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The potential impact of coal on electricity generation and economic growth of Pakistan
Samreen Akhtar MS Scholar, Preston University, Islamabad, Pakistan samreen.akhtar1@gmail.com Dr Khalid Mugal Associate Professor, Preston University, Islamabad, Pakistan drkhalid0@gmail.com Dr. Muhammad Aslam Khan Associate Professor, Preston University, Islamabad, Pakistan aslamnuml@yahoo.com ABSTRACT This paper is a review of generating electricity from Thar coal and analysis effective usage reserves of coal in Pakistan. The country had faced enormous crises from 1947 to till today. According to the (EIA), the coal was inexpensive and primary source of energy. With economic growth the demand of electricity has exceeded the supply by 6000MW in 2010 causing load shedding in 2011.this has slowed down the economic growth. Thar coal can alone produce 5000MW electricity for the next 800 years. It is found that coal is an efficient estimator than other energy resources. The effects of energy generation through coal elements like hydro, nuclear, oil, gas were selected and its impact on economic growth has been evaluated in the study. The secondary data in this paper has been taken and results analyzed according. Coal and energy resources are independent variables besides electricity is dependent variable. The method of least square is used on the basis of 13observations. Keywords: Coal, hydro, oil, gas, nuclear, electricity, economic growth. Paper Type: Research Paper

