Construction of K-Electric’s $650 million 900MW RLNG-based Bin Qasim Power Station III will commence in December under the project contracts signed in October this year and is expected to start producing electricity by summer of 2021. The project has received all required approvals and is part of KE’s planned initiatives resulting in investments of around US$3 billion across the power value chain over the next few years. The project was conceived in 2016; after the completion of feasibility studies it was approved and publicly announced in 2017.
KE has awarded the project contracts to Siemens AG and Harbin Electric International for the 900MW RLNG-based Bin Qasim Power Station III. This was said by Moonis Alvi, CEO, KE.
He said that the project represents one of the largest private sector investments of its kind in the country’s power sector and is in line with the power utility’s vision of improving KE’s generation fleet efficiency. “The project is part of KE’s business plan formulated after detailed study to review all possible solutions for increase in generation capacity including long term off-take of additional power from the national grid with the objective of bridging the supply demand gap and decommissioning of its old furnace oil-based BQPS-I plant,” Moonis said.
Elaborating on KE’s plans about opting to take more power from the national grid, Alvi said that presently, NTDC supplies 650 MW to Karachi through two circuits. KE requested for additional power from the national grid last year; NTDC, however, concluded after a detailed study that it could not provide the requested MWs from the existing interconnection infrastructure, citing overloading and system stability as concerns. This was intimated to both KE and the Ministry of Energy, on several occasions. NTDC however allowed additional 150MW via wind power plants from Gharo for two years which KE is already evacuating.
However, wind power plants are dependent on the average yield of wind, which fluctuates substantially, rendering the supply less reliable. Additionally, KE has also requested for the import of 500 MW from the national grid through under-construction nuclear power plants KANUPP II & III which is under Government of Pakistan’s approval. Further, a study to see the possibility of evacuating additional power from the national grid in the next few years is presently underway. But, the construction of interconnection facilities will take at least two and a half years following the receipt of required approvals which will also take their due time. If this additional 500MW is made available to K-Electric, it can evacuate that power to replace the remaining inefficient power plants.
Reminding that the existing supply of 650 MW is without a valid contract which KE and NTDC/CPPA still have to sign, Alvi said that we are ready to invest in interconnections when and if we have agreement for supply of additional power. Putting the urgency of Karachi’s power needs in perspective, Moonis responded to a query as to why KE cannot wait for the development of required interconnection facilities.
He said that Karachi’s power needs are growing faster than the rest of the country and KE is already visualizing a bigger power shortfall next year which may necessitate load management, part of which was already seen this year. Based on the projected peak demand outlook for FY 2023 for KE’s service area, even with the commissioning of the 900 MW RLNG project and the proposed 700 MW Coal IPP, there may still be a shortfall of around 1,400 MW and KE is working with all stakeholders to bridge that gap. Moonis further said that the last power plant added by KE was in 2012, when the 560MW BQPS2 was added to KE’s own fleet. Since then, while focusing more on Transmission and Distribution, KE continued to undertake robust planning for additional power plants along with capacity enhancement at its existing power plants, and in parallel has also drawn power from the national grid and IPPs to meet the power shortfall, which is likely to continue if immediate actions are not taken to make power available. The decision to add power was part of KE’s long term and dynamic business plan.
The plant was conceived in 2016 at a time when continuity of supply from the national grid was uncertain. Based on Karachi’s urgent need, a very comprehensive study was done and in August 2017, the K-Electric Board approved the construction of a 900 MW power plant at the Bin Qasim power complex.
Talking about the various stages that led to the final contracts Moonis said that due process was diligently followed. “Following the approval given by the KE Board, a competitive bidding process for contractors of BQPS3 was initiated, which was in full compliance with all NEPRA guidelines as well. The bidding was conducted by Ernst & Young and NESPAK who also evaluated the received bids. Siemens AG and Harbin Electric International emerged as the top contender. Following this, the proposal was approved by the Board of Directors in September 2019. Alvi reiterated that when NEPRA determined KE’s MYT which was duly notified by Government of Pakistan in May 2019, the proposed 900 MW plant was also part of the tariff and investment plan approved by NEPRA, which substantiates that the project met all regulatory, operational and financial requirements.
Further, when NEPRA made some changes to its determination, even though the project was already approved, we went through the approval process once again.
So, there can be no parallels with KE’s state-of-the-art 900MW highly efficient power plant – which will set impressive precedents.
The KE CEO rejected the misconception that since the plant is designed to run on imported fuel, it would be a drain on the national exchequer, and stressed that the contrary was actually true, “By replacing older, inefficient furnace oil based units with new lower cost and efficient generation units, KE is actually lowering the burden on consumers and on the national exchequer.
This is a highly efficient combined cycle plant and will run at an efficiency of around 60% which will not only help bridge the demand for electricity, but will allow us to gradually phase out some units of the aging and less efficient BQPS I plant which have been in service for more than 25 years. This older plant runs at about 30% efficiency and is a drag on KE’s overall fleet efficiency.
Moreover, these units run on Furnace Oil, which is imported and more expensive than RLNG. In contrast the 900 MW RLNG plant will result in lower import costs for the government, affordable power for consumers and a much smaller carbon footprint. Moonis further elaborated the benefits of 900 MW project to the economy of the city and Pakistan, “Natural gas is a dwindling resource in Pakistan and the shift to RLNG is a practical compromise in every way. As it is KE gets around 105-110 mmcfd of natural gas on average against allocation of 276 mmcfd.
The country is already facing a situation where homes face low gas pressure as well. We must consume RLNG at older, less efficient plants and we must not lose out on gaining the maximum advantage of shifting away from furnace oil.
We have also re-negotiated the terms of the contract and it will now be built with just 5% advance payment and the first unit of 450MW will be commissioned in only 19 months instead of 24 months, thus greatly reducing the time in which Karachi will start reaping the benefits. Given the robust due diligence, demand supply gap, transmission situation, efficiency and all related factors – the upcoming 900 MW RLNG power plant is very crucial for Karachi and KE is committed to commissioning the project as soon as possible.