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Coal Power: The Politics of Indecision

28 février 2012, 00:00

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CT Power (Mauritius) Ltd, in an unsolicited bid, was issued a contract by the CEB in 2006 to build and operate a coal power station of 2 X 50MW capacity at Point-aux- Caves, Albion. Incredibly, 6 years later, the project is still mired in a legal and environmental imbroglio with no end in sight. Nuclear power stations with greater environmental and legal complexities and hazards take, on average, 8 years from inception to final licensing.

CEB is facing difficult choices to meet the increasing demand in power capacity and electrical energy for the country. Its projection to the year 2016 is 490 Megawatt (MW) capacity and 2700 Gigawatthour (gwh) - an increase of 60 MW and 320 gwh from its current level. It had resorted to expensive heavy fuel oil (HFO) to meet its increasing base and semibase demand by investing in 2 X15MW capacity mid merit engines at Fort Victoria (Phase 1) and 4 X15MW (Phase 2).These engines normally operate as semibase but could be stretched at a cost to base load.

Modern public utilities use nuclear power and/or coal power stations to meet their base load. CEB currently purchases 1315 gwh of electricity annually from independent power producers (IPP) using coal/bagasse as fuel and it generates 1040gwh from HFO and 56 gwh from its hydrostations. The economic costs to the country of coal generated electricity compared to that of HFO should be revealing to our policy makers. The marginal cost of producing electricity by coal is about Rs 2.30/ kwh, compared to Rs 5.00/ kwh for HFO.

Electricity generated by Fort George power station last year as base load amounted to 600gwh and if that was produced by coal instead of HFO, the hypothetical savings in foreign currency to the country would have been a staggering Rs 1.4 billion. Anyone can compute the overall savings over the next 4 years - the time span for the construction and commissioning of a coal power station.

HFO has always been characterized by high price volatility and is currently priced at USD 750 per ton compare to USD 650 last year. Oil traders predict this year’s average of Brent crude to be USD 120 per barrel against last year’s average of USD 100 per barrel – an increase of 20% this price forecast does not factor in the geostrategic uncertainty of the Iran nuclear issue.
Hostilities in the region could send the price scurrying to USD 175 per barrel with dire consequence to the world economy and with disastrous effect to our cost of electricity production from HFO.

Using coal as fuel for electricity production will raise the eyebrows of our environmentalists and quite so. Many economies, including USA, Germany, Britain, China, India and South Africa, among others, are constructing new coal power plants or refurbishing existing ones using new technology that are fuel efficient and reduce gas emission. They are protecting their own economic development from the long term uncertainty of future oil crises.

The incantations of our green theologians will hardly be heard when Mauritius has to face such stark choices. Renewable energy has so far proved to be highly unreliable and marginal. The increase in capacity and energy demand referred to above for the next years could hardly be met by renewables or demand side management. The coal/ bagasse capacity has nearly reached its full potential within the existing assets of the IPPs.

The increase in demand of electrical energy over the years will be met by progressively more expensive HFO. CEB, as a supplier of last resort, and with statutory obligations to consumers has to face the hard reality of supply constraints against the soft options of green well-wishers. Government should come with a firm policy decision on the future of coal fired power stations. Either a dedicated site for a potential of 300MW capacity power stations is identified and meet all environmental, legal and social concerns or several sites spread across the country for 50MW capacity plants. Once these sites selected, Government should proceed with a Request for Proposals (RFP) tender exercise in an open and transparent way to avoid doubt, establish a good governance image, comfort potential foreign investors in our procurement procedures.

CEB, through a Special Investment Vehicle (SIV), must participate in the exercise in partnership with a company having proven track record in coal power generation. This exercise should also proceed through an open tender procedure. The SIV should be ring-fenced from CEB proper so as not to allow for conflict of interest between a supplier and the purchaser. It should operate on similar terms and conditions as any IPP.

Time is of essence and the time for action is now.