Biogas by Landhi Farm

8/14/2019 Biogas by Landhi Farm

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Draft Final Report

P ROMOTION OF RENEWABLE ENERGY ,ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT

(PREGA)

Pakistan

Waste to Energy and FertiliserLandhi Cattle Colony

A Pre-Feasibility Study Report 1

July 2006

1 Prepared by the Anthony Noel Woods and Beverly Ann McClean of Empower ConsultantsLimited, New Zealand.


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Table of Contents

List of Acronyms ........................................................................................................................ 4 1 Executive Summary............................................................................................................ 5 2 Map of Project Location.................................................................................................. 10

3 Introduction...................................................................................................................... 13 4 Background...................................................................................................................... 14 4.1 Sectoral Context......................................................................................................... 14

4.1.1 Environment Sector ....................................................................................... 144.1.2 Energy Sector................................................................................................. 154.1.3 Fertiliser Sector .............................................................................................. 20

4.2 Sectoral Opportunities and Constraints ..................................................................... 214.2.1 Energy Sector Opportunities and Issues ........................................................ 214.2.2 Fertiliser Sector Opportunities....................................................................... 254.2.3 Environment Sector Issues and Opportunities............................................... 28

4.3 Project Contribution to Sustainable Development..................................................... 324.3.1 Employment................................................................................................... 324.3.2 Gender Impacts .............................................................................................. 324.3.3 Environmental Improvement ......................................................................... 324.3.4 Improvements in Handling Abattoir Waste ................................................... 334.3.5 Fresh Water Impacts ...................................................................................... 344.3.6 Impacts on Power Use ................................................................................... 344.3.7 Impacts on the Marine Environment.............................................................. 344.3.8 Green Spaces.................................................................................................. 344.3.9 Downstream Potential for Use of Liquid Waste ............................................ 344.3.10 Return of Benefits to the Community............................................................ 354.3.11 Greater Use of Renewable Fuels.................................................................... 354.3.12 Reduction in Reliance on Imports.................................................................. 354.3.13 Contribution Towards Renewable Energy or Energy Efficiency Targets ..... 374.3.14 Alleviation of Electricity Supply Constraints ................................................ 384.3.15 Cost Reduction............................................................................................... 38

4.4 Government Policies and Strategies in the Power Sector .......................................... 384.5 Regulation and Enforcement Issues........................................................................... 394.6 Policy Coherence between ADB and Government of Pakistan Objectives............... 40

4.6.1 Implementation Arrangements for the Pilot Plant ......................................... 405 The Proposed Project ...................................................................................................... 41

5.1 Stakeholders............................................................................................................... 415.2 Alignment with ADB and other ODA Funding and Programmes............................. 445.3 Goal, Objectives and Outputs of the Pilot Project..................................................... 445.4 Poverty Reduction and Millennium Development Goal Impacts..............................455.5 Technology Transfer.................................................................................................. 465.6 Core Business of the Proposed Project Partners ........................................................ 465.7 Products and Services to be Generated by the Project............................................... 47


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6 Project Implementation Plan ........................................................................................... 48 7 Contribution to Sustainable Development ....................................................................... 48 8 Project Baseline and GHG Abatement Calculation ........................................................ 49

8.1 Baseline Scenario....................................................................................................... 498.2 Additionality .............................................................................................................. 508.3 Identification of Plausible Scenarios ......................................................................... 518.4 Flowchart of the Current Delivery System ................................................................ 528.3 Status, Adequacy and Operation Modes of the Baseline........................................... 558.4 Baseline Methodology and Calculation of Baseline Emissions ................................ 558.5 Calculation of Total Project GHG Emissions............................................................ 568.6 Net Emission Reduction ............................................................................................ 56

9 GHG Emission Reduction Monitoring and Verification.................................................. 57 9.1 Identification of Data Needs and Data Quality .........................................................579.2 Methodology Used for Data Collection and Monitoring........................................... 58

9.3 Estimates of Costs for Monitoring and Verification.................................................. 5910 Financial Analysis of the Project..................................................................................... 59

10.1 Electricity Production .................................................................................... 5910.2 Fertiliser Production................................................................................................... 6010.3 Carbon Credit Calculations........................................................................................ 6110.4 Financial Summary Table..........................................................................................6710.5 Estimation of Overall Cost Estimates........................................................................ 6710.6 Project Financial Analyses......................................................................................... 6810.7 Financing Plan ............................................................................................................ 68

11 Economic Impacts............................................................................................................ 68 11.1 Statement of Poverty Reduction Impacts................................................................... 6911.2 Statement of Social, Gender and Environment Impacts ........................................... 69

12 Stakeholders Comments.................................................................................................. 70 13 Key factors Impacting Project & Baseline Emissions ..................................................... 71

13.1 Project Uncertainties.................................................................................................. 7214 Conclusions and Recommendations ................................................................................ 73

References ................................................................................................................................ 74


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List of AcronymsADB Asian Development Bank Btu British Thermal UnitsCBO Community Based OrganisationCDGK City District Government of Karachi, formerly Karachi Municipal CorporationCDM Clean Development MechanismCNG Compressed Natural GasECL Empower Consultants LimitedEDO Executive District OfficerEIA Environmental Impact AssessmentEPA Environmental Protection AgencyFDI Foreign Direct InvestmentGDP Gross Domestic ProductGEF Global Environment FacilityHDIP Hydrocarbon Development Institute of PakistanHRT Hydraulic Retention TimeIDP Internally Displaced PersonIEE Initial Environmental ExaminationJFPR Japan Fund for Poverty ReductionKESC Karachi Electricity Supply CompanyKMC Karachi Municipal Corporation, now City District Government of KarachiMCF Millions of cubic feetMTOE Million tonnes of oil equivalentMW MegawattNazim Elected local body leader, equivalent to MayorNCS National Conservation StrategyNEPRA National Electric Power Regulatory AuthorityNFDC National Fertiliser Development CorporationNGO Non Governmental OrganisationNZAID New Zealand Agency for International DevelopmentOGRA Oil and Gas Regulatory AuthorityPARC Pakistan Agricultural Research CouncilPCRET Pakistan Council for Renewable Energy TechnologiesPCSIR Pakistan Council for Scientific and Industrial ResearchPPIB Private Power and Infrastructure BoardPREGA Program for Renewable Energy, Energy Efficiency and Greenhouse Gas AbatementSEEICCK Society for Economic and Environmental Improvement of the Cattle Colonies of

KarachiSNGPL Sui Northern Gas Pipelines LimitedSSGC Sui Southern Gas CompanyTCF Trillions of cubic feetTOE Tonnes of oil equivalentUAE United Arab EmiratesVOC Volatile Organic CompoundsWAPDA Water and Power Development Authority


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1 Executive Summary

1. This study addresses pre-feasibility of a waste-to-energy-and-fertiliser proposal at LandhiCattle Colony, Karachi, Pakistan.

2. The project site is 20 km from the centre of Karachi, adjacent to Korangi, an industrialprocessing zone, and close to the coastal mangrove swamps on the Malir River in the IrrawaddyRiver delta.

3. Landhi and Bin Qasim towns are home to over a million people, and 400,000 heads of cattle. The area is economically depressed; one third to half the population lives under thepoverty line. Many are economic migrants from other parts of Pakistan. The industrial zone andcattle colonies place the area under severe environmental stress; there is no waste disposal planfor the 8,000 tonnes of cattle waste generated daily. Most of this is flushed into open drains, anddisgorged on the nearby coast. In 1998, farmer groups requested assistance from internationalconsultants from New Zealand to address the problem of cattle waste. After some years of

institutional change, stakeholder consultations and quest for funding, the New Zealand Agencyfunded a demonstration waste-to-energy-and fertiliser project in 2005 for InternationalDevelopment, endorsed by the Alternative Energy Development Board (AEDB) of theGovernment of Pakistan. At the time of writing, the demonstration planning is proceeding withparticipation of local partners, and local and central government stakeholder support.Commissioning is expected in late 2006.

4. This project has relevance to the environment, energy, and fertiliser sectors.

Pakistan is signatory to numerous international environmental conventions, including the KyotoProtocol. Environmental legislation in Pakistan is relatively recent, and the sector is still weak,

lacking comprehensive standards, means of verification, incentives for environmentally benignoptions, and ability to successfully prosecute violators. Establishment in February 2006 of aDesignated National Authority (DNA) and a Clean Development Mechanism (CDM) Cell in theMinistry of Environment offer the country the possibility of benefit from CDM mechanisms.

