The two thermal power plants in the country, with a combined generation
capacity of 700 MW, have expressed interest in converting to Thar coal. This
transition is expected to reduce their generation tariff from Rs 46 to Rs 8 per unit,
as per sources close to the Managing Director of PPIB.
Representatives from the company met with the MD PPIB on September 25,
2023, to discuss a concept paper outlining the conversion of both Lalpir and
Pakgen complexes from RFO to Thar coal. This proposal aims to include both
plants in the Indicative Generation Capacity Expansion Plan (IGCEP) document.
Lalpir Power Limited and Pakgen Power Limited, established under Power Policy
1994, are currently Residual Fuel Oil (RFO) based thermal power plants with
capacities of 362 MW and 365 MW respectively. These plants have operated for
over 25 years, located strategically at the center of the transmission network,
contributing to system stability.
Due to a significant increase in RFO prices, these plants have slipped in economic
merit order. In alignment with the Government of Pakistan’s objective to utilize
indigenous resources, Lalpir and Pakgen intend to replace their existing RFO fired
boilers with Thar coal fired boilers. This project will require relatively low capital
expenditure compared to adding a 700 MW new green-field project.
Power Purchase Agreements (PPAs) for both projects are valid until the end of 2028. The current IGCEP envisions almost 0% capacity factor for these plants until 2028. This implies that the GoP will be paying an estimated Rs.90 billion for idle capacity until the end of PPAs.
The proposed conversion is a brown-field project, with lower CAPEX requirements compared to setting up a green-field project in the same grid location. The power companies assert that this transition will lead to a substantial reduction in generation costs, a decrease in the overall basket price, and substantial savings in capacity payments.
Furthermore, they argue that this conversion will allow the estimated Rs.90 billion, originally allocated for idle capacity payments, to be better utilized in providing cheaper electricity for consumers. The proposal, unique and the first of its kind in Pakistan, aims to bring down the current Fuel Cost Component from Rs 46 kWh to Rs 8 kWh by utilizing Thar Coal. Sindh Engro Coal Mining Company (SECMC) stands as a potential coal supplier for this project, with plans in sync with the conversion timelines, ensuring a steady supply of coal to the plants. The logistics plan includes a rail connection from Thar Coalfield to Chore Cantt, which is already in place for the proposed conversion project.