Economics of Energy-Brotherhood

 

  

Mehmood-Ul-Hassan Khan

 

Easy and smooth of energy supply has become mantra of every government around the globe and Pakistan is not any exemption. Energy generates power and power has become a rarity in our country. The sacristy of energy resources (rise by 10-12 percent annually) has already created multidimensional socio-economic problems in the country and saga still continues. A consortium of three financial institutions i.e. Islamic Development Bank, Asian Development Bank and World Bank has recently agreed to provide $ 1 billion to Pakistan to import electricity from Central Asian Republics (CARs). The ministers of four countries, Pakistan, Tajikistan, Kyrgyzstan and Afghanistan signed a  resolution to proceed further with the Central Asia/South Asia Regional Electricity Market (Casarem) project envisaging transmission of 1,300 MW from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan; but further commitment to the project will be linked to the availability of financing.

 

Participants

 

The two-day Inter-Governmental Council (IGC) meeting of Casarem was held on 3-4 August 2008, in Islamabad, which was attended by ministers and delegates from Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan along with the International Financial Institutions (IFIs), i.e., Asian Development Bank, Islamic Development Bank and World Bank, besides a project consultant.

During the meeting it was rigorously debated and after incorporating the changes/modifications agreed upon, it was signed by Water and Power Minister Raja Pervez Ashraf, from the Pakistan side, Alhaj Mohammad Ismail Khan, Minister for Energy and Water, Afghanistan, Saparbek Balkibekov, Minister for Industry, Energy and Fuel Resources, Kyrgyz Republic and Farrukh Hamraliev, Chairman, State Committee for Investments and State Property Management, Republic of Tajikistan.

 

Modalities

 

The participating countries will have to negotiate commercial term sheets by the end of November as they have committed to go forward with the project subject to the bids received being consistent with the agreed cost estimates. Deteriorating law & order and rapidly changing geo-political & geo-strategic scenarios in the all the participating countries would be harmful to it. The Central Asia-South Asia (Casa) 1,000 Project is anticipated to be commissioned by 2013. The project would go a long way in overcoming power shortages in Pakistan (1,000MW) as well as Afghanistan (300 MW).

 

Salient features

 

It was estimated that the project would ensure a supply of 5.5 billion units of electricity per year to Pakistan from Sangtuda, Rogun, Talimardjan and Kambarata hydropower stations at 3.3-4.7 cents per unit. Pakistan would bear the cost of all the line losses in the transmission system. Two routes have been identified for the project. One route will run through Afghanistan’s Kunduz province, Salang Pass and Jalalabad before reaching Peshawar and would cost 4.4 cents per unit. The transmission line through this route would stretch 170km in Tajikistan, 430km in Afghanistan and 50km in Pakistan. The World Bank supports this route. Pakistan supports a route via Wakhan and Chitral whose length is estimated at 700km and its per unit cost in Peshawar is estimated at 4.9 to 5 cents. The line will run 360km in Tajikistan, 30km in Afghanistan (Wakhan) and 310km in Pakistan.

 

The Casa 1000 MW power transmission project comprises developing, designing, procuring, financing, constructing and operating electricity transmission lines and related facilities to enable the trade of electricity among the four countries. It has been decided and finalized that 1300 MW of electricity will be imported from Kyrgyz Republic and Tajikistan of which 300 MW will be for Afghanistan and remaining 1000 MW for Pakistan. According to an official statement .the transmission line will consist of 477-km of 500 kV AC line from Kyrgyz Republic to Tajikistan and 750-km of 500 kV high voltages DC between Tajikistan and Pakistan via Kabul. Furthermore, IGC Secretariat will be established at Kabul and hopefully would become operational with immediate effect.

 

Multiplier effects  

 

(a)    The successful project may decrease the high ratios of the energy shortage in the country as according to government officials, Pakistan faces 3,000MW to 4,000MW electricity shortfall per day.

(b)   Pakistan and Afghanistan are going to share the amount to lay transmission lines for electricity imported from CARs.

(c)    Pakistan is to invest some $ 600 million while the remaining amount will be paid by Afghanistan.

(d)   Tariff of the imported electricity will stand at 6 cents to 8 cents per kWh as compared to the tariff of Independent Power Producers (IPPs) that is 12 cents to 14 cents/kWh.