Energy supply is constrained, while increases in demand have continued to outstrip supply bymore than 6% per annum over the past five years. Indigenous oil reserves may last ten years.Gas reserves from currently developed sites have a life expectancy of around 25 years. Althoughcoal is abundant, the quality is poor. Renewable energy has great potential, but development isconstrained by high investment costs and lack of a suitable conducive policy and regulatoryenvironment.

Fertiliser is an extremely important input to Pakistans still predominantly agrarian economy.38% of fertiliser is imported. Use of natural gas for fertiliser production is rising steadily,against a scenario of dwindling gas reserves. Use of an organic-inorganic fertiliser mix isencouraged, since it produces better yields and improves soil condition.

The project offers opportunities in the energy sector to alleviate shortages of either power(around 24 MW) or equivalent CNG in the vicinity of the cattle colonies. There is scope in the


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rest of the country for replication of the demonstration scale project (around 100 kW), and two orthree other sites, which may offer one quarter the potential of the up scaled proposed Landhiplant. Sale of small quantities of power to the grid faces institutional difficulties, and second-tiersupply, which requires a No Objection Certificate (NOC) from the concessionaire for the area,is sometimes economically unattractive due to the local consumer profile.

Tariffs have not yet been set for electricity generated from biogas. The Landhi project wouldneed to establish a precedent for this.

Power is subsidised to lifeline block consumers. With institutional strengthening assistance fromADB, capacity and performance within the power sector has improved. There is however noexperience yet with running biogas-fuelled generation facilities, and technical capacity for thisneeds to be built.

There is no current commercial market for dung-based fertiliser. Great potential exists todevelop a market for fertiliser/soil conditioner from the biogas plant slurry for the bulk industrial

crop consumer market. Research indicates that yields can be improved using a specifiedorganic-inorganic fertiliser mix. A vestigial boutique market for city garden consumers isalready in operation in Karachi. It is much more lucrative on a per kg basis than the bulk commercial fertiliser market, but would require more marketing effort to develop.

Opportunities in the environment sector are wide, since little environmental control is currentlyexercised. Effective solid waste management is an urgent need, as is sewage and sanitation,especially in the large cities. The Landhi project may provide a model that can be extended toinclude compostable city and human wastes. Enforcement in the sector is weak because of incomplete standards, paucity of certified laboratories and monitoring inspectors, and lack of alternatives to infraction. However, some infringement notices have been issued andsuccessfully prosecuted in the past two or three years, which is a promising start to effectiveenforcement.

The Landhi project could make useful contributions to sustainable development in generatingemployment, some targeted to women. It will effect environmental improvement. In addition toutilising the cattle waste, the biodigester can accept residual abattoir waste. Compared withcurrent requirements for flushing waste to the coast, the project will save both water and power.It will remove most cattle waste from the marine environment, where mangroves and marine lifeare dying due to dumping of industrial and organic waste. The liquid effluent from thebiodigester can be used to green public spaces.

There is no conflict in this project with government strategies or policies, though there is someinternal incoherence in existing policies and regulations.

If the energy is used for electricity generation, the project will set a precedent in establishing atariff for biogas-based generation.

ADB and Government of Pakistan policies in the relevant sectors align well with each other, andwith the project.


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5. The project process takes dung, mixes it with water to slurry and digests it anaerobicallyin a covered digester. Outputs are gas and organic fertiliser/soil conditioner. The gas may beused directly, converted to CNG, or used to generate electricity. The remnant grey water and thesolid waste are valuable fertilisers/soil conditioners.

Stakeholders are local farmer groups and CBOs, the Karachi City District Government, utilities,provincial authorities, and policy and regulatory authorities with interest in environment, energy,and fertiliser. No stakeholder has identified any potentially adverse impacts.

All stakeholders share a common goal of economic and environmental improvement.

The project will have positive impacts on poverty reduction and on some MillenniumDevelopment Goals.

A group of local NGO and business proponents is active in the promotion of the project. Their

core business is social and environmental improvement and professional engineering.Products and services to be developed by the project are energy and organic fertiliser. Energymay be used as biogas, scrubbed and used as methane, converted to CNG or electricity.Biodigester residue will produce liquid and solid organic fertiliser.

6. Project implementation is expected to proceed as follows:

July 2006: Completion of pre-feasibility study August 2006: Construction of NZAID-funded demonstration plant commences November 2006: Commissioning of demonstration plant

January 2007-on: Monitoring data from demonstration plant available Mid-2007: Feasibility study may commence, followed by implementation when

investment is determined.

7. The project will have a significant impact on the sustainable development of the Landhiand Bin Qasim areas. The long-term and on-going dumping of massive quantities of raw dunginto the local environment renders much of the land over-nutrified and good only for dumpingyet more dung, while the waterways and coastal waters are unable to support meaningful marinelife due to the excessive biological oxygen demand of the decaying material.

Local employment and standard of living can be expected to improve as the environs are made

more inviting to productive uses and external investment.

Replication of the project is highly likely. Pakistan has multiple private and military cattlefarming lots around the country, few offering any solid waste management process. In addition,this process can be expanded to incorporate urban solid waste management to mitigate theenvironmental impact of city waste also.


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8. Greenhouse gas reductions are certain from the project and will form a third incomestream for the project after fertiliser sales and energy sales. The collection and combustion of methane from the present situation results in a nearly 21-fold reduction in current greenhouse gasemissions. Presently dung is generally dumped into open land and waterways, resulting in openrelease of methane as the dung rots. This project will capture and combust this methane, thus

reducing its environmental impact and generating electricity in the process, which will furtherreduce fossil fuel releases elsewhere in Pakistan.

Assuming only 70% of the dung is currently dumped and composted to release methane andcarbon dioxide, the project will produce approximately 196,000 m 3 of methane per day and105,000 m 3 of CO 2. This equates to 1,156,000 tons of CO 2 per annum.

If the dung is digested and digested with a 95% gas capture rate, total CO 2 emissions wouldequal 295,000 tons per annum. Allowing for reduced CO 2 emissions for avoided generationelsewhere in the Pakistan electricity grid, the final net CO 2 reduction quantity would be1,038,000 tons per annum.

In order to utilise and complete a UNFCCC-recognised methodology related to the baselinescenario and possible reductions, additional lab testing on rates of decay in the local waterwaysis necessary, as is field testing of the actual gas released from the raw dung resource. The pilotproject presently underway will clarify many of these necessary details related to the productionand mitigation of greenhouse gases from cattle dung in the Landhi area.

9. Project monitoring is a necessary and important aspect of the project, particularly in thepilot stage where there are process variables needing measurement and monitoring to provideaccurate design criteria for the downstream project. The monitoring of greenhouse gas emissionswill be a critical factor if the project is accepted for the sale of greenhouse gas credits. Suchmonitoring will need to be done in strict accordance with UNFCCC procedures.

The monitoring of social and environmental impacts also needs to be conducted, particularlysince wider replication of the project is expected around Pakistan. Should unexpected impactsbe noted, they can then be avoided in future projects of this type.

10. The project financial returns are split into three distinct groups. Energy sales (in this caseelectricity), fertiliser sales, and carbon credits. At the rates of production described, net revenuesof US$ 11.5 million pa are expected from the sale of power. Net income from fertiliser sales isforecast at US$ 2.1 million pa. Carbon credit income is likely, but as carbon credits are a newcommodity and the price is steadily rising over time, with some volatility in some markets, suchas the European Union internal market, as markets mature. Revenues have been predicted atUS$ 0, 3, 5 and 10 per ton of CO 2 abated, respectively, giving potential net revenues of US$ 0.0,million, US$ 3.1 million, US$ 5.2 million and US$ 10.4 million, respectively. These revenuesare assuming the 0,0 % renewable energy tax exemption applies, and assuming raw dung ispurchased from farmers at the rate of Rs 150 per ton, or 0.15 Rs per kg.


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The estimated capital cost for the project is US$ 70 million. Using the income streams identifiedabove, and depending on the CO 2 credit rate assumed, the projects FIRR ranges from 18% to48%.

From an investment perspective, carbon credit income is necessary to offset project risk and

form an attractive investment opportunity.11. Economic impacts of the project incorporate results of land and water use, plusenvironmental and social impacts. Assessments of land use and preliminary results of watermeasurements on existing farms show that very positive results are likely. Land in the projectarea is unused, desertified, and degraded. Water is scarce and wasted in massive quantities toflush raw effluent into the sea. Employment and incomes for local inhabitants will improvedirectly as a result of employment created in the project itself, as well as indirectly through animproved investment climate in the Landhi and Bin Qasim environs. Empirical data will becollected during the pilot stage to quantify and evaluate these effects, thus allowing an improvedeconomic comparison in the feasibility stage.

