitably the stationed tripped.
Lahore was in darkness for many hours. When the issue was discussed with a senior professional in WAPDA, a very competent protection engineer, he said he has all along maintained that the stations around Lahore should be made into an “Island” protection-wise, thus the Industries and people in and around Lahore do not suffer on account of a system fault, say, at Mangla. He said he is putting up a proposal to the high ups in WAPDA to this effect.
The Islanding around a “Distributed” Power facility may really benefit the local community by keeping its “lights-on” an advantage for health and safety and purely humanitarian, school going children, examinees, sick people etc etc. One would consider the benefits of Islanding do recommend the need to provide a technical solution, which not only deliberately allows islanding but also avoids the problems arising out of it.
4.3.3. Fortunately IEEE USA is looking into the technical aspects and is drafting a Uniform Technical standard for all Interconnections. It is recommended that the IEEE Pakistan Chapter, who have professionals from the Utility and private sector get actively involved in this and might influence drafting of a special part dealing with a small system like Pakistan, having its own practical problems which may substantially differ from what would be considered quite normal for, for example, California.
4.3.4 The FEDERAL ENERGY REGULATORY COMMISSION (FERC) of USA is actively looking into the Regulatory part of the Interconnection. It will be worthwhile for NEPRA to communicate with them and obtain necessary data to add into the existing NEPRA Regulations.
- An overview of Benefits of Distributed Power
The title of this paper is “Distributed Power an asset not a liability”. In the foregoing all known advantages and disadvantages have been elaborated. None of these are theoretical or imaginary but based on actual case studies initiated by the DOE (USA). If looked at with an open mind, if would be clear that the benefits of making full use of the Distributed Power Generation Resources presently available and/or planned for the future, if taken into the fold by the mother hen, the WAPDA, the end result would be beneficial to all.
Thus the presently conceived notion that the isolated Captive Plants are hurting the interest of WAPDA and should be discouraged is not based on comprehensive thinking.
In the following attempt is made to elaborate how we get to a win-win position by systematically taking the Distributed Power generators into the system:
5.1 Benefits to the Utility
- Distributed generation can provide capacity to meet energy reach during peak periods.
- The peak shaving can reduce demand charges.
- Emergency Back-up
- Option for utilizing Heat and Power where such a project exists
- Avoidance of congestion in the transmission system.
- The Grid can benefit from availability of surplus power with the Distributed generation operators.
- Support to voltage stabilization; elimination of voltage sag in most areas.
- Availability of power in high-density electrical power requirement area; reduction in losses.
(b) Financial Benefits
- Power can be available during peak load without addition to Utilities’ own system.
- The energy they purchase from the Distributed generator can be at a cheaper rate compared to the IPP. It is not possible to estimate accurately this figure, but a figure of Rs 1 per unit will not be too optimistic. This can be achieved without addition to the infrastructure (may be with some modifications to the protection system).
- The quantum of saving would initially be not very high, but it will provide some relief to begin with, and would be a definite movement in the positive direction.
- It is not possible to ascertain how much energy would immediately be available from the Distributed generators to be fed into the system. However, if the incentive (the Tariff) is right, and if they are reasonably assured of getting WAPDA Back-up during their own emergencies, they might switch “on” all their standbys, so with a load factor of 60% that WAPDA might be able to give them, the energy from their source would be 3000 million kwhr (see Annexure III). If WAPDA saves 1 Re on each of these units, WAPDA could in principle be saving that many Rupees per year. And on this sale the relevant Distributed generator would also be saving some money. So it is a win- win position.
- The Distributed Power Generator, once into the system, would no doubt be buying electricity from WAPDA, the comprehensive tariff could take into account both buy and sell; but (or revival of?) J1 and J2 tariff may not be adequate. More shall have to be done.
This would be the first step. Once this relationship is established, in areas of power shortage the Distributed generator may be encouraged to add capacity in his system, and it is definite that if the incentive were right they would do so.
5.2 Benefits to the Distributed Power Generator
- He does not have to retain specific standby capacity.
- He does not even have to have spare sets for catering for the period of maintenance.
- In periods of real catastrophe (like the recent gas failure), presence of the big Brother on their back would be of great help.
- Once the Distributed generation scheme becomes a part of system, the individual Distributed generator would suddenly find the strength and support of WAPDA making his life easy in so far as implementation of his project is concerned. It would have to be assumed that both NEPRA and Gas Company would be positively contributing to the implementation of the System.