(e)    It is predicted that the project, if completed and implemented in time, will result in considerably solving the electricity crisis of the country.

(f)     The success of the project is extremely important, as it will set a new era of mutual co-operation on electricity

(g)    It increase trade and economic activities among the participating countries

(h)    It will be instrumental for trade and commerce too among the participating countries

(i)      It will foster regional electricity market and brings together countries of Central and South Asia and also opened new vistas of trade and energy among energy rich and energy deficit countries.

(j)     It will enable lower cost (mainly hydroelectric) power to be transmitted from Central Asia to markets in South Asia

(k)   It is estimated that it will increase the exports and lower the cost of production

(l)      It will boost industrial and agricultural productivity in these countries

 

World Bank’s assessment

 

The World Bank has been trying to persuade Pakistan to import 4,000MW of cheap electricity from Central Asian states, besides working on domestic sources to overcome electricity shortage. The bank estimates that Pakistan’s peak demand now exceeds 14,000MW and the present installed capacity of 19,500MW has become inadequate on account of wide variations in water availability. The demand is expected to exceed 20,000MW by 2010. The World Bank says Pakistan should immediately start importing 1,000MW from Tajikistan and the Kyrgyz Republic and then increase imports to 4,000MW in the second phase. According to the World Bank, the cost of supply from Sangtuda, Rogun, Talimardjan and Kambarata power stations will range between 2.26 cents and 3.75 cents per unit compared with the existing average generation cost in Pakistan of 5.6 cents. Another attractive feature of the imports, according to the bank, is that Pakistan’s peak demand occurs in summer when Central Asian power systems have large surplus from their hydroelectric generation stations.

 

Pakistan’s worsening energy crisis

 

The country has been facing severe imbalances in energy demand and supply for the last twenty years. During the early 1980s, domestic supply of energy was fulfilling almost 86 per cent of total domestic energy demand and the gap of 14 per cent was being filled by imports. However, the demand-supply gap started increasing since then and reached almost 47 per cent by the year 2000. Moreover, the domestic supply position of energy, nevertheless, improved after 2000 and the gap shrank to 18 per cent in 2005. It was mainly due to steady expansion in the supply of natural gas. Currently, the total supply of energy from all sources is about 34 MTOE and total consumption is 32 MTOE. According to the officials of WAPDA the electricity shortfall has hit the record level of 7,075 MW owing to the forced shutdown of more than 24 units of power generation plants following the severe fuel scarcity So it is necessary for especially Pakistan to complete this project as soon as possible. 

 

Energy dynamics of Kyrgyzstan and Tajikistan

 

  • Kyrghyzstan had a surplus of 4,000 megawatts of electricity out of which it could supply 3,000MW to Pakistan. This could help improve the power supply situation in Pakistan
  • Tajikistan has already signed a memorandum of understanding with Islamabad for the supply of 1,000MW.

 

(a)   Kyrgyzstan

 

Power production is one of the core industries in Kyrgyzstan. Most of the country’s electricity is generated at hydroelectric plants and is low cost. It accounted for 14.7 per cent of industrial output in 2001. The country has nine large power plants with combined capacity of 3.6 mm kw, including seven hydroelectric plants with a capacity of 2.9 mm kw along with two heat and power plants with a capacity of 728,000 kW. Kyrgyzstan has the third largest hydroelectric resources in the CIS after Russia and Tajikistan. Kyrgyzstan exported about 800 mm kWh of electricity in the first eight months of the year 2004, nearly double that produced in the same period last year. Kazakhstan received 421 mm kWh, Uzbekistan received 200.3 mm kWh, Tajikistan received 173.9 mm kWh, and China received 650,000 kWh.

 

Kyrgyzstan Supply Scenario to 2020

 

(b)   Tajikistan

 

According to the WB (2004), Tajikistan obtained an overwhelming majority of its electricity supply from hydropower plants, 90 percent in 2003, and 97 percent in

2004.

 

(c)    Future  Production of Tajikistan Electricity

 

 

Concluding Remarks  

 

Pakistan is a energy deficient country and project like Casarem would be beneficial for it. Political commitment