By Kumar David –
This is my third piece on Norochcholi in the last two years; previously, soft and mild mannered gentleman that I am, I expressed myself in polite terms . . . hmm, well! But its just too much now; junk the wretched thing, sell it for scrap, collect insurance, get the Chinese Government to write off the loan; in the long run this will be cheaper and less annoying than pottering around with this Lemon in the hope that it may come right one day. Lemon is an Americanism for a dud, usually a car, which from the time you take home fresh from the dealer is trouble, a flop, chronic. You are stuck with it and the dealer won’t take it back. The equivalent Australian expression is ‘up the gum tree’. Norochcholi Unit-1 has failed about 30 times since it was commissioned; these are no teething troubles, the failures are endemic and betoken defective manufacturing, poor quality materials and probably dumping on one sucker garbage that could not be passed off on some other sucker.
Mind you I am not saying that Chinese electrical plant is generically lousy; not at all. Thousands of MWs are commissioned in China each year and the stuff works fine. The point in this case is that if the customer is a sucker, or if someone on the buyer’s side was on the take, or if competent technical people were excluded from the specification drafting, negotiation and inspection process, well expect to be taken for a ride. I have no inside knowledge of which of these happened, or if it was some other reason, but it’s time to call a spade a spade; or if you don’t mind, let’s call it a bloody shovel.
What is the failure costing?
Let me put things in perspective. All numbers are rounded for ease of memory, but rest assured nothing is so out of shape as to lead you astray. For the same reason the preposition ‘about’ and adverb ‘approximately’ are discarded in this piece. CEB electricity generation in 2013 was 12 terra-watt-hours (TWh), maybe 6% more this year – I will tell you what a TWh is in a moment – and if Norochcholi Unit-1 (300 MW) was behaving as it should it would be churning out 2.1 TWh per annum or 17% of the needed output. And if it worked well, that is maintained a satisfactory heat-rate in the jargon, the production cost would be Rs 10 per unit. The hydro-complexes generate 3.6 TWh in an average rainfall year, practically gratis. Therefore another 6.3 TWh per annum (53%) is targeted for oil-fired power plant at an average cost of Rs 25 to 35 per unit. The great hope was that when the 600 MW Norochcholi Stage-2 is added, another say 4.2 TWh per annum of cheap (Rs 10) coal power would become available, displacing an equal amount of expensive (Rs 25 to 35) oil-fired power. These price estimates of course fluctuate with world coal and oil prices.
A TWh is one billion units. A unit, more properly known as a kilo-watt-hour, is the measure we colloquially use in everyday conversations about electricity bills. If you are consuming 200 units a month and your bill is Rs 4000, you are paying Rs 20 per unit, averaged over various tariff slabs. One reason price is on the high side is because free hydro, and hoped for cheap coal power, have to be supplemented by the said 53% of more expensive oil-fired power. There is a small addition for transmission, distribution, management services and capital stock repayment/depreciation also to bear in mind.
Now if the output of this Lemon falls short by say 1.05 TWh per year (50% shortfall), you can think of it like this. For every unit of Norochcholi Unit-1 electricity that is not received by the system at Rs 10, oil generated electricity at Rs 25 to Rs 35 (say 30) has to be substituted. Then the increase in annual CEB generation cost is, 1.05 x one billion units x Rs (30-10); that is Rs 21 billion per annum. If, heaven forbid, the two Norochcholi Stage-2 units also turn out to be Lemons on a similar scale (worst case scenario), then we will be foist with a total cost overrun of Rs 63 billion every year. This, if it comes to pass, would be frightening as it is not much less than the government’s budgeted expenditure in 2011 on education (Rs 99 billion) or health (Rs 75 billion)! Mind you we are not talking of the cost of producing the country’s electricity, but only of the cost overrun in a worst case failure scenario. To put it the other way, if Norochcholi, all stages, could produce 6.3 TWh of Rs 10 per kWh electricity, instead of half of this having to come from say Rs 30 per kWh oil-fired plant, the public will pay Rs 63 billion per year less for electricity needs. All along I use rounded numbers to get across the main thrust of my message.
In fairness I must add that it is possible standards have been tightened and the manufacturer put on his toes; in this case the two 300 MW units in Stage-2 may perform better. My worst case scenario veers towards pessimism and is included as a not incredible conjecture.
Frankly, the real problem is Unit-1; I think there is too much wrong to put right. Problems will recur interminably; once a Lemon always a Lemon. I am sad about this because I have long advocated including some coal-fired power in the CEB system mix. Poor reliability is neither endemic nor common with coal; thousands of these plants run with excellent reliability all over the world including China. In fact China adds a large coal plant every fortnight. Either this supplier suckered the CEB and the Power Ministry, or some graft recipient in a high place suckered us all.
Demand for a public inquiry
These barebones are factually right but like a witch’s petticoat conceal an assemblage of deeper sins. Unit-1 is perpetually shut down, or de-rated for extended periods, so it is time to face reality; it is a white elephant, it is a bright yellow Lemon and may have to be de-rated in perpetuity, or its reliability index written down, or be decommissioned before its planned obsolescence, or all three. If it is de-rated, the construction of other plant has to be brought forward to take up the shortfall and the much vaunted expectation of cheap coal power evaporates. President Rajapakse is foist with his own petard and his promise of soon to come cheap power goes up in smoke.
Another concern is that Unit-1’s fuel efficiency, its long-term heat-rate (that is to say, is it using too much fuel for a given power output) is yet a big unknown. If the last several months the quantum of reserve and emergency power to be held in readiness to compensate for it’s low operational reliability also increased. All this costs money and Lanka’s first encounter with coal is going to be more expensive, not cheaper electricity; a counter-intuitive experience.
We are told secrecy was necessary in project award and terms of financing because it was part gift; this reasoning is absurd. This is a public venture and no concealment is acceptable; secrecy breeds graft, and breeds suspicion of graft. Furthermore, power cuts lead to huge knock-on losses to the economy and public angst. The knock-on effect of sustained power cuts on manufacturing could be severe.
The repeated and chronic failure of Unit-1 will have another repercussion beyond what meets the eye; Lanka’s long-term generation expansion programme may suffer a shock for reasons that are not obvious to laymen. Electricity sector expansion has to be planned 10 to 20 years ahead and is interleaved with plant currently in-house. If plant expected to produce 40 to 50% of current needs is a sour citrus, then the CEB had better rethink its future 10-20 year growth strategy.
I ask readers to join me in demanding a public inquiry; not a presidential commission since they are discredited and the president or his siblings may have been involved in negotiating the financing package and contract terms. The way to deal with a cock-up on this scale is a parliamentary inquiry which includes a robust component from the opposition and an overseas input. Parliamentarians are not technical experts but this can be remedied by using expert consultants to assist. Given the nadir to which local commissions of inquiry, especially presidential commissions have sunk, it is vital, if credibility is to be upheld, that it includes a foreign component that cannot be influenced by local actors.
*The author has 40 years experience in academia in power systems and was professor of electrical engineering in Hong Kong. Prior to retirement he was a Fellow of the IEEE and IEE. In the 1970s he was a Director of the CEB