Rental Power Plants , Myth or Reality ?By: Junaid Ahmed

Written and Complied By: Junaid Ahmed

Pakistan is a developing country and because of this fact there are massive problems from food to health. One of the major problems of Pakistan is electricity shortage across the country. Business, factories, industries etc are closing down or to some extant unable to contribute to it’s full potential to the economy. The current government tries to solve this problem by implementing short-term energy generation project initiated in 2007 through RENTAL POWER PLANTS to eliminate load shedding by December 2009 and work concurrently on other medium and long term thermal and hydel projects.

Rental power plants are set up to meet short-term and emergency requirements of a country. Rental periods are normally of 5-7 years contracts depending on the country’s need. Rental power plants are setup in the US, UK, India, Kuwait, Bangladesh, Kuwait , Sri Lanka, Turkey, UAE, Saudi Arabia ,Iraq, and Palestine.Pakistan is facing deficit of around 4000MV in the system and this deficiency is primarily a generation deficit not being met by better augmentation of existing plants or saving of line across. Better augmentation and line losses can help but not solve the problem. However, around 20% of electricity is illegally use by people.

Rental plants are simple cycle plants and consume marginally more fuel than combined cycle power plants which are normally set up as independent Power Producers (IPP’s).However, most IPPs normally first start out as simple cycle plants and then converted to combine cycle over a period of time. Despite the fact, that rental contacts are between 3-5 years and not of 20 years(as with IPPs) rental tariffs are low. When lower tariffs to rental plants are taken into account and a further allowance made for higher fuel costs, the difference is almost equal or marginally higher in case of rental plants. Therefore, it is entirely incorrect to suggest that rental power costs are substantially higher than those of IPPs.

Apart from this debate, advertisements published in leading newspapers recently, PEPCO claims it will be able to eliminate the power deficit. However, many rental power plants will not be able to come on stream by December this year as the government has failed to make down payment to various companies. This may leave a power deficit of 1,200 to 1,500 megawatts in December or may be more than that. For instance Walters rental project of 205MW and Karkey rental project of 232MW, scheduled to be commissioned in June this year in Karachi, have been delayed because the government has failed to make initial payments. Guddu project of 110MW, expected to come on stream in October, is also very much delayed as machinery and plants have not so far been brought from abroad. This plant will start functioning in March 2010 if the machinery lands in Pakistan by October as some payments for the plants have been given to the seller.

However, if the elected government wants to restore its credibility, it has no option but to install rental power plants as these can start generating electricity within a short span of four to six months. But it requires a will, availability of finances and assurance of reasonable tariff to the companies, which want to facilitate the government by installing the rental power plants.No doubt it is a very hard choice for the government. Earlier, the Musharraf government did not take any step to ensure hydrogenation, coal-based electricity and even did not explore alternative areas to generate electricity keeping in view future needs of the country in accordance with the increasing demand. Former finance adviser Dr Salman Shah, who worked with the previous government, has also admitted that the Musharraf’s government failed to match electricity generation with increasing demand.

Now, government should and supposed to support the companies which are keen to install rental power plants. Moreover, government should also explore every source of electricity including rental, independent power producers (IPPs), solar, hydropower and nuclear, but ensure the electricity mix at affordable prices. Some experts oppose rental power plants on the ground that their tariff is so high, but there is no other option as hydropower, wind power and coal power projects take years to complete. Also, government pays only for electricity supplied, If electricity is not supplied to the grid, no payment is made to the rental plant. Government takes no responsibility for payment of loans taken by rental sponsors, and rental plants are successfully set up in 6-8 months whereas IPPs take 3-4 years. In conclusion, I would like to say that Pakistan is in serious power crisis and rental power plants would be a better idea and these should be taken because something is better than nothing.