12. Feedback from stakeholders has been highly supportive of the project. Consultationsinclude federal government, provincial and city government representatives, as well as farmersand community groups. Support for the project has been encountered at all levels and is a veryencouraging indicator for the widespread recognition that the dumping of massive volumes of effluent into the environment cannot continue indefinitely. Copies of the letters of support areavailable for review on request.

13. The project is not without risk. The political situation in Pakistan is uncertain, and whilethe technical process is relatively simple, if it not correctly managed, gas production can cease orbe significantly reduced. This directly impacts on gas production and sales, as well as the qualityof the fertiliser produced. Other risks relate primarily to fuel supply, being the raw dung. Whilethere is no mention of the cattle farms being moved or disbanded, should municipal law changeand force the cattle farmers to move, the transportation and collection costs for the dung willincrease accordingly.

14. Recommendations:

a. That given the viable nature of the project from a financial, social and environmentalperspective, the project should proceed forward to a feasibility stage.

b. That the pilot stage funded by the New Zealand government be regarded as anopportunity to collect and monitor the data needed to accurately assess the design andinvestment criteria for the large-scale project.


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2 Map of Project Location

The project area is in Sindh Province on the coastal fringes of the Thar Desert, 30 kilometres eastof Karachi city. It is flat, sandy, devegetated and windswept. The meagre and heavily polluted

Korangi stream borders the colony and joins the coastal delta, which is flanked by mangroveswamps, dying where cattle and industrial effluent is flushed out to sea. The national electricityHV transmission grid and Sui Southern Gas Company (SSGC) pipeline cross the area.

Fig. 1: Map of Project Area and Environs

Karachi Centre

Project area

Korangi Industrial zone


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Fig. 2: Landhi Cattle Colony Aerial Photographs

Coast and fishing port

Main road link

Pilot project site. Seephoto below

Karachi city CBD

Landhi cattle colony


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Landhi Cattle Colony Pilot plant site

.

Existing digester nrepair

Two concrete watstorage tanks

The pilot plant location

Effluent leaching into theocean is clearly evident


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3 Introduction

Landhi Cattle Colony is located in the administrative units of Landhi and Bin Qasim townships,close to the Korangi industrial zone some twenty kilometres east of Karachi centre. Thepopulation of the two townships together is more than 1.2 million in almost 175,000 households.

Of these, some 2,000 are farmer households closely agglomerated in Bhains Colony. Within thetownships are clusters of internal migrants, Baloch and Pashtun from Balochistan, Punjabis,ethnic Aryans from Bangladesh and, lately, Kashmiris from the earthquake-affected northernareas. Young unemployed males are overrepresented in the population profile. About 50% arepoor (earnings of less than US$ 1/day). There are numerous clusters of informal katchi abadi(squatter) dwellings in the area.

The railway line, natural gas pipeline and high voltage national transmission grid cross the area.Physical and social infrastructure is poor; roads and markets are in deplorable condition. Waterreticulation is weak, and pressures are inadequate. Many residents sink private bores, thoughthis has now been prohibited to prevent further damage to the water table. There is no public

sanitation. Education is available only to middle school level, and there is no public BasicHealth Unit, though there is a veterinary hospital at which sick people sometimes seek medicalattention.

Aside from labour in the cattle farms, the main source of livelihood is work in textile, leather andsteel factories in the adjacent industrial zone. There are two farmer groups in the area, and anumber of CBOs, often organised on ethnic minority group lines, and focussed mainly oneducation and employment creation, especially for women. A 2002 survey of 1,000 householdsin the project area revealed the top five development priorities as employment, education, watersupply, transport, and electricity supply.

Landhi is socially and environmentally stressed, exacerbated and compounded by years of unrestricted dumping of household, industrial and farming waste into the local environment.Waste volumes are vast, comprising up to 8,000 tons of cattle dung per day from the farms alone.Formerly, dung was sold to the UAE, but an outbreak of rinderpest closed this market.

In 1998, the original farmer group requested assistance from international consultants from NewZealand for a solution to dispose of the dung and clean up the environment. Followingprotracted grassroots and institutional stakeholder consultation through four years of considerable change in the structure of local government, all stakeholder agencies agreement tosupport a waste-to-energy and fertiliser project. Funding was sought from GEF. After two yearsin the pipeline, and following the coming into force of the Kyoto Protocol, the concept was

referred for CDM funding. In 2005 ADB agreed to place the project on its list for pre-feasibilitystudy under its Promotion of Renewable Energy, Energy Efficiency and Greenhouse GasAbatement (PREGA) project. Separately, in late 2005 the New Zealand Agency forInternational Development (NZAID) agreed to fund a pilot project, currently in progress underEmpower Consultants Ltd (ECL), in partnership with the National Engineering Corporation(Pakistan) and a Landhi NGO, the Society for the Environmental and Economic Improvement of Cattle Colonies in Karachi (SEEICCK). The project was endorsed by the Alternative Energy


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Development Board, Government of Pakistan. This pilot is now in its planning stages andcommissioning is expected in late 2006.

The pilot plant will be used to demonstrate the process in the Landhi context, train staff, andobtain empirical data on process variables to permit optimisation of the design for an up scaled

project to treat all of the waste produced at the cattle colony. The sale of organic fertiliser hasnot been formally commercialised in Pakistan yet. The pilot, based on about 1% of the waste,will identify markets to grow with the expanded production of the downstream project.

The political, social and environmental drivers behind the project are now aligned. Given localpoverty and unemployment, the national energy deficit, need for organic fertiliser and financialviability, the project will make a useful contribution and is expected to be sustainable.

4 Background

The potential of the waste-to-energy-and-fertiliser concept at Landhi to create win-win

outcomes is so clear that it begs the question as to why this opportunity has not already beenseized. In the following sections the issues, opportunities and constraints are discussed.

4.1 Sectoral Context

The waste-to-energy project at the Landhi Cattle Colony sits primarily within the environmentsector. As the project will produce biogas and/or electricity, fertiliser and significant GHGemission reductions from the waste, it also has relevance to the energy and agriculture sectors.Institutional disarticulation is a major contributor to past failure to address the problems andrealise the opportunities that this project represents.

4.1.1 Environment Sector

Pakistans environmental legislation is relatively recent. An Environmental ProtectionOrdinance was promulgated in 1983, followed by development of a National ConservationStrategy (NCS) in 1992, and in 1997 by the passage of the Pakistan Environmental ProtectionAct (PEPA) to give effect to the Strategy.

The institutional structure comprises the Pakistan Environmental Protection Agency at federallevel, and provincial environmental protection agencies. A coordinating Pakistan EnvironmentalProtection Council predated the PEPA, and was reconstituted under the Act as an apex agencycomprising stakeholders from trade, industry, academia, concerned government agencies, and

civil society groups. The federal Ministry of Environment is the relevant executive arm of thegovernment. An energy conservation agency (ENERCON) has wide ranging responsibilities foridentifying and implementing energy conservation and efficiency measures. The Pakistan ForestInstitute and the Zoological Survey are attached to the Ministry of Environment. A NationalCouncil for Conservation of Wildlife is responsible for Pakistans international obligations inthis field.


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The Act provides for establishment of National Environmental Quality Standards (NEQS), amonitoring and impact assessment regime, and delegation of enforcement responsibilities toprovincial-level environmental protection agencies. Standards are being harmonised with thoseof other countries in the region, and are still somewhat limited in purview.

Pakistan is a signatory to numerous international environment conventions. These include theRio Agenda 21, signed in 1992, the United Nations Framework Convention on Climate Change(UNFCCC), signed in 1992 and ratified in 1994, the Conventions on Biological Diversity(CBD), Persistent Organic Compounds (POPS), International Trade in Endangered Species of Wild Fauna and Flora (CITES), wetland and migratory species conventions. Pakistancontributed to the ADB Asia Least-cost Greenhouse Gas Abatement Strategy (ALGAS)completed in 1998. A greenhouse gas inventory was prepared to meet initial obligations underUNFCCC.

Pakistan formulated its Initial National Communication on Climate Change in 2003, anddeposited its Instrument of Accession to the Kyoto Protocol Annex A in January 2005. In

February 2006 the CDM Cell within the Ministry of Environment unveiled the countrys CDMStrategy. Salient features of the strategy are to offer one-window facilitation of CDM initiativesthrough the Designated National Authority. Three technical committees have been set up toexamine proposals for renewable energy and energy efficiency, waste management and chemicalprocesses, agriculture, forestry and livestock. Carbon credits will be the property of the investorwithout government deduction, and will attract no tax or duty on transfer. The tariff paid toCDM energy project investors is not to take the value of carbon credits into consideration; thecarbon credits are regarded as an incentive for green investment. The CDM Cells projectevaluation mechanisms recognise social as well as environmental benefits. Pakistan is a lateentrant to the CDM, but stands to benefit substantially from availability of carbon credits toreduce the cost of clean energy provision. Poor and remote communities for whom renewableenergy technologies represent the most realistic means of electrification stand to be beneficiaries.

