GILGIT-BALTISTAN POWER DEVELOPMENT BOARD DECENTRALIZED ENERGY GENERATION THROUGH PPPs Summary Proposal for Establishing Two Pilots in GB 1. BACKGROUND As in the rest of Pakistan, GB is facing acute shortages of energy, despite having huge potential for generating tens of thousands of MW of clean hydropower. Presently, per capita power availability in GB is only 0.05 kW, which is the lowest in Pakistan. Projected demand and supply shows a huge gap to meet the energy needs of the area. Even with the existing plans of expansion of power through the public sector, it will not be possible to meet the projected demand, and the energy crisis will deepen even more. The public sector funding alone is not enough to narrow the supply-demand gap, which means that other strategies are needed to complement and supplement the public sector investments. The hydropower potential of GB is well established for large projects. Though vital, these are complex and long-term projects, requiring large sums of investment money and time to develop. However, hundreds of other sites have been identified by GB-W&PDD, where technically sound, economically viable and ecologically smart mini and small projects can be built within a short period. The recoverable energy from these sites is roughly estimated to be 300 MW on perennial water flows in GB . The downside of developing off-grid, small-scale hydropower projects is high up-front cost and low plant load factor (PLF). To mitigate this disadvantage, the International Finance Corporation (IFC) and Aga Khan Rural Support Programme (AKRSP) are working together to develop an off-grid model for productive uses of energy. AKRSP has considerable experience in promoting community based power utilities in Chitral and GB, and it has also registered a CDM project with UNFCCC in small-scale hydropower sector. 2. PURPOSE AND JUSTIFICATION The proposal is to pilot two hydel projects in GB, targeted at productive uses. The focus of this investment will be providing required energy for developing potential growth sectors. The financing model involves leveraging public funds to raise equity from community and venture funds for investing in hydropower for developing small industry, such as food, agroforestry and marble processing, ICTs, tourism and other employment opportunities. The long-term goal is to scale up the community based power utility concept of AKRSP, by developing new sites under 5 MW, making private investors and local communities as partners. A beneficial policy implication of this approach would be for the public sector to build and maintain ‘regional grids’ allowing local investors and communities to generate clean hydroelectricity to feed such grids. 3. PROPOSED PILOTS The proposed pilot projects are: a) Ahmedabad, a village located near the spillway of Attabad Lake and, b) Misgar, a village near Pak-China Border, both in the Hunza-Nagar district of GB. 3.1 Ahmedabad Phase II In 2008, the community received a partial grant of Rs. 7 m from Pakistan Poverty Alleviation Fund (PPAF), and technical assistance from AKRSP to build a 200 kW micro-hydel unit. The unit became operational towards the end of 2009. The total power requirement of the community was less than 150 kW, and the surplus electricity was wheeled to nearby villages providing access to power to over 300 households and few commercial users. The small community-based power unit was registered as a Utility company under the Companies Ordinance in July 2010. During the last two and half years of operations, the Utility has been able to achieve cash break-even, and is generating an average annual income of PKR 1.5 million. The proposal is to utilize the outflow of water from this power plant and the steep slope gradient available below it, to build a second unit with a minimum capacity of 500 kW. The targeted productive uses include construction of five tunnels that have been started to realign the KKH above the lake. The tunnel construction company, China Road and Bridges Corporation (CRBC) has approached the community of Ahmedabad for supply of electricity to its camp, which is hardly 5 km away from the powerhouse with the distribution line already in place. The total requirement of CRBC is over 100 kW/hour. The spillway and the lake itself has become a hub for transhipping and recreational activities. The nearby tourist hub of Karimabad has 40 hotels, five telecommunication towers, and other commercial concerns, besides a population of 7000. More significant, Ahmedabad village itself has large deposits of white marble, and agro-forestry resources. A nearby wood processing enterprise run by local women is already purchasing electricity from the Utility, which has plans to expand its operations. The total requirement of Central Hunza is about 12 MW, while the availability is only 1.2 MW from two public sector plants. 3.2 Misgar (Gojal) Gojal or Upper Hunza forms Pakistan’s northern most borders with Afghanistan and China in the northeast. Until Attabad disaster, Gojal had been developing at a rapid pace and was recognized as a role model community for its social and economic progress and environmental awareness. The local economy was driven by the Dry Port at Sost, border trade with China, international trophy hunting, community share in the entrance fees to Khunjarab National Park, and tourism and transportation services on KKH. People in Gojal, with the highest education rates in the area, were also the early adopters of new agricultural technologies and the largest suppliers of high quality seed potatoes in Pakistan. The economic basis of this best community development practice has suddenly collapsed, due to a single natural disaster, the Attabad landslide and the formation of the Lake. The new costs and risks associated with transhipping and handling of bulky goods like potatoes and heavy consignments of consumer goods imported from China over the lake, have reduced incentives for border and local trade. As a result, all economic activities have come to a standstill. The Chinese government is providing food and fuel aid to the entire population of 25,000 for the last three years at the request of GoP. Proximity to China gives potential access to a large and growing market. China has a soft corner for GB and is likely to provide market access for semi-processed marble and granite. Pakistan already has a captive market in China and it is currently negotiating with the Chinese government to include semi-processed marble and granite in the zero tariff list of their bilateral trade agreement. Gojal has large deposits of good quality marble and Pakistan Stone Development Company (PASDEC) is keen to create a marble city in Gojal for export of marble to China. However electricity is the main constraint as shipping diesel to this area is very expensive. The Government of GB is constructing a 2 MW power plant at Misgar, and has plans to build another 1 MW unit nearby, but due to financial constraints under regular budget, progress is very slow. The total power requirement, including for marble processing is 10 MW. The proposal is to build the second 1 MW unit as a PPP pilot, as captive energy for the proposed marble city. 4. BUDGET AND FINANACING The estimated cost of these two pilots is about Rs. 300 million. The exact cost will have to be worked out after detailed survey and design. The financing strategy proposed is to create a one-window facility under GBPDB for PPP investments, and invite other partners who have a strong interest in developing renewable energy in GB to participate. Potential partners include PPAF, IFC, ADB, USAID, KfW, GIZ, AKRSP and AEDB. Once this concept meets the approval of the Board, a meeting of these and other partners can be hosted by GBPDB in earnest.
Posted on: Sat, 07 Sep 2013 14:09:01 +0000
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