Pakistan’s intention to use coal for power production through gasification and liquefaction technologies is likely to cause harmful economic impacts and a subsequent increased reliance on fossil fuels in Pakistan, finds a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
Author of the report energy finance analyst Simon Nicholas says national policies and plans aimed at the transition to cleaner energy must be informed by the local economic and debt realities, the declining prices of renewable energy technologies like solar, wind and green hydrogen, and cautionary global experiences of coal gasification and liquefaction. “The coal-to-gas (CTG) and coal-to-liquid (CTL) proposals intend to use Chinese technology and finance and come as coal-fired power continues to contribute to ballooning capacity payments, accelerating the build-up of circular debt in Pakistan’s power system,” he said.
He adds that such plans are immediately challenged however by the relatively high cost of coal production in Pakistan, and the heavy reliance on yet-more debt dependence on China. These new proposals will cost the government even more. Projects to convert coal into gas and liquid for fuel production around the world have to-date been heavily reliant on subsidies.
In his report, Nicholas reviews coal-to-liquids and -gas projects and businesses from around the world – the Kemper coal gasification project in the U.S., Sasol’s coal liquefaction processes in South Africa, and PT Bukit Asam’s dimethyl ether (DBE) project in Indonesia. He says that the global experience of coal-to-liquids (CTL) and coal-to-gas (CTG) processes ought to be a warning that there is no bright future for such projects in Pakistan. The Kemper coal-to-gas project’s attempt to gasify lignite coal proved to be a highly expensive failure despite receiving significant federal government subsidies. Power consumers are now picking up a US$1 billion bill via increased tariffs. There was also much-higher-than-anticipated water usage during the coal gasification process. Such very high water use makes the technology unviable in water-stressed places like Thar.