INTRODUCTION Energy plays an important role in the industrial and economic growth of the nations. Pakistan has been experiencing energy crisis especially of electricity since its independence. Energy has adversely affected the growth and the development of all economic sectors. This paper stabs to measure the gap and explores alternative sources for electricity production. There has been strong relationship among the electricity, productivity and volume of GDP (National academies press, 1986) Total electricity generation remained around 20100MW out of which Hydel contributed to the production of 6500MW, thermal add 13000MW and only 450MW from nuclear resources and
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150MW from coal (Economic survey, 2010). The gap between supply and demand is increasing day by day (Agha, 2008). According to the International Energy Agency (IEA), coal was inexpensive primary source of energy. The overall consumption of world was projected to be around 6.7 billion tons and it is estimated to increase by 98% to 9.98 billion tons till 2030. In early 1990s, coal mines in Thar, Pakistan were discovered and considered as one of the largest reserves in the world. It facilitates to overcome the crises, if coal is used for electricity generation (Raiz, 2010). Electricity was the main source of energy but the prices or charges of electricity had increase due to the significant enhancement in oil prices; the cost of electricity has also increased. This results into lower consumption rate of electricity for consumers; however, efforts for the reduction of power theft and electricity wastage have improved productivity (Mitsubishi Electric Corporation). The prices of electricity created economic and social problems particularly for middle income group besides industrial sector. It had also adversely affected competitive advantage of export oriented industries. It raised the prices of products causes cost push inflation which slowed down the productivity (Forex, 2009). Coal was the primary and cheap source of energy; mostly advanced countries used coal in power sector but Pakistan used only 1% for electricity generation. Coal was in abundance, easy to store and transport attain than other resources. About 40% of the world used coal in electricity generation (EIA, 1998). Hydro sources could produce matchlessly cheap electricity. It could be produced about one cent per KWH. Once a dam had been built, the electricity from hydro system stood the cheapest (Secondary Information Energy). There were two great negative aspect of Hydel electricity. First, it involve an enormous initial financial lay out. Second, its construction period was too long (Development of energy resources). Natural gas was superior in performance and environment friendly source. It also decreased the cost of production and manufactures the long life (Energy Solutions Center, 2005) .It created lower level of secretion in the industry of electricity generation. Natural gas was used as a fuels cell as technology in the electricity generation (EPA) Oil was the big source for the electricity generation in U.S. About 40% of the economy of the U.S relied on it. Oil produced significantly air, land, water pollution (Power scorecard). The oilfired plants had higher cost of production and it had expensive energy input. It was more expensive than other energy resources like coal (Priddle, 1990). The nuclear power was a maintainable energy. The nuclear energy plant had a huge capital cost (Leeuwen and Smith, 2002). Nuclear energy provided clean, inexpensive electricity as well as therapeutic judgment, defend livestock health, and increase water assets, protect food, encourage agricultural output (A.ChE, 2008). He has quoted James (2008), There is no more sensible alternative than Nuclear Energy if we really want to sustain our civilization Electricity played an important role in the economy. The demand of worldwide had increased about 60% in the last 25 years and electricity had probable to increase the green house gases production which are related to environmental change. Economic growth required consistent and inexpensive energy conversely; increasing demand of energy was big confronted for worldwide power markets (Gleneagles, 2005; Bulteel and Capros, 2007)
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Source of electricity like coal, gas, oil, nuclear and hydro had polluted the environment but all provide industrial growth and facilities to consumers. They accelerate economic growth increase employment in the economy. Energy utilization is considered the back bone of the economic growth (Anjum and Butt, 2001). Ferguson et al., (2000) examined a positive relationship between use of electricity and economic growth about 100 countries. They had focused on electricity utilization and capital formation. But in previous studies Ghosh (2002), Shiu and Lam (2004), Moritomo and Hope (2004), Jumbe (2004), Wolde-Rufael (2004), Narayan and Smyth (2005), and Yoo (2005) had explained positive relationship of electricity utilization and economic expansion in developing world (Galip Altinay,Erdal Karagol, 2005). Karagol (2004) further explained the economic disaster and scarcity of supply electricity (Altinay and Karagol, 2005). The results of this study would prove as a basis for countries enriched with coal to generate electricity through coal at cheaper rate. It could also provide useful thought for countries producing electricity through other sources at expensive rates. LITERATURE REVIEW The result of this study would serve as basis for countries enriched with coal, to generate electricity through coal at cheaper rate. It could also provide useful thought for countries producing electricity through hydel expensive rates. Electricity has led to industrial and economic growth bringing prosperity to the nation. In Pakistan demand and supply of electricity had a wide gap. Out of many sources, few are used in Pakistan. Apart from electricity generation Coal was the important raw material for chemical and manufacturing industries and many chemicals formed during the process like creosote oil, naphthalene, phenol, pyridine, benzene, toluene, xylene, ethylene, propylene, polyesters, plastics, synthesis gas, acetic acid, acetic anhydride (Waheed, 2010). There are two met hods of generat ing electricit y from coal, which include underground coal gasificat ion and coal clean technology (Aust ralian Coal Associat ion, 2008). The cost of construction of coal fired plants was at 1000-1500USD/ KW and construction time was four years. The prices of fuel were increased alas with the economic life of plant. The generation cost of coal fired plants was between 5 and 20 USD/ MWh at 5%discount rate and investment cost was 20% and fuel at 45%. The generation cost of coal fired plants at 10% discount rate was from 35 and 60 USD/ MWh and investment cost was 50% and fuel was 35% (EIA, 1998). Water wheels were used for more than 2000 years ago to propel flour mills. The hydro electricity became efficient source of energy. The hydro electricity had different in functions. It supplied power in huge quantity to residential areas, cities and little towns. The disadvantages included high initial costs of construction of dam for reservoir of water and generation plant (Hydro Electric Power, 2011). Hydro electricity did not generate any pollution. It had highest consistent to increase the output than other resources. The negative point was it increased the cost of production (Alternative Energy Resources, 2011).
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Natural gas was the hygienic energy resource of the fossil fuels (Power Scorecard).Natural gas could be used for heating, generation of electricity and in industrial purpose.( EIA, 2009).Gas was harmful for buildings in the form of explosions and it was nonrenewable resource.(manchester,1824).The natural gas was the major source for electricity generation but it was used for new power plants due to economic, environmental and technological changes in 1970s and 1980s (Natural Gas, 2004, 2010). There were advantages of gas like easy to attain and consumed having high heating point. It had finite and non renewable reserves. But it had poisonous in case of breathe in and explosion in the form of leakage (Solar Power Notes in Natural Resources). Crude oil was also convenient in use and easy to transport through pipes (Energy Resources, 2011). Oil is expensive in the formation of electricity. It increases the prices of electricity to consumers due to uncertain oil prices in the international market. Oil is the key factor for boosting the economy now. Oil used in electricity generation was very expensive or costly and their oil based plants were less efficient than coal plants (Paffenbarger, 1990). It had some benefits. It had very limited in resources due to shortage and a high price fluctuated with supply and demand. However, often better for heating energy resource and superior circulation channels (EIA, 2009). Squat water was used in nuclear power which low the effectiveness of condensation turbine methods (USDOE 2006; Poole, 2009). Nuclear energy had the ability to provide electricity at the worldwide level. Two third of world population used nuclear plants for electricity generation for industries and half of population had below erection level of the plant. The unit cost of nuclear electricity was lower but capital outlay was greater than other energy plants (World Nuclear Association, 2008). The major countries found those electricity generation elements which had low creation of pollution and efficient estimator in electricity formation (Electricity Generation UK, 2007). Growth of economy occurred when everyone had done innovations and discovered new resources. Electricity has been proved to be the major driver of economic growth and development (Romer, 2007). The prices of electricity based on investment and its apparatus as interest rates, fuel or oil cost, rate of return (Electricity in Economic Growth, 1986). Theoretical frame work On The basis of extensive literature review the elements of energy generation have been included in this paper like Hydel, coal, oil, gas and nuclear. It has also emerged that the sufficient capacity of electricity generation significantly affects the economic growth (International Energy Outlook, 2010). Since the government of Pakistan has accorded highest priority to this sector on the belief that if there was rapidly increase in demand for electricity generation of the electricity will faster the economic growth in the country (Wikipedia, 2010). Therefore, the conceptual frame work has been drawn keeping all the factors in mind as depicted below:

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STUDY MODEL:

Hypothesis According to Leedy and Ormrod, (2001) Hypothesis had played significant role in the research which solved the problems in research model. All fossils of electricity production included coal, gas, oil, nuclear, Hydel had its effect on the growth of economy (International Energy Outlook 2010). Power policies could increase prices and could affect the economic growth (Guerrerio, 2011). The hypothesis of the study is enunciated in the succeeding paragraph. H1 coal has significant effects on the electricity generation. H2 gas has significant effects on the electricity generation. H3 hydro has significant increase in the electricity generation. H4 oil has significant product in the electricity generation. H5 nuclear has significant effects on the economic growth. H6 electricity generation has significant impact on the economic growth. METHOLOGY The sample has been taken from 1995 to 2007 and 13 observations were included. Unstructured interviews have been done for collecting the information. The OLS or method had been used. The method of ordinary least squares is attributed to Carl Friedrichgauss, a German mathematician. Under certain assumptions, the method of least squares has some very attractive statistical properties that have made it one of the most powerful and popular methods of regression analysis (Damodar ,Gujrati and Sangeetha, 4th ed). The model includes Y = 0 + 1 X1 +2 X2+ 3X3 +4X4 +5X5 + Uit

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Where Y is electricity generation, X1 is coal, X2 is gas, X3 is Hydel, X4 is nuclear, X5 is oil and Uit is error term or control variables. Y = 0 + 1V1 + Uit Where Y is economic growth, v1 is electricity generation and Uit is error term. RESULTS AND DISCUSSION Table -1 Secondary data has been used for 13 years. The data has been from 1995-2007 Variable C COAL R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 13682.93 15.52809 0.470043 0.421865 10859.98 1.30E+09 -138.1673 0.943980 Std. Error 19984.76 4.971338 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) t-Statistic 0.684668 3.123524 Prob. 0.5077 0.0097 75392.77 14282.84 21.56419 21.65111 9.756404 0.009689

From the estimation we find that coal is efficient estimator then other energy resources. If the coal is increase by 1 unit of electricity on average then total electricity is generated by 15.52.on the average. There is a positive relation between electricity generation and coal. If the electricity generation from coal is zero, the average electricity production would be about 13682.28units. The R-square value of about 0.47, which means 47 % of the variation in electricity generations, is explained by the coal electricity generation. It means that electricity can be produce form coal at a lower cost. Table 2Variable C GAS R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Secondary data has been used for 13 years. The data has been from 1995-2007. Coefficient 42222.20 1.225363 0.782121 0.762314 6963.326 5.33E+08 -132.3897 0.669370 Std. Error t-Statistic Prob. 0.0000 0.0001 75392.77 14282.84 20.67534 20.76226 39.48667 0.000060

5620.907 7.511635 0.195002 6.283842 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

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If gas is increased by 1 unit on an average then the total electricity can be increase by 1.22 units. There is a positive relation between electricity generation and gas. If the electricity generation from gas is zero, the average electricity production would be about 42222.20 units. The R-square value of about 0.78 its means that 78 % of the variation in electricity generations is explained by the gas electricity generation. In this reject H0. Table 3Variable C HYDLE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Secondary data has been used for 13 years. The data has been from 1995-2007 Coefficient 14682.42 2.541949 0.679106 0.649934 8450.641 7.86E+08 -134.9063 0.506906 Std. Error 12799.26 0.526845 t-Statistic 1.147130 4.824854 Prob. 0.2757 0.0005 75392.77 14282.84 21.06251 21.14943 23.27922 0.000532

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

If hydel is increased by 1 unit on average then total electricity can be increased by 2.541 units. There is a positive relation between electricity generation and electricity generation from Hydel. If the electricity generation from Hydel is zero, the average electricity production would be about 14682.42 units. The R-square value of about 0.67 its means that 67 % of the variation in electricity generations is explained by the Hydel electricity generation. Table 4 Secondary data has been used for 13 years. The data has been from 1995-2007. Variable C NUCLEAR R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 57119.71 11.69101 0.727059 0.702246 7793.692 6.68E+08 -133.8543 1.205717 Std. Error t-Statistic Prob. 0.0000 0.0002 75392.77 14282.84 20.90066 20.98757 29.30174 0.000212