- High caliber technical support throughout the life of the Project.
(b) Financial Benefits
- Low first cost.
- Increased profitability
- Adequate return for maintaining and operating an energy efficient, highly available power plant and to keep it optimally functional.
- Operating in parallel with grid, he has very high load factor that increases his economics considerably. Some non-industrial loads have quite low load factor, say 40%. If they have to retain set or sets for standby as well as emergency duty, the feasibility of their captive plant ends up being rather un-attractive (unless they can effectively utilize their waste Heat). However, if they get connected to grid, they immediately become viable, since they can then expect a reasonable load factor, and do not have to have standby set(s)
- A definite area of income, which is not dependent upon his own line of business and may be of help during his own slack periods.
5.3 Benefits to Future Generation
- Increased overall efficiency of the system leads to optimum utilization of fuel (a captive Co-Gen plant can achieve efficiency of 60 to 80% as against normal efficiencies of 25 to 32% in conventional larger scale Plants).
- Most Distributed generation stations are environmentally friendly as compared to huge fossil fuel central plants.
- The movement towards Distributed generation would be similar to the revolution that moved us towards PCs from the mainframe computer. One can look forward to a day when the “next-door” Power plant, would produce most of the Electricity used in the system rather than huge monsters, whose percentage in the total capacity shall gradually go down. Indeed it would be of interest to mention that against the IPP policy of 1991, there were many applications in the range of 25 to 50 MW, but at a very high level it was decided to restrict the size to 100 MW minimum and the entrepreneur should be free to decide where he puts up the plant and WAPDA MUST provide at its own cost the interconnection transmission line, wherever the entrepreneur sites a plant to his convenience.
On the Contrary the basic benefit of the Distributed generation is that it fits into the existing or planned T&D scheme and is located at or proposed for a known or predetermined high load density location.
- RECOMMENDATIONS – HOW TO IMPLEMENT
- If is recommended that WAPDA forms a small committee to go into the pros and cons of this presentation. Considerable help can be available from DOE, USA and IEEE USA who are actively engaged in finding ways and means to develop a procedure that addresses all possible reservations, to help cross all barriers. Technical, financial, legal and any other.
- Simultaneously a dialogue may be started with the Distributed generators (the SPPs the CPPs, the Self Generator, the term WAPDA uses) to find out what are their thoughts on the issue.
- Immediate steps should be taken to cease putting hurdles in the way of those trying to put up their own Power plant rather they should be encouraged to put up one, but with a plan to connect it to grid. Obviously this would mean formation of a technical cell that ensures that the controls and protection provided are such that there are no problems in interconnecting. In this help can also be taken from EDF (France) who are actively pursuing this policy. The buy/sell proposition would go quite well if the incentives are right. Such examples are there in many parts of USA, as well.
- WAPDA shall have to establish a liaison with the SNGPL and SSGC to jointly encourage the prospective Distributed generator to establish plants having optimum utilization of heat; may be it could be made mandatory to have a CHP installation, rather than a pure electrical power generation installation, when there is an on location need for both Heat and Power.
- NEPRA should be requested by WAPDA to modify their regulations to include some thing on the lines of PURPA (Public Utility Regulatory Policies Act of USA). Sooner or later a Distribute generator (existing or proposed) can become a component of the Distributed generation scheme once it meets the criteria of QF (Qualifying Facility) as per PURPA requirements. NEPRA could coordinate, if necessary with the FERC (Federal Energy Regulatory Commission of USA).
The scheme so developed would encourage the renewable Energy Resources based plants to be connected to the system; this would considerably improve the viability of these plants (wind energy, solar energy) because they will cease to require the battery back up.
2005 is round the corner WAPDA knows MORE THAN ANY BODY; 2005 might mark the beginning of another period of load shedding. On the other hand, the Industrialist will be faced with tough competition from the Asian neighbors in the International market (because in that year quota system would end), so any saving in its cost of production would be of great help. Availability of reliable Power will help increased productivity; which really means lowered cost of production. Adopting the recommendations given above on a crash basis would considerably help the Industrialist in both directions. And when the Industrialist finds the full weight of WAPDA behind him, he will go for Captive Plants with a new zeal, and this may, just may, defer Load shedding for a few years if not permanently.