The main focus of environmental agencies at present is on mainstreaming environmentalconsiderations in the work of all government agencies, continued public awareness raising,capacity building, and strengthening of institutions to give effect to policy and strategy.

The Landhi project relates to five of the fourteen priority areas of the NCS: maintaining soils incroplands, protecting water bodies and sustaining fisheries, developing and deploying renewableenergy, preventing/abating pollution, and managing urban wastes. Environmental agencies arepointing to policy incompatibilities, for example between agricultural and environmental goals,and are articulating a need for development of a national sustainable development strategy thatintegrates environmental and economic planning.

4.1.2 Energy Sector

4.1.2.1 Policy Context

Pakistans energy sector policy is formulated by the Energy Division of the PlanningCommission. There is no ministry of energy, but separate ministries for water and power, andpetroleum and natural resources. An Energy Adviser to the Prime Minister is currently working


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on a comprehensive energy policy and coordinated strategic planning of the sector. Powergeneration policy is articulated in a 2002 document issued by the Ministry of Water and Powerthrough its Private Power and Infrastructure Board (PPIB). An annual Energy Yearbook,including commercial energy statistics from all sources, is issued by the HydrocarbonDevelopment Institute of Pakistan (HDIP). The 2004 Yearbook included renewable energy for

the first time. The Government of Pakistan has set a target of achieving 10% alternative andrenewable energy in the primary energy mix by 2015, regarded by ADB as ambitious butachievable. In a recent press release, AEDB scaled this back to 5% by 2030.

4.1.2.2 Supply and Demand

An important focus of government policy is to improve commercial energy availability. Primarycommercial energy supply has increased over the past five years from 41.7 MTOE in 1998-9 to50.8 MTOE in 2003-4, with an 8% increase in supply in that year alone. Net consumption of commercial fuels in the latest available energy balance (2003-4) is shown below. Oilconsumption has dropped steadily over the past five years, and now supplies 38.5% of finalenergy consumption compared with 47.7% in 1998-9. Gas, coal and electricity consumption

have all increased between 2 and 4% over this period. Natural gas now supplies 35% of commercial energy demand, while electricity represents 16.2%.

Fig. 3: Energy Balance in Pakistan

Energy Balance 2003-4

Oil

GasLPG

Coal

Electricity

Data Source: Pakistan Energy Yearbook 2004:5

Final energy consumption over the past five years shows a steady trend to reduction independence on imported oil, and increasing use of indigenous gas and coal. Included in gas use,

power generation has increased from 28.9% in 1998-9 to 44.7% in 2003-4. Over the sameperiod, CNG has increased from 0.3% to 1.5% of natural gas use, an accumulated rate of increase of 48.7%.


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Fig. 4: Final Energy Consumption in Pakistan

0

10

20

30

40

50

%

1998-9

1999-2000

2000-1

2001-2

2002-3

2003-4

Final Energy Consumption %

Oil

Gas

Coal

Electricity

LPG

Data source: Pakistan Energy Yearbook 2004:3

Despite achievements in improving supply, Pakistan continues to be energy constrained, withdemand pushing ahead of supply at a cumulative 6.1% increase per annum over the past fiveyears. Demand increased strongly in 2003-4, by 8% over the previous year. Percentagemovements in supply and demand during this period are graphed below. A strong policy focusof the Government of Pakistan is bringing electricity to almost half the population currentlywithout service by end-2007. Since many of those without service are far from the grid,renewable energy technologies are likely to provide the least-cost solution.

Fig. 5: Energy Supply and Demand in Pakistan

Data Source: Pakistan Energy Yearbook 2004:3

Percentage Changes in Energy Supply and Demand 1998-2004

-2

0 2 4 6 8

10 12

1998-9 1999- 2000 2000-01 2001-2 2002-3 2003-4

% Supply

Demand


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4.1.2.3 Energy Forecasts Power

In 2002, the Government of Pakistans Power Policy predicted that power capacity would besufficient until 2004-5. In the past five years, generation capacity has increased 23%, from15,663 to 19,252 MW. Over this period, accumulated growth in power consumption was 5.8%per annum. In 2004 alone, the rate was 9.18%, suggesting that the growth in demand isaccelerating, and increased capacity is meeting suppressed demand rather than achieving acomfort level between supply and demand.

Gas

From an original resource of 42.2 TCF 2 (907.3 MTOE equivalent), recoverable natural gasreserves including associated gas in 2004 are 24.5 TCF, equivalent to 525.4 MTOE. At

depletion rate of 10 MTOE, and allowing increase in demand at 5% per annum this represents26-27 years supply. Additional natural gas deposits exist, but require intensive investment todevelop. Energy authorities are looking to the proposed Iran-to-India pipeline to secure futuregas supplies; however, its prospects are overshadowed by ongoing international politicalconsiderations. Indigenous natural gas is supplied by the two main utilities: Sui Southern GasCompany (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) to almost all major townsin Pakistan. Additional gas supplies are dedicated to fertiliser plants, which use it both asfeedstock as well as an energy source. The Oil and Gas Regulatory Authority (OGRA),established in 2002 to foster competition and increase participation and ownership in themidstream and downstream petroleum industry, regulates supply and distribution and protectsconsumer interests.

Oil

Pakistan has limited indigenous oil reserves, estimated at 41 million TOE in 2005. These areexpected to last for about ten years at current consumption rates. Indigenous productionaccounts for 21% of total consumption, with the balance being imported. Power generationconsumes a little over 22% of total oil consumption in the country

Coal

While coal deposits are abundant at an indicated 11,648 million tonnes, and a hypothetical113,637 million tonnes, very little are high-grade bituminous coal, the largest reserves being in

sub-bituminous and lignite deposits in Sindh Province. More than 80% is used in brick kilns andcement making. Power accounts for 3% of current consumption.

Additional generation from this source will face increased environmental scrutiny due to thepassage of the Environment Protection Act in 1997.

2 Normalized at 900 Btu/cft.


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Renewable Energy

Pakistan has enormous renewable energy potential, with an excellent solar radiation profile, andsporadically good wind resources. Harnessing these resources is inhibited by their relativelyhigh investment costs, the remote and low-density populations they would at present serve, andscarcity of willing investors as long as conventional energy offers a better financial return.Sector reforms that will encourage investment are still in progress. Thirty-two investors are eachseparately planning wind farms in Sindh of 50 MW capacity each. If they proceed, these willmake a significant contribution to the countrys renewable energy profile.

4.1.2.4 Operation and Regulation in the Energy Sector

The main players in the electricity sector are the Water and Power Development Authority(WAPDA) established in 1958, and the Karachi Electricity Supply Company (KESC),incorporated in 1913. These are vertically integrated utilities with specified concession areas towhich conditional access to other suppliers applies. Reform of the power sector is high on theagenda of the Government of Pakistan, and ADB has given substantial assistance to buildcapacity in these utilities and to reform the power sector. Unbundling and corporatisation of WAPDA, en route to privatisation, is under way. KESC, the relevant concessionaire in theproject area, has just been sold intact to the private sector.

The relevant national level regulatory authority is the National Electric Power RegulatoryAuthority (NEPRA) set up in 1997 to protect consumer and supplier interests. Though NEPRAhas made some headway in ensuring equity of access to the grid at reasonable cost, the currentregulatory regime does not suggest awareness of new technology that makes net billingtechnically feasible and cheap. It is thus not well adapted to facilitating small inputs of renewable energy.

The Private Power and Infrastructure Board (PPIB) was set up in 1994 to attract investment inPakistans power sector. It initially operated under the Power Policy of 1994. This wasaugmented in 1995 with hydroelectric (hydel) and transmission line policies designed to removeinvestment roadblocks. A revision of the power policy in 1998 took further steps to reduceinvestment disincentives, including permission for unsolicited bids and removal of competitivebidding requirements for small hydel and renewable energy proposals. A further revision in2002 opened a single-window, fast track clearance system, and provided tax incentives to attractprivate power investment in projects of capacity over 50 MW for which feasibility studies exist.Applications should now take less than eighteen months from pre-qualification to bid to issue of a Letter of Support to the successful bidder. Where a feasibility study does not exist, the timefrom submission of a proposal for development of a raw site to issue of a Letter of Support maytake three to four years. The PPIB secured FDI worth US$ 4 billion over a period of three years,mainly in thermal generation facilities. Fourteen of these have been commissioned since 1996,while the PPIB has processed 75 thermal, three coal, 39 hydro and three renewable (wind)project applications. Two thirds of the hydro projects are below the nominal 50 MW thresholdrequired for PPIB involvement.

