Jun 102008
 

By AMJAD AGHA

The country is facing a huge electric power crisis today. This crisis appears insurmountable in the near or even long-term future, unless proper understanding and correct implementation is undertaken on priority basis. At present total power production capacity in the country is about 19,500 MW, out of which Hydel Power is only 6,500 MW, balance of 13,000 MW is thermal either using Natural Gas or Furnace Oil. Small capacity of 450 MW is Nuclear and only 150 MW is through coal.
Although gas is to be provided for 5800 MW to various thermal plants, but in actual fact much less gas is being made available, the deficiency is being filled through furnace oil. It can be inferred that in the recent past, only furnace oil was used as fuel for about 9000 MW generation.
It is very important to understand the consequence of the prevailing situation. Current price of furnace oil is about Rs 49,000 per ton, which amount upto Rs 49/- per kg. On an average one kg of furnace oil produces 3.8 kWh of electricity. Thus, the cost of furnace oil for generating one unit of electricity is about Rs 13. On top of this the fixed cost of a thermal plant works out to be about Rs 3 per unit. Therefore, one unit (kWh) of the electricity produced by all thermal plants using furnace oil is Rs 16 per unit. According to WAPDA/IPP agreement, the private power producers will charge WAPDA the actual fuel cost for which they have a direct contract with PSO. As we all know that WAPDA tariff charged from the consumers is about Rs 5 per unit (kWh).
The production cost of furnace oil electricity is Rs 16 per unit, add to it the transmission, distribution cost (including loses), “the total cost of such electricity works out to approximately Rs 22 per kWh. The difference between WAPDA tariff and the furnace oil electricity is Rs17 per kWh.” It is estimated that the country consumes at least 25 billion units of electricity produced annually through furnace oil, which amounts to the total deficit of Rs 425 Billion. If WAPDA has to balance its books it would require a subsidy of Rs 425 Billion. This deficit is somewhat reduced due to cheap power produced through hydel energy and natural gas, but the deficit cannot change substantially, unless bulk of electricity is produced through hydel energy. Obviously, a deficit of Rs 300-350 Billion cannot be sustained, the government does not have resources to pay such a huge subsidy, it is also not feasible to increase the power tariff very much. Therefore the power crisis is far greater than what is being perceived. In the absence of extremely heavy subsidy, WAPDA is delaying payments to IPPs and also to the oil companies. The result is that IPPs are now producing much less electricity than their capacity.
To any planner, it should be obvious that the country cannot afford electricity produced through oil. Indigenous fuels like coal, gas, atomic will have to be developed and developed quickly. The final solution however lies in depending on the hydroelectric renewable energy, but unfortunately the narrow minded bickering on construction of dams has persuaded the planners to find an easy solution, which we cannot afford any more. Since the shortage or high price of electricity has severe detrimental effect on all sectors of economy, the situation calls for concerted short-term, medium-term and long-term actions to overcome the problem of energy shortage.
Way Forward: In the short-term, the shortages have to be somehow met. The foremost immediate action which can give some relief is the conservation of energy. The government has already announced certain measures like shutting down power on billboards, hoardings and neon signs. Recently in Lahore supersize televisions have been installed on important traffic points. In order to keep the temperature down air conditioners are installed behind these sets. In spite of government directions, the energy saving measures are not being implemented. Shops use excessive lights, which can be conveniently reduced. A suggestion that cities be divided in zones, and the market on these zones be closed on different days, can also save peak time energy usage. In order to implement conservation measures, the nazims, naib nazims should visit the areas and try to convince and negotiate with the people, shopkeepers etc requesting them to cooperate in the overall interests.
