ISLAMABAD: The Cabinet Committee on Energy (CCoE) has directed the Petroleum Division to revise efficiency benchmarks of Captive Power Plants (CCPs) on its own in consultation with stakeholders as most of the plants’ efficiency is below 50 per cent, sources close to Minister for Information and Broadcasting told Business Recorder.
Sharing the background of proposal titled “policy guidelines for energy efficiency audit for CPPs”, the sources said that the ECC while considering a summary submitted by the erstwhile Ministry of Petroleum and Natural Resources (now Petroleum Division) on November 11, 2011 approved the following minimum efficiency benchmarks for captive plants using natural gas: (i) gas engine / gas turbine (based on cogeneration technology) — 60% and (ii) combined cycle (applicable to above 50 MW capacity power plant) — 50%.
The ECC also approved the procedure for conducting an energy audit as well as the penalty for not meeting the approved efficiency criteria. Subsequently, the erstwhile Ministry of Petroleum and Natural Resources’ summary which was approved the following revised policy guidelines for energy efficiency audit of captive power plants: (i) gas engine generator set/gas turbine based Captive Power Plants (CPP) (500 KW and above) with cogeneration system with Jacket Water OR Exhaust Flue Gases Heat Recovery utilization in their process should have efficiency of around 50%;(ii) gas engine generator set/gas turbine based CPPs (500 KW and above) with cogeneration system with Jacket Water and Exhaust Flue Gases Heat Recovery utilization in their process should have efficiency of around 60%;(iii) Only spinning units of the textile industry would be exempted from Waste Heat Recovery (Cogeneration system) but their Gas Engine Generator sets should have an efficiency of around 34% however all other units, except spinning industries, should have an efficiency of around 38% and ;(iv) Combined Cycle Power Plant with a capacity of 50 MW and above should have efficiency of around 42%.
Petroleum Division apprised that the revised guidelines provided for revised efficiency benchmarks, deposit of penalty in the Government Exchequer instead of its earlier treatment as operating income of gas companies, discouraging the sale of surplus power to Distribution Companies, grace period, disconnection and audit fee, etc. In pursuance of the guidelines, the gas companies were unable to conduct a holistic efficiency audit of the captive power units on the grounds that it was not their core function and they lacked the technical capacity for conducting such an audit. However, these companies were able to seek details of the efficiencies from captive power units from time to time which could not be independently verified and hence were considered as given. The gas utility companies were unable to impose penalties on the captive units with a below efficiency benchmark as there was no mechanism and legal cover at the end of the regulator (OGRA). Later based on a summary submitted by Cabinet Division of October 24, 2013, with respect to the role of OGRA for energy efficiency audit of captive power plants and natural gas boilers, the ECC in its meeting held on November 06, 2013, approved the following proposal:
“Since no technical expertise on the subject is available in the Cabinet Division, it is proposed that a Committee under the chairmanship of Secretary M/o Water & Power may be constituted comprising representatives of Ministries of Industries & Production and Petroleum & Natural Resources as well as OGRA. The committee may formulate concrete proposals for solution of the problem and develop a viable plan for the capacity building of related bodies for carrying out regular energy efficiency audits to bring transparency in the system. The committee may co-opt representatives from related Ministries/Divisions/Agencies, as it may deem appropriate and submit its report to the ECC within one month.”
Petroleum Division stated that the ECC also directed that a representative each from Commerce Division and Nepra may also be included in the committee. To-date the said committee has not made any progress on the matter. Historically, gas tariff for industrial units and the captive power plants were kept at the same level until August, 2013 when the tariff for captive power plants was revised from Rs 488 per MMBTU to Rs 573 per MMBTU so as to discourage use of indigenous natural gas, whereas tariff for industrial units was kept unchanged. However, this upward tariff revision was challenged by the industry and Sindh High Court decided against M/s SSGCL and resultantly large amounts of tariff differential are outstanding towards industrial units. M/S SSGCL has filed a review in the Supreme Court of Pakistan against the decision which is pending adjudication. In the recent case of M/s Bulleh Shah Packaging versus Federation and others, the Supreme Court of Pakistan directed that the Federal Government and OGRA may review the tariff structure and clearly provide the basis of categorization, factoring in technologies like cogeneration and distinguish between an industrial process and an independent business unit e.g. captive power plant that also sells electricity. Consequently, a suitable definition of captive plants /unit has been provided/notified vide OGRA’s gas sale price notification of August 9, 2019 as follows:
“Captive Power Plant/Unit” means an Industrial undertaking/unit carrying out the activity of power production (with or without co-generation) for self-consumption and/or sale of surplus power to Distribution Company or bulk-power consumer,’
Petroleum Division stated that the current notified natural gas tariff for the industry and the captive power plants with effect from July 01, 2019 is Rs.1,021 per MMBTU whereas gas tariff for export oriented industry and captive power units is Rs.736 per MMBTU.
The tariff for export oriented industry in Punjab has been fixed at $ 6.5 per MMBTU whereas the amount exceeding the said tariff is provided through a budgeted subsidy. It was stated that three Government Power Plants (GPPs) with efficiency above 60% are being charged notified RLNG tariff which is higher than the subsidized tariff for captive power plants having lower efficiencies than the GPPs.
Petroleum Division submitted the following proposals for consideration of the ECC in view of the declining trend of natural gas resources with no sizeable gas discoveries, the availability of power in the national grid and to promote efficient use of indigenous natural gas:(i) minimum efficiency benchmarks may be set for captive power units whether in single cycle or combined cycle using natural gas as a primary fuel- 45 percent minimum net efficiency for units upto 50 MW and 50 percent minimum net efficiency for unit above 50 MW;(ii) captive units, whether in simple cycle or combined cycle, where steam is also used in the process of industrial undertaking, may have a minimum net combined electrical and thermal efficiency of 60 percent;(iii) National Energy Efficiency & Conservation Authority (NEECA) may be mandated to conduct the audit of captive power plants by hiring an engineering consulting firm(s) for audit. The audited company will pay the charges for the said audit; (iv) the captive power units not meeting the above criteria will be given 90 days’ time to modernize/upgrade their units and in case of failure to comply; the gas tariff for such units will be revised to that of the notified RLNG tariff.
During the ensuing discussion, Minister for information & Broadcasting, Syed Shibli Faraz raised no concern over the selection of National Energy Efficiency & Conservation Authority (NEECA) for conducting the audit of captive power plants because of its limited capacity. He further stated that the proposed revision of efficiencies for the Captive Power Plants may attract opposition from industrial sector as majority of these plants are functioning below 50 % efficiency.
The CCoE discussed proposed efficiency benchmark for CPPs threadbare and agreed to their revision. The Minister for Maritime Affairs raised the issue of non implementation of the decision of Cabinet in terms of transportation of petroleum products through PNSC.
After a detailed discussion, the CCoE directed Petroleum Division to review the proposal in consultation with stakeholders and take a decision thereon at its own level.
The CCoE directed Ministries/Divisions to submit their summaries with definite and clear recommendation for the consideration of CCoE. The CCoE further directed that the Petroleum Division should implement the decision of Cabinet regarding transportation of the petroleum products through PNSC ships and submit a report in this regard to the CCoE/Cabinet.