Projects under 50 MW can be executed directly by provincial governments, and are subject totheir regulatory processes. All projects are subject to the national environmental laws. Tax andimport duty incentives exist for investments in renewables that do not apply to oil-fired


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generation. The tariff is determined by NEPRA, informed by the investor, the provincialgovernment, and the power purchaser. The power price is calculated according to the fuelsource. For firm power (i.e., non-renewable), the tariff comprises an energy as well as acapacity price component. In the case of renewables, the capacity price purchase element willusually be the larger component, since the fuel is effectively free, and a single-part tariff has thus

been proposed for the initial wind projects under an immediate-term renewable energy policyawaiting final GoP approval.

There are established and transparent tariff determination formulae for this process that recognisecost of plant and equipment, depreciation, and return on investment. Applicants are encouragedto reflect in the proposed tariff the full cost of service. Tariffs may be set below the cost of production if financially sustainable. They should take into account government subsidies.These currently apply to the lifeline block (up to 50 kWh/month) and certain rural consumers.The price set for one plant utilising a particular fuel tends to set a benchmark for subsequentunits using the same fuel. A standardised application fee structure applies, payable to the PPIBor the province, and varying with the scale of the project. The same provisos apply to public-

private partnerships.4.1.3 Fertiliser Sector

Fertiliser continues to be a major import for the country, with some 38% of its supplies imported.The National Fertilizer Corporation is the state trading and price stabilisation agency thatmanufactures, imports and distributes chemical fertilisers. The National Fertilizer DevelopmentCentre, a state agency supported by the FAO, was set up in 1977 to increase farmer awarenessand encourage the use of fertilisers. This has succeeded to the point where the environmentalimpact of chemical fertilisers is now of concern. Total chemical fertiliser use trends over thepast ten years are graphed below.

Fig. 6: Consumption of Inorganic Fertilisers in Pakistan

0

500

1000

1500

2000

2500

3000

' 0 0 0 t o n n e s

1993-4

1995-6

1997-8

1999-2000

2001-2

2003-4

Fertiliser Consumption 1994-2004

Nitrogen

Phosphate

Potash

Data source: Ministry of Agriculture

Increased availability of indigenous gas is contributing to this growth, graphed below. Fertiliserproduction takes priority in allocation of gas supplies.


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Fig. 7: Utilisation of Natural Gas for Fertiliser Production in Pakistan

Data source: Pakistan Energy Yearbook 2004

Environmental impacts aside, dwindling gas reserves call into question the sustainability of thisgrowth. NFDCs present emphasis is on educating farmers to use a combination of organic,inorganic and bio-fertilisers for balanced plant nutrition and soil fertility.

4.2 Sectoral Opportunities and Constraints

The waste-to-energy concept offers opportunities in all the main sectors it touches. Energysecurity is a major concern of the Government of Pakistan (GoP). Recent power sector reformefforts, and the establishment of the Alternative Energy Development Board (AEDB), nowplaced directly under the Ministry of Water and Power, sends a signal about the seriousness withwhich this is taken. Energy supply remains constrained. Fertiliser is in short supply. Theenvironment is approaching crisis point in the areas of waste management in general. Un- andunder-employment is a serious social problem. The Landhi project has therefore attracted solidinstitutional support from all players.

4.2.1 Energy Sector Opportunities and Issues

The Landhi project has the potential to make a useful contribution to either gas or electricityavailability in the area. Load shedding in the project area is common and negatively impacts onthe standard of living and commercial investment decisions in the area. Many of the farmersown and operate small standby diesel generator sets to ensure continuity of supply, such as theone pictured below.

115000 120000 125000 130000 135000 140000 145000 150000

MCF

1998-9 1999-2000

2000-1 2001-2 2002-3 2003-4

Natural Gas Consumption for Fertiliser Feedstock


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Fig. 8: Landhi Farmer with Standby Generator

The installation at Landhi will receive the waste from 400,000 heads of cattle, which at an

estimated average of 18 kg per head per day yields 7,200 tons of raw dung every 24 hours. Thisdung will produce at least 196,000 m 3 of methane (CH 4) per day. Options for utilisation includeconversion to electricity or to CNG. Allowing an electrical conversion efficiency of 28%, thiswill yield approximately 24 MW of electrical output, or 564 MWh per day. This is small interms of overall energy consumption in Karachi, but is expected to make a significant differenceto the power availability and quality in the Landhi area. Alternatively, the methane could be fedinto the pipeline, or scrubbed, compressed and sold as CNG, yielding around 64,500 tonnes of CNG per year, sufficient to fill 18,000 standard cars per day.

Estimated gas outputs are based on preliminary findings on dung quality. Evaluation of dungquality is ongoing to test for consistency.

The Landhi demonstration will provide the basis for a waste treatment and a small power plant tosupply operational needs at Landhi itself. Surplus gas may be converted to compressed naturalgas (CNG) to fill around 150 cars per day, or to generate an additional 50kW of electricity.There is potential to replicate this output at two other large military-owned cattle farms in thecountry, one at Okara some 100 km south of Lahore, the other at Sargodha, an important airforce base around 250 km south of Islamabad. The team did not visit these facilities, butDefence authorities believe that there are around 100,000 head of stall-fed cattle at each, onequarter the size of the Landhi colonies.

The pilot plant will be of a scale that could be adjusted to towns or cantonments that collect 80

tonnes or so of compostable cattle, market, abattoir or green waste per day. Biodigester designsare able to be scaled-up or down, with small designs handling less than 100 kg of material perday. Cantonments are a peculiarity in Pakistani civil administration. Originally purely militarysettlements, civilians have infiltrated cantonment land, and civilian military in such areas havebecome the effective local government. As such they represent a cadre with relatively goodawareness of environmental hygiene, and better than usual skills and disciplines to implementsolutions. Further research is required to identify the number and location of Defencecantonment cattle colonies.


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4.2.1.1 Energy Sales and Pricing

The Landhi project falls into a definitional vacuum in that biogas is not explicitly defined asnatural gas for regulatory purposes, although it could conceivably be covered under the generaldefinition of natural gas in the OGRA Ordinance. 3 The Oil and Gas Regulatory Authority(OGRA)s jurisdiction over the proposed project, unless the biogas is converted to CNG or soldto a distributor, therefore needs to be made unambiguous.

Similarly, conversion of biogas to electricity if sold to the grid will break new ground forNEPRA. Tariffs are normally set by NEPRA based on the proposal from the seller to thepurchaser, and taking account of the generation source as an indicator of front-end cost. Sincethis fuel source is currently without commercial precedent, power pricing will have to beundertaken from scratch if the energy generated is to be converted to electricity.

196,000 m 3 of CH 4 (methane) gas could be produced, or converted into 564 MWh of electricityper day, if all the raw dung from the 400,000 cattle were to be captured and processed. If this

course were selected, the project would fall within provincial jurisdiction. If the enterprise sellspower, it would also require a generation licence from NEPRA. In the interests of predictabilityfor distributors and consumers, it is to be expected that the issue of a generation licence woulddepend on reasonable indications of stability of fuel source and electricity supply, as is the casewith large-scale hydrocarbon-based IPP generation projects.

The project is located in the exclusive service territory of KESC. At present, KESC is sellingpower at an average rate of Rs 3.5-4.0 per unit. IPPs using furnace oil to generate currently haveabout a 60% load factor, and sell to KESC at Rs 6.3 and 6.5 per unit. Tariffs are usually fixedfor seven years. A power sale tariff of Rs 5.03 has been applied in this financial model, as this isthe present rate allowed for natural gas generated electricity in Pakistan.

For small power producers, the option of becoming a second-tier supplier to a limited area exists.If a captive consumer was found, and the power was not sold to the grid, the generator wouldhave to obtain a No Objection Certificate from KESC to supply the consumer. At present, sincethe project site is located in a poor area with a high percentage of subsidised lifeline block consumers (charged Rs 1.44 per unit up to 50 kWh per month) and around 50% technical andnon-technical losses at the local transformers, this is unlikely to be an attractive option untildistribution system strengthening is implemented. 4 Against this, in a locally much-resentedanomaly, cattle colony farmers are levied at the industrial power rate, Rs 5.4 per unit, rather thanthe Rs 3.53 that applies to agricultural loads. Average household consumption in the KESCsupply area is 130-140 kWh per month, and a typical household monthly bill is Rs 400-500.

3 In Chapter 1 of the OGRA Ordinance (XVII of March 22, 2002) under Definitions: natural gas means hydrocarbons or mixture of hydrocarbons and other gases which at sixty degrees Fahrenheit and atmospheric pressure are in the gaseous state (including gas from gas wells, gas produced with crude oil and residue gas and products resulting from the processing of gas) consisting primarily of methane, together with any other substance produced with such hydrocarbons.

4 In areas where shielded cable has been substituted for open wire to prevent theft, losses have dropped dramatically, fatalaccidents have halved, and supply has stabilised.


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4.2.1.2 Subsidies

The GoP, in principle, tries to avoid subsidies and recognises the necessity for utilities to runefficiently. However, it is considered that the poor should be provided minimum service in theinterests of social equity. The government, therefore, pays to the utilities the difference betweenactual costs and the subsidised cost where price rises place production and power purchase costsabove the lifeline tariff. KESCs generating costs in 2004-05 amounted to Rs 5.556 per unitgenerated, and Rs 6.1424 per unit billed. Revenue from energy sales was Rs 4.1288 per unitgenerated, and Rs 4.5643 per unit billed. Operating losses are due to very high non-technicallosses - more than half the supply in some areas - as well as to cross-subsidise lifeline block andagricultural consumers. KESC received a subsidy amounting to 24.26% of its 2004-05 revenuefrom the government that enabled it to sustain cheap supply to the vulnerable segment of itsconsumer base. This enabled the company to realise a modest before-tax profit. However, underWorld Bank-led sector reforms, both direct and cross subsidy levels for natural gas are graduallybeing phased out to realize better economic value of energy resources, remove price distortionsand inefficiencies, and rationalize tariffs. Therefore, retail natural gas prices are expected to rise

further in the near future, at a pace determined largely by political considerations.

4.2.1.3 Organisational and Management Capacity

KESC has the full range of competencies needed to purchase and distribute power from theLandhi project. However, it has no experience in operating waste-to-energy plants. As the firstof this scale in the region, the Landhi waste-to-energy installation will require technology andskills transfer to local engineers. Principles of biogasification of cattle waste are well understoodin Pakistan, but not on the industrial scale required at Landhi. Technical assistance and supportis available from both the AEDB, as well as the Pakistan Council for Renewable EnergyTechnology (PCRET) and the Pakistan Agricultural Research Council (PARC), all based inIslamabad, for generic issues related to biogasification, but specialist gas, power and waste watertreatment skills will be required for the planning and implementation of the project. Somemanagerial capacity and experience will be gained during the planning, construction andoperation of the pilot phase, but with its daily volume of 80 tons of dung (around 1% of the totalvolume), it will be dwarfed by the full-scale project.

4.2.2 Fertiliser Sector Opportunities

Fertiliser is a vital input for agriculture. Agriculture still employs half of the countrys entirelabour force, contributes about a quarter of the GDP, and provides most of the countrys food.Environmental agencies comment with concern about the still rising population and warn of theonset of the law of diminishing returns from using inorganic fertilisers to boost production.Agricultural statistics show that production of some important food crops and fruits are alreadyin decline over the past five years, and water availability is declining while fertiliser off-take isrising. In 2000-01, Pakistan consumed an average 138 kg of fertiliser per cultivated hectare,compared with neighbouring Indias 103 kg, or the USAs 106 kg. Since 1997, yields per acrefor wheat and rice have made modest and uneven gains, while sugarcane, maize and gram yieldshave fallen. This suggests that potential for further intensification is limited.


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The potential for cheap organic fertilisers with illustrated potential to improve the effectivenessof inorganic fertilisers in combination is therefore promising. At present the market for sale of dung is an informal one. At Landhi, the occasional purchaser will pay Rs 3,000-5,000 for asmall truckload of half-dried loose dung. It is not weighed or measured, but the quantity seemsto be around two tonnes. Garden centre owners sometimes buy an even smaller truckload, about

1 tonne, for Rs 1,500 to 2,000. They may cover this with a tarpaulin and leave it to rot for up totwo years. They state that they can re-sell a load or part thereof for Rs 6,000 delivered to theurban consumer. The fertiliser from the biodigester will be an enriched product compared withthe products currently available, though these act as a useful benchmark for assessing willingnessand ability to pay. There is apparently a ready city market for boutique potting mix or fertiliserbagged in 10 to 20 kg bags for city gardens and balcony flowerpots. 5

The Pakistan Agricultural Research Council prepares and sells compost at Rs 20 per kg for thecity garden market. A representative states that it sells well. The Pakistan Council for Scientificand Industrial Research has developed a seaweed-based fertiliser that sells at Rs 35 per half kg,illustrated below. It seems likely that a city market could be developed for organic fertiliser/soil

conditioner/potting mix for the Karachi market.

Bulk fertiliser from Landhi seems likely to have a distribution radius of 150-200 km fromKarachi before the costs of transport render it uneconomic. Within this radius, significantpotential markets exist in Badin, a horticultural centre, and Hyderabad, a sugar-producing andhorticultural area. Sugar industry representatives have already expressed interest in bulk purchase. Trucks bring dry and green feed into the colony from Sindh, Punjab and Balochistan.They often return empty. A group of some twenty truck drivers consulted indicated readywillingness to truck bagged fertiliser back to the point of origin of the feed, thus completing anatural feedback loop. Work is continuing on assessing willingness-to-pay when long distancetransport costs are included.

5 An organic fertiliser prepared by PCSIR from dried and powdered seaweed and with comparable NPK content is offered at Rs 35per bag of about 500 gm.

Fig. 9: Boutique organic fertilisers onthe city markets


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At a conservative production cost of Rs 100including bagging, handling, transport and profitmargin per 50 kg bagand a projected retail cost of Rs 200-300, organic fertiliser from theproject compares favourably with inorganic fertilisers. While it is not as nitrogen-rich, thedigestion process renders its nitrogen readily available compared with inorganic fertilisers.Chemical fertiliser prices have risen sharply since they were decontrolled in 1986 and 1995. List

prices for urea are Rs 411, nitrophosphate (NP) at Rs 539, diammonium phosphate (DAP) at Rs765 and potassium sulphate (SOP) at Rs 780 per 50 kg bag.6 However, hydrocarbon prices haverisen so steeply that a 50 kg bag of imported urea today costs Rs 1,100. It is being sold at Rs500, and government is making up the balance to soften the severity of this in the short term.These events all predispose the market to receptivity of a new indigenous alternative product.

A 1999 Symposium on Integrated Plant Nutrition Management concluded that blends of inorganic and organic fertilisers, indicatively between 50:50 and 75:25, produce better yields of rice and wheat than inorganic fertilisers alone. This fertiliser blend also assists absorption andretention of chemicals that otherwise leach and contaminate ground and river waters. At theorganic-inorganic fertiliser ratios found by NFDC to give optimal yields, a farmer could displace

25% of urea with organic manure and achieve a 4% increase in grain and a 9% increase in strawyield at a 6.75-10% saving in fertiliser costs.

Fig. 10: Productivity Responses to Use of Inorganic: Organic Fertiliser Mixes

Data Source: NFDC Symposium on Integrated Plant Nutrition Management, 2000:14.

This analysis measures only the minimum potential financial benefits to the farmer. Theeconomic benefit potential to the country in terms of import substitution, averaging down of thetransportation costs of servicing the Landhi farmers with fodder by providing a return load fortrucks, improvement of soil condition, and prevention of chemical run-off into waterwaysrequires more detailed investigation.

The Landhi cattle colony is close to a port and rail line. In the past, some dung was dried, andexported to the United Arab Emirates. The product was not formally weighed, but farmers

6 2003 prices, Federal Bureau of Statistics, Islamabad on http//:www.nationalpak.com/retailprice accessed 8.12.05

0 2 4

6 8

10

Tonnes per

Hectare

100:00 75:25 50:50 25:75

Rates of ApplicationUrea:Farmyard Manure

Crop Yields by Inorganic - OrganicFertiliser Mixture Rates

Yield t/ha Straw

Yield t/ha Grain


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The environment sector has been in the spotlight since the policy on the use of the CDM that wasadopted in mid-February 2006. This will provide a means through carbon trading to fund someof the measures necessary to prevent further environmental degradation, and to highlightopportunities to fund environmental improvements, in particular the management of solid wastewhich generates methane, currently deemed to offer the best opportunities in generation of

carbon credits due to its high global warming potential. Both energy and fertiliser are enablinginputs to economic growth and social development. These sectors are both growing in size andimportance.

The environment sector presents numerous opportunities for activities that align with GoP andADB policies. Waste management in Pakistan is the responsibility of the relevant localmunicipal authority. No city in Pakistan has a sanitary sewage system, however. Thoughsewerage is collected and piped, there is no treatment, and even in Islamabad it is ultimatelydumped into streams. Several public municipal and industrial wastewater treatment facilities arecurrently being planned, although these would only address a fraction of national needs. Sewageand municipal waste management thus, prima facie, represents a significant opportunity for

treatment of waste and recovery of gas. The team was able to identify some unpublished studiesundertaken in Karachi and Rawalpindi, but the subject requires systematic quantification andcharacterisation of waste stream elements to enable a first-cut estimation of potential.


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Fig. 11: Below: Waste management in Sector F7/2, a residential quarter of Islamabad. Thedumpster at the top of the bank is emptied daily. The pipeline across the stream, which acts as anopen sewer, carries natural gas.

As a subset of waste stream management, the Landhi Cattle Colony presents an opportunity torealise some of this potential at a location and on a scale that will have a powerful demonstrationeffect. It is also an opportunity to demonstrate the spin-off benefits to the other concernedsectors in generating jobs and incomes, power and fertiliser, and possibly fertigation orhydroponics enterprises.

Left and below:Bridges across the stream by JinnahSupermarket in F7, Islamabad


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Capitalisation on the opportunities in waste-to-energy is hindered by a number of factors. First,it suffers from weakly articulated and enforced environmental policy. This is discussed furtherbelow.

Second, it is multi-sectoral, and requires coordination of environmental, agricultural and energy

sector inputs to maximise benefits. The institutional framework has not been conducive toeffective coordination since responsibilities and budgets are constrained, and do not readilyadmit innovative activities, even though there is policy consensus between sectors about thedesirability of recovery of energy and fertiliser from waste.

Third, it suffers from the absence of demonstration effect to date of seeing is believing. Use of waste for energy has not been undertaken before in Pakistan except at the level of householdscale biogas plants where direct use is made of the gas for household cooking or animal feedpreparation. On a medium-to-large industrial scale, the processes and equipment are unfamiliar;even the large cities have no management strategy that includes capture of energy from waste,and indeed the waste management strategies per se are sub-optimal, featuring at best trench

burial of unsorted city wastes. Waste recovery and recycling is the preserve of the poorest of thepoor; garbage pickers who recover saleable paper, glass or scrap metals. A first-of-its-kindcomposting plant with a daily capacity of processing 1,000 tons of solid waste to produce 250tons of organic fertiliser has just been inaugurated in Lahore.

4.2.3.1 Regulation and Enforcement in the Environment Sector

There is still work to be done in harmonising and adopting environmental standards, andestablishing laboratories qualified to undertake environmental sampling and analysis beforeprosecution for environmental breaches is technically a realistic option. Emphasis is at presentgiven to soliciting voluntary industrial compliance with the National Environmental QualityStandards, generally held to be a more effective approach than issuing Environmental Protection

Orders and prosecuting offenders who may have few realistic options to polluting through theireconomic activities. Towards this end, the EPA has recently launched the Self Monitoring andReporting Tool (SMART) programme for industrial pollution data collection nationwide afterearlier trial runs and refinement. Critics, however, point to laxity and irregularities inadministration of environmental law.

At the time of the State of the Environment Report, 2005, the EPA in Punjab had issued 143Environmental Protection Orders, Balochistan 89, and 3 were issued in the Federal CapitalTerritory. Several show cause notices have been issued in Sindh. As compliance wasobtained, prosecution did not follow. EPA is well aware of the blatant infraction of environmental regulations in the dumping of cattle waste. It does not prosecute individual

farmers, since it is recognised that they are offered no alternative by the municipal authoritiesresponsible for solid waste management. Nor are the town authorities currently prosecuted, dueto lack of applicable standards against which to enforce environmental law, and lack of accredited laboratories to validate data.

Two Environmental Tribunals have been set up in Lahore and Karachi, and three of the fourProvinces have designated Environmental Magistrates. The courts have power to levy graduated


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pollution charges for exceeding NEQS limits. These charges are paid into a SustainableDevelopment Fund administered by each provincial government.

4.3 Project Contribution to Sustainable Development

The project will have numerous spin-off benefits that would contribute to sustainabledevelopment.

4.3.1 Employment

Lack of employment opportunities is a countrywide problem, and is locally acute in the Karachicattle colony areas due to the in-migration of primarily unskilled labour from the surroundingcountryside. There is potential to create a substantial number of sustainable livelihoods for thepoor through the project. Dung collection at Landhi could use dump trucks collecting about sixloads of ten tonnes each day. Alternatively some 140 two-person teams could collect the 8,000tonnes daily, if this task is undertaken without trucks.

For the pilot, and replication in smaller colonies on the scale of the demonstration project, a low-tech option would be to use donkey teams. Each team of two could handle 4-5 tonnes per day,the output from around 200 cattle, one full time equivalent labouring job per 100 heads of cattle.A colony of 1,000-2,000 buffaloes could therefore support a quite viable small enterpriseemploying up to 20 labourers, administration, and technical staff. This size of colony is wellwithin the parameters for a small town or even a well-to-do individual farmer. The prospects for

job creation from commercial recovery of manure from such colonies and returning it to thepoint of origin as fertiliser are also, prima facie, quite bright.

Jobs will also be created preparing and printing bags, bagging, and distributing the fertiliser.

4.3.2 Gender Impacts

If all the manure were sold in bulk 50 kg bags, the full-scale enterprise would need around29,000 sacks stitched and printed each day. This work would be primarily targeted to women. If each sack takes around 10 minutes to stitch and print, 500-600 full time equivalent jobs could becreated for women. Female participation in the work force is highly constrained by culturalnorms, but three CBOs in the area have established industrial homes where it is acceptable forwomen to work, a short distance from their places of residence. There is thus already somesocial infrastructure ready to operationalise the employment opportunities for women from theLandhi project. If this function is performed in existing factories, womens participation will beless easy.

4.3.3 Environmental Improvement

The terrestrial environment at Landhi is buckling under the waste load from the colonies.Canyons of cattle dung line the roads. The area is fly infested. The project will remove most of the solid cattle waste and convert it into three income streams, improving both the appearanceand the sanitary conditions in the area.


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4.3.5 Fresh Water Impacts

Landhi is located in a desert area. Its water is supplied from a lake approximately 80 km to thenorth. Farmers pay a flat Rs 4,000 per annum water rate. Usage metered at a farm of 200 cattleover a period of six weeks in the coolest part of the year indicated an average consumption of 38

m3

per day; more would be used in the hotter months. Approximately one-third of this water isused for drinking, bathing the cattle, and washing down the sheds. The balance carries dung tothe coast. Farmers' report show that about 90% of the dung is flushed. Allowing for the 8,000m3 of water required for the digester each day, net daily water savings of around 450,000 m 3 canbe made if cattle waste is not flushed to the sea. Groundwater is contaminated. The project willnot ensure safe drinking water in the area, though water quantity and quality may improvegradually after implementation.

4.3.6 Impacts on Power Use

At present, most farmers use pumps, typically of 1 kW rating, for about four hours per day to

pump water used to wash waste into drains. This usage will roughly halve, saving about 40,000kWh of power daily in total, and resulting in private savings on electricity bills in the colony of over US$ 7,400 per day, a not insignificant benefit in a poor area. During the quite frequentscheduled or unscheduled load shedding in the area, power is often supplied from private petrolor diesel generators. There will be an additional environmental benefit in displacing thishydrocarbon-based generation.

4.3.7 Impacts on the Marine Environment

The coast by the outfall from the colony is heavily polluted with organic waste from the colony.Tidal drift carries industrial waste from the Korangi stream that flanks the export-processingzone immediately to the west of the main cattle colony. Water and soil analysis close to theoutfall are being conducted to provide quantified baseline information on coastal conditions.Mangroves in the area are dying. Livelihoods of the fishers on the coast are adversely impacted.The project will remove the bulk of the organic waste, and may permit some recovery over timeof coastal plant and marine animal life.

4.3.8 Green Spaces

At present there are no public green spaces in the vicinity. The construction phase of both thedemonstration and the up scaled installation to follow will enable flattening some of thesurrounding area and planting to create some green space that can be sustained by liquid effluentand used for public amenity.

4.3.9 Downstream Potential for Use of Liquid Waste

When laboratory analysis of the waste is available from the demonstration installation, it will bepossible to identify productive uses for the liquid as well as the solid waste. This may be used onpublic green spaces and median strips, but may also have commercial potential as a basis forhydroponics or for watering and nourishing commercial crops. A preliminary plan to utilise


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liquid waste to cultivate biofuel crops on wasteland under a wind farm planned at Keti Bandar iscurrently contemplated. Conceptual encouragement for this activity has already been obtainedfrom AEDB.

4.3.10 Return of Benefits to the Community

The demonstration installation will be managed by the Society for Environmental and EconomicImprovements in the Cattle Colonies of Karachi (SEEICCK). Following stakeholder meetings inKarachi, it was decided in principle to form a Management Board comprising SEEICCK, theCity District Government, the farmer groups and a community representative. Some profit willbe returned to the City District Government in recognition of its grant of land access, and to thecommunity through representative groups. There will thus be some generalised social benefitfrom the demonstration phase of the project. It is hoped that this will build confidence andcapacity in members of the community to enable participation in the up scaled project.

4.3.11 Greater Use of Renewable Fuels

The nutritional and cultural need for milk will grow with the population, and possibly increasewith improved incomes. Cattle dung is therefore likely to be a sustainable and growing source of renewable energy. Two new smaller colonies in the vicinity are already under planning to meetthe growing market. The possibility that the colony might some time be moved further away wasmooted with City District officials, but dismissed by them, since the project will remove the onlyincentive to relocate the colony which is to clean up the environment. There is a remotepossibility that a new model colony might be reconstructed on waste government land close tothe present site, but no drivers exist at present to take this step.

There is potential for replication of biogasification projects in other parts of the country thatshould multiply these benefits.

4.3.12 Reduction in Reliance on Imports

Pakistans imports have outgrown its exports at an accelerating pace over the past five years.Prices for Pakistans commodity exports are resurgent, but rapid economic growth and rising fuelprices have nonetheless resulted in a widening trade deficit. Import substitution is a governmentpriority in all sectors, including harnessing indigenous renewable energy. The balance of tradeover the past five years is graphed below.


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Fig. 13: Pakistan Balance of Trade

0

5000

10000

15000

20000

25000

U S D m

i l l i o n s

2000-1 2001-2 2002-3 2003-4 2004-5

Balance of Trade: Exports vs Imports 2000-2005

Exports

Imports

Data source: Federal Bureau of Statistics Exports and Imports of Pakistan on www.statpak.gov.pk .

Imports of both mineral fuels and chemicals have increased in cost tenfold since 1990, and haverisen in cost at a higher rate than all imports taken as a whole.

Fig. 14: Imports of Selected Items to Pakistan

0200400600800

1000120014001600

Index value,1990-91=100

2000-1 2001-2 2002-3 2003-4 2004-5

Index of Unit Values of Selected Imports

All

Mineral Fuels

Chemicals

Data source: Federal Bureau of Statistics Exports and Imports of Pakistan on www.statpak.gov.pk

At an average 0.27 tonnes of diesel to generate one MWh, the Landhi project could displace 151tonnes of diesel per day, generating at an output of 24 MW and producing 564 MWh per day if

used in a base load power generation mode. The actual power produced is difficult to estimate asat present the chemical analysis of the base resource (raw dung) is incomplete. Conservativeestimates have therefore been used, and yield the 24 MW figure.

Indirectly, the project will assist in displacing imports, since most of the local generation issupplied by indigenous natural gas. This has supplanted some generation from importedpetroleum.


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Total fertiliser output will be of the order of 525,000 tonnes per annum. Substituting the NFDC-recommended one-quarter of urea application with this organic manure will save import orproduction of an equivalent tonnage of urea per annum. Urea production takes priority forindigenous gas supply, but is constrained by plant size. Recently, urea has had to be imported atRs 1,100 per 50 kg bag, compared with the Ministry of Agriculture list price of Rs 411. Since

farmers could not bear such an extreme and abrupt price rise, the government has reverted tosubsidy of some Rs 600 per bag. If organic fertiliser substitutes a conservative eighth of importsby weight, the annual saving will be some US$ 27 million at the current cost to the countrysforex reserves.

4.3.13 Contribution Towards Renewable Energy or Energy Efficiency Targets

On creation of the AEDB, the GoP set itself a target of 10% renewable energy, around 1700MW, by 2015. 7 This has recently been revised to 5% by 2030. 8 At present, 32 wind powerinvestors are negotiating to install 50 MW capacities each in Sindh province. Short-terms plansare to install 5.4 MW as solar home systems and 140 MW of solar thermal capacity. The up

scaled Landhi project will produce around 25 MW of electricity, almost 3% of the revised REtarget. 9 Replication potential could account for a further 4% of the renewable energy target fromthe Karachi cattle colonies alone, and potentially a further half of the output of the Landhi colonyat Okara and Sarghoda. Many smaller colonies exist that may replicate the demonstration scaleproject, but are not yet quantified. An optimistic scenario is tabulated below.

Table 1: Electrical Output and CO 2 Abatement Potential from Major Cattle Colony Waste-to-Energy Capture in Pakistan

Location No of Cattle MW Capacity Tonnes CO 2 Equivalent Saved

per Annum

Value of CarbonCredits @

US$ 5/Tonne

Landhi 400,000 10 24 1,038,00 5,100,000

Other Karachicolonies

650,000 40 2,026,000 11,654,000

Okara 100,000 6 311,000 1,793,000

Sarghoda 100,000 6 311,000 1,793,000

7 Pakistan Energy Yearbook 2004:738 AEDB Press Release, 28 February 20069 However the 1700 MW originally targeted for installation over the next ten years is less than 10% of the 2004 installed capacity(19,252 MW), and does not allow for growth in demand.

10 This is the figure as at 2004; two new colonies in the Landhi catchment area are under planning. Hence the figure of 400,000 hasbeen used in this report .


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4.3.14 Alleviation of Electricity Supply Constraints

Load shedding is an almost daily fact of life in Landhi and negatively impacts on standards of living and commercial productivity. Whether or not the production of power in Landhi

improves, the local supply quality and availability of power supplies depends largely on how andwhere the power produced is fed into the power network. A high voltage supply may bypasslocal transformers and substations and do little to improve matters, whereas a medium voltagesupply may have a more pronounced effect. Once the location, local energy needs, and powernetworks are more clearly understood following the pilot project, it will be possible to considerthese issues jointly.

4.3.15 Cost Reduction

The environmental cost reduction in avoiding some 8,000 tons per day of raw dung beingdumped into the local environment is clear, and as the pilot phase water testing results are made

available, will be able to be quantified. The results are expected to show waterways and coastalwaters as being too heavily polluted to sustain life. The treatment of waste can only improve thissituation.

In terms of the retail cost of energy to local consumers, there is unlikely to be significantreductions unless the overall project is run on a not-for-profit basis. Energy is a commodityproduct, with well-established and variable market rates. While it is possible that localproduction may improve energy security and local power quality, it cannot be argued that marketprices would be lower, particularly when the 24 MW output, while a useful amount of power, isinsufficient and unlikely to influence the supply and demand relationship in a city of 15 millionpeople.

Savings of water and power have been noted in Sections 4.3.5 and 4.3.6.

Transporting fertiliser back to the countryside from which cattle feed is delivered will averagedown transport costs by providing an income stream from the return trip.

4.4 Government Policies and Strategies in the Power Sector

With substantial assistance from ADB, the power sector in Pakistan has undergonecomprehensive structural adjustment. The process of removing distortions caused by subsidy inenergy markets, unbundling and privatising the power sector is still continuing. The PrivatePower and Infrastructure Board, established in 1994 to stimulate investment, offers a range of incentives for projects over 50MW. In harmony with the 2002 Power Policy, these include:

One-window facilitation of investment in the power sector Government guarantee of payment terms of executed agreements Government guarantee of fuel availability Permission for GENCOs to issue corporate registered bonds Permission for nonresidents to be equity participants in generation


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Concessionary customs duty of 5% for plant and equipment not manufactured locally, andexemption for renewable energy equipment

Except for oil-fired plants, exemption from most taxes (sales and income tax, provincialtaxes and duties)

Tax holidays by negotiation for renewable energy generation Permission of repatriation of equity and dividends (though maximum indigenisation is

encouraged) Tariff fixing normally for seven years by transparent and streamlined process. The GoP

picks up the excess cost of supply above the subsidised price to certain categories of consumer.

Attempts have been made to reduce delays in decision-making by publishing timetables for thevarious stages of the regulatory process. The same guidelines apply in principle to negotiation of smaller projects (under 50 MW) through parallel provincial government processes. Acquisitionof land for projects is a process that is not included, and has the potential to cause delays.During discussions with the Karachi City District authorities regarding land for the

demonstration plant, officials identified a tract of land for which no purpose had yet beendesignated. It is now in the process of being earmarked for use in future waste-to-energyinitiatives.

4.5 Regulation and Enforcement Issues

OGRA, the Oil and Gas Regulatory Authority govern the regulation of gas production and sale.This activity will follow all applicable laws and regulations pertai

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Biogas by Landhi Farm

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