4008.468 14.24976 2.159760 5.413108 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

If nuclear is increased by 1 unit on average then total electricity can be increased by 11.69 units. There is a positive relation between electricity generation and electricity generation from nuclear. If the electricity generation from nuclear is zero, the average electricity production would be about 57119.71 units. The R-square value of about 0.72 its means that 72 % of the variation in electricity generations is explained by the nuclear electricity generation.
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Table 5 Variable C OIL R-squared

Secondary data has been used for 13 years. The data has been from 1995-2007 Coefficient Std. Error t-Statistic Prob. 69247.69 0.271971 0.011016 -0.078892 14835.54 2.42E+09 -142.2225 0.086107 18031.29 0.776979 3.840418 0.350036 0.0027 0.7329 75392.77 14282.84 22.18808 22.27499 0.122525 0.732922

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat

If oil is increased by 1 unit on average then total electricity can be increased by 0.27 units. There is a positive relation between electricity generation and electricity generation from oil. If the electricity generation from oil is zero, the average electricity production would be about 69247.69 units. The R-square value of about 0.011 its means that 1 % of the variation in an electricity generation is explained by the oil electricity generation. Table 6 Secondary data has been used for 13 years. The data has been from 1995-2007. Variable C ELECTRICITY R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -2.320872 9.04E-05 0.417458 0.364500 1.592525 27.89749 -23.40952 1.349576 Std. Error 2.466539 3.22E-05 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) t-Statistic -0.940943 2.807625 Prob. 0.3669 0.0170 4.492308 1.997691 3.909157 3.996072 7.882757 0.017041

If electricity is increased by 1 unit on average then total economic growth can be increased by 9.04 units. There is a positive relation between electricity generation and economic growth. If the electricity is zero, the average economic growth would be about -2.320872 units. The R-square value of about 0.41 its means that 1 % of the variation in an economic growth is explained by the electricity generation.

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CONCLUSION Using the data of thirteen years the estimation results confirms that coal is the cheap estimator then other energy resources and have low cost for the electricity generation. Government should invest in Thar-coal project and invite foreign companies to invest in Thar-coal project. Pakistan can overcome electricity problem by utilization of Thar-coal reserves in the right way. Pakistan are having 185 trillion Thar-coal reserves, by utilizing it at full capacity we are able to overcome electricity crises but as well as we can export the electricity. According to Dr. Sammar Mubarak, Pakistan can produce electricity from coal at 3 to 4 cent per unit and also produce 1000 barrel oil per annum. To achieve this goal government policy to remain is stable until the projects are completed. From the estimation we also found that coal is cheap for electricity but others energy resources are too important. From the coal electricity, the gap between supply and demand can be decreased and no load shedding will be done in the next years if best policy can adopt and finance is available. Due to the present electricity crisis, there was need to increase practice of indigenous resources for power generation, Thar coal could prove to be a useful source of energy. Any electricit y generated from Thar coal might help in reducing the need of importing expensive furnace oil. Gasification can also be a potential use of Thar coal. It will diversify our electricity generation sources, save us some foreign exchange and decrease the present gap between supply and demand of electricity. Most importantly, it will bring much needed development and employment to the Thar area. It increases employment in the country and development of industries or it will help climb up the ladder of industrial development in future. Industrial development will enhance GDP per capita income and living of standards of the people, generation electricity, prosperity and development to the country. Recommendations Since Pakistan has no other substitute except to make use of coal therefore government must declare a clear coal policy instantaneously comprising: 1. 2. 3. 4. 5. Free import of plant and machinery without custom duties for initial installations. Government should identify the companies who could arrange their own financing. Government should develop a reasonable infrastructure and other ancillary facilities. Government should provide special funds for utilization of the Thar coal. Government should clearly indicate its short-term, medium-term, long-term and perspective plan to attract the private sector for investment in power generation.

Limitations & Delimitations The problem in this project faces was data availability. I was able to check the coal as a cheap estimator with low cost of electricity generation, the research was. The second problem is that the data can converted in different units and researcher changes it in same. The variables as

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solar-energy, wind energy, bio-mass energy, fuel energy and other kinds of energies are excluded. Future Gap Researcher could not highlight the cost of effectiveness of other energy variables as well as the gaps between electricity generation and their capacity. On the basis of this study, further research could be able to find out the cost and benefits of other energy variables in the electricity generation manner.

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