At present the IPPs, and WAPDA owned thermal plants are averaging about 50 percent plant factor, which means that they are not being used to their potential level, 70 to 80 percent plant factor is quite feasible; this would require better maintenance of such plants. A higher plant factor on these power stations can provide 20 to 30 percent more energy, which will circumvent the present shortages to a certain extent. Improving the plant factor of the existing plants is far more economical then setting up new plants, although new plants will still be needed. One of the reasons for low plant factor is that the funds are not made available for the purchase of oil, solution for this factor will help in short term increase in energy production. The government has announced that immediately 1200 MW of additional plants will be set-up. If these plants will operate on furnace oil, the deficit will further increase. At present the country has about 28 Trillion cft of recoverable gas available, the yearly consumption is about 1.2 Trillion cft, which means that even if gas consumption is increased, the existing recoverable gas will be sufficient for the next 15 years. Therefore the additional thermal generation should be based on gas, but in order to make additional gas available, the gas pressure and its transmission system will have to be enhanced. The money saved by using gas instead of furnace oil, should be invested in developing new gas fields which have already been discovered.
Mid and Long Term: The oil prices are not going to come down drastically, therefore all efforts are needed to stay away from oil. For thermal plants only Coal and Natural Gas should be used. Vast deposits of coal exist at Thar, but it is inconceivable why the mining of this coal has not yet started. There are a number of new gas fields discovered; but their development has been put on the back burner, again for some unknown reasons. The gas purchase agreement with Iran be finalised immediately, even without India. A large power station using this gas can be installed at Gwadar, 500 KV transmission lines can bring the power to load centres. In addition agreement with Kazakistan be persued diligently for the import of gas.
Currently the country loses 29 billion units of electricity annually due to heavy losses in the system. All efforts must be genuinely applied to reduce the losses. If losses are reduced by even 5 percent, the saving will be over 7 Billion rupees.
For hydroelectric projects, the large ones can only be built on the Indus River, where not only hydroelectricity can be produced, but highly needed water storage can also be a by-product. Some legitimate objections on the environment and social impacts of large dams are there, but solutions for such objections can be satisfactorily found. The will of the government leaders is needed, with the present coalition partnership in the centre, matters can be resolved. Experts from various provinces can get together and put forward a solution for mitigating the objections. It was due to the clear vision of the leadership that the Tarbela Dam was constructed, without which where would we have been today. Similar visionary approach is needed and needed now.
There are a number of other attractive runs of the river hydel projects which are being offered to the Private Sector. None of these projects have yet started, because the tariff is still not finalised. With the huge losses being accumulated in thermal plants, again it is strange that the hydel projects in the private sector are not being encouraged. Under the present circumstances, a rational and market oriented policy has to be adopted, hopefully the present government will immediately look into this.
It is good to know that the work on Neelum Jhelum Hydro Project (900MW) has started by WAPDA.
The current power crisis is grossly due to very high oil prices, and the country has to prepare itself at least for the next several years to somehow cope with it, since no immediate cheaper alternate solutions are available. It has been a big set back that new Hydel Projects have not been undertaken, neither the indigenous coal mining has started, investments in the existing as well as new gas field have been lacking. The policy orientation needs a drastic modification and indigenous resource like hydel energy production as well as development of coal mining and new gas fields should be the top priority.
E-mail: amjadagha@hotmail.com

Source: The Nation, 10/6/2008

[lastupdated]

  20 Responses to “Pakistan Electricity crisis – a real perspective”

  1. What percentage Pakistan produces electricity from thermal source

    • Nancy
      hopefully the following information will be of some help to you.

      1 What does IPP stands for ?

      IPP is an abbreviation of Independent Power Producer.
      Top
      2 How many projects in the private sector are in operation in Pakistan ?

      At present there are 16 private power projects with a capacity of above 5500 MW which are in operation. This is roughly one-third of the total power generation capacity of Pakistan.
      Top
      3 Why has private sector been inducted in power generation ?

      Power shortage had been one of the chronic problems hampering Pakistan’s socio-economic growth By 1994, the problem had assumed such acute dimensions that power supply fell short of demand by almost 2000 MW during peak load hours. On a routine basis, this resulted in forced interruptions in the supply of electricity to consumers during peak hours resulting in load shedding. The unreliable power supply shattered the industrial progress. There was a gap between demand and supply due the rapid increase in electricity demand (estimated to be growing at a rate of 7-8 % per annum at that time).

      This situation called for immediate intervention by the GOP through adoption of policy measures aimed at massive resource mobilization for investment in the power/energy sector. The enormous quantum of required investment compared with the constrained funding potential of the national exchequer, was not conducive to allocation of scarce GOP funds for energy. Therefore, the GOP took a bold initiative to encourage private sector investment in infrastructure development, in the power sector.
      Top
      4 Why did the 1994 Power Policy receive such an enthusiastic response ?

      In March 1994, the GOP announced the Private Power Policy 1994 which, essentially, comprised a well-thought-out package of incentives to attract foreign direct investment (FDI) in private power generation projects, due to which the Policy received a very enthusiastic response. The package of incentives envisaged in the 1994 Power Policy was internationally competitive in terms of assured cash flow for debt repayment and returns on investment. Procedures were simplified; PPIB was created as a one window facility to eliminate unnecessary delays in finalization and approval of projects and to facilitate interaction between the GOP and investors; local currency investment requirements were reduced; and measures were adopted to create and encourage a domestic corporate debt security market.
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      5 Who are the main lenders to IPPs in Pakistan ?

      The main lenders to IPPs in Pakistan are World Bank, Asian Development Bank, International Finance Co-operation, US-Exim Bank, J-Exim Bank etc.

      6 What is the minimum equity requirement to finance IPPs in Pakistan ?

      The minimum equity requirement to finance IPPs in Pakistan is 20%.
      Top
      7 Why IPPs were allowed to do business in Pakistan ?

      If projects are implemented through the public sector utilities, they absorb a significant portion of national budget allocation. The allocation for new power projects surpasses the cumulative allocation for health, housing, education and agriculture sectors. Therefore, in order to save governmental allocations for these vital sectors, private sector investment has been sought in Pakistan.

      8 IPPs have resulted in sky-rocketing tariff. The consumer tariff and electricity has become unaffordable, Is it true ?

      Although after induction of IPPs the consumer tariff has been increased, but only IPPs can not be blamed. The price hike is mainly due to the increase in the furnace oil prices. Secondly, the electricity generated through IPPs will dip down sharply after completion of debt servicing period. The consumers will get the real benefit of IPPs at that time. The Bulk Power Tariff (BPT) offered by Pakistan was comparable to the IPP tariff in other Asian countries. As per a research conducted by a famous international firm the BPT was the third lowest amongst the list of fourteen IPPs of some other countries of the Asian region.
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      9 Environment for IPPs is hostile. Are the investors expected to invest further in the business of IPPs ?

      Environment for IPPs is NOT at all hostile. The initial turbulent period has passed. The misgivings and hostilities which occurred during the teething time and which were the result of inexperience on both sides of the fence i.e. IPPs and the Government, have now been overcome. Now there is a new rapprochement between the Government and the investors. The investors are very eagerly looking forward to invest in Pakistan. Infact, pursuant to the announcement of the Power Policy 2002, a very encouraging response has been received from the investors.
      Top
      10 The 1994 power policy resulted in induction of only RFO based thermal power plants. Reasons ?

      Hydel projects are more capital intensive than the thermal projects. Although the Policy-1994 promises more tariff for the hydel projects but still due to their capital-cum-time intensiveness and hydrological risks, hydel projects could not be materialized. Thus thermal projects which could start generating the electricity in shortest possible time, and which are less time consuming for installation rushed to fill the vacuum.
      Top
      11 Thermal power plants using furnace oil are depriving the country of hard earned foreign exchange. What steps the Government has initiated to check this ?

      Conscious of this fact, the Government is exploring the avenues of transforming the thermal projects from furnace oil to gas. Almost all the public sector projects which do have useful lives and which have the appropriate technology have been converted to dual fired mode, and they consume gas as per the availability in system. Under the Power Policy for Power Generation 2002, indigenous resources like hydel and coal are being encouraged.
      Top
      12 Coal is abundantly available in Pakistan. Why this coal is not being utilized ?

      To develop coal resources of Pakistan serious efforts are afoot. A task force under the President of Pakistan is rigorously following a plan to fully exploit the coal resources especially the Thar Coal reserves. Sindh Government and PPIB are also in good liaison to develop coal resources. Many MOUs signed in this regard promise a bright future for the brown coal.
      http://www.ppib.gov.pk/FAQs.htm

  2. Firstly on many web pages including Wikipedia.com, the power consumption of Pakistan is mentioned as 7800 MW. Is it not correct.
    Secondly, there are rumors that 2 turbines of Mangla dam are not working thats why there is electricity crisis in Pakistan. Is that true?

  3. Please read the following article also, it might be of some help to you.
    This loss of water, however, became the source of creating big reservoirs in the shape of Mangla and Tarbela. The country nearly got about 4700 MW hydel electricity from the Mangla and Tarbela Dams. With the installation of a number of thermal and hydel power stations, both by Independent Power Producers and WAPDA, and a nuclear power station at Chashma, the total installed capacity stood at about 19,530 MW in 2003.
    Some planners at this juncture thought that keeping in view the total requirement of electricity during peak hours, which varied between 12500 to 13000 MW, the country had surplus of about 3000 MW which could be exported to India. The demand of electricity suddenly started surging from year 2003 mainly because of non-development activities.
    http://www.opfblog.com/4852/energy-crisis-in-pakistan-where-planning-went-wrong/

    In the power crisis, multiple factors are involved. Circular debt is one of the main causes, if we could produce electricity to the full capacity, we can avoid load shedding at present but the electricity consumption is growing at fast pace and Pakistan has to increase the capacity in near future.

  4. IN ELECTRICITY WHAT IS THE FUTURE OF PAKISTAN?

  5. this is a good web site and article is also nice. your struggle is absolutely fine. i like your thinking really positive.

  6. please give the points for electricity crises in Pakistan. Thanks for this kind of act.

  7. Why isn’t Pakistan Building Plants? I visited India on business two months ago and was amazed at the frantic pace with which they’re building Huge Power plants Across the country. India will become a power surplus nation in 4 years. Though I find Pakistani Infrastructure ok – with India building roads/ports/power plants/nuclear plants/space infrastructure – I feel they’re going to leave us far behind in the dust very soon. Its sad our politicians are so lethargic. One power plant in Gujarat is 5000MW – they’be vrought in Chinese engineers to complement Indians and the work shows for itself. it will be ready in 1 year!! This is in addition to 100,000 MW they’re adding all over the country!!!

    And we cannot even build a 500 MW power plant?

  8. in present crisis of electricity what will be the future of our agriculture

  9. [...] Pakistan Electricity crisis [...]

  10. Today Pakistan facing many problems.I want to say you all.Please do something for Pakistan.Everyone say what i can do.No dear when 1 stand for do something others with them.This message for all Pakistanis.

  11. Plz i want to ask that some peoples r saying that in mushraf government circular dead incread for ipps up to 6 billion usd and this is the main reason of load shedding bcz it is not possible for present government to solve the mattar is it true plz replyp

    • the current corrupt government intentionally created and cashed elecrtical crises to implement IMF policies and to cash the corruption of rental power stations. The current circular debt is 200% more that it was back in musharaf government that is (declared by the government and dear correct your ratings) 320 billion rs
      The power stations are working at 25% capacity so instead of increasing their capacity this bloody government members earned billions in rental power corruption, according to transparency international 2.2 billion $ irregularities and corruption is linked with rpp. so unless this government is wiped out there is still worst to come

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  14. Assalam o Alikum Friends i m a student of intermediate and i m very proud to say that i can make electricity in very cheapest method in which no country resources (like coal , oil , gas or sunlight will be needed) will be needed but a big problem is if i show my example to make this type cheap electricity my own rulers will kill me bcz they wanted to keep us in under their pressure i can only pray that ALLAH PAK bless our rulers

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