Our coal dilemma

In recent years, Pakistan has turned to coal development as a potential solution to its ongoing energy crisis. The country operates nine coal-fired power plants that generate approximately 21.8 terawatt hours (TWh) of energy annually, using both imported and locally sourced coal from the Thar Desert. To further reduce costs, the government is planning to switch all plants running on imported coal to local coal.

This emphasis on local coal stems from an assumption that it is cheaper than imported coal or other fuel sources, which could, in turn, help the government mitigate soaring electricity prices. However, this assumption overlooks several significant factors.

While local coal may appear cost-effective at first glance, its environmental and health impacts on communities are far too severe to be disregarded. Additionally, by doubling down on coal, Pakistan risks falling behind in the global shift towards renewable energy, with many economies moving swiftly toward cleaner and greener alternatives.

Coal developers in Pakistan appear either unaware of or deliberately indifferent to this international trend. This mindset explains why they are pushing for expanded uses of local coal. Along with converting plants from imported to local coal, developers are promoting ideas like coal-to-liquid (CTL) and coal-to-gas (CTG) projects. These technologies are marketed as a way to channel Thar coal into industries beyond power generation, particularly the fertilizer industry. The feasibility of converting Thar coal into fertilizer will be explored later in this article.

A recent study conducted by the Policy Research Institute for Equitable Development (PRIED) casts doubt on the practicality of coal gasification. The study examines the techno-economic aspects of a proposed project to convert Thar coal into gas and concludes that the technology is more expensive than direct coal-based power generation. It also points out that coal gasification plants involve highly complex technology, which not only presents operational challenges but also demands substantial funds for ongoing expenses.

The study further notes that coal gasification plants consume significantly more natural resources, particularly water, than coal-based power plants. Given these high financial and environmental costs, coal gasification becomes a largely unviable option.

Water consumption poses a considerable obstacle to coal gasification. While PRIED’s research notes that coal gasification uses less water than traditional coal-based power plants, the volume of water required remains substantial. The Kemper project, a coal-to-gas initiative in the US, serves as a cautionary tale; it experienced much higher water usage than anticipated, leading to environmental damage. Given the technical complexity involved, it would not be surprising if estimates of water usage for Thar coal gasification also turned out to be overly optimistic.

A related issue is the financial backing for these projects, which is expected to come from China which has already invested billions of dollars in Pakistan’s energy sector, and there is concern that it may not be inclined to allocate additional resources for new coal projects.

The financial, legal, and administrative obstacles encountered in many energy projects have also cast doubt on Pakistan's status as an attractive investment destination for foreign financiers. Another factor complicating investment is Pakistan’s escalating debt burden and low credit rating, which make it a less appealing option for foreign investment.

Given Pakistan's current economic and financial challenges, the idea of investing in coal gasification appears unwise. The cost of producing electricity from a coal gasification plant is approximately $1.52 million per megawatt, compared to just $300,000 per megawatt for solar power. When viewed through a cost-benefit lens, coal gasification fails to make financial sense.

Coal gasification has proven problematic even in financially stable countries. The US, South Africa, India, and Indonesia have all experimented with this technology, achieving mixed results at best. The Kemper project, which uses lignite coal similar to that found in Thar, received substantial government subsidies but ultimately proved too costly and was abandoned. Similarly, a flagship coal gasification project in Indonesia, as reported by the Institute of Energy Economics and Financial Analysis (IEEFA), is projected to incur $377 million in annual losses.

The Sindh provincial government, however, insists that its coal gasification project will not be used to generate electricity but rather to produce gas for fertilizer. According to a statement from the provincial government, gasification of Thar coal could reduce gas costs to 40 per cent of those for imported gas. The statement further claims that gasification is a “globally proven method to produce chemicals, including urea”, and points to large-scale coal gasification projects in countries like China, the US, and South Africa that produce ammonia, urea, and synthetic fuels.

This approach, which proposes converting gas to fertilizer, remains largely unexplored in Pakistan. No comprehensive studies have been conducted on its environmental and climatic implications. Additionally, the government seems to overlook that China’s coal gasification plants are heavily subsidised, while many such projects in South Africa and Indonesia continue to incur significant losses despite subsidies. Worldwide, coal gasification plants are known for their complex processes, which lead to operational and maintenance costs far exceeding initial projections.

Essentially, converting Thar coal into gas for fertilizer or energy is a risky venture from financial, environmental, and technological perspectives. The associated costs, resource demands, and potential risks of failure far outweigh any assumed benefits, especially given Pakistan’s pressing economic challenges and the global shift towards sustainable energy.

The government would be wise to carefully reconsider these plans and explore cleaner, more cost-effective energy alternatives before committing further to coal gasification.

The writer is a researcher at the

Policy Research Institute for

Equitable Development (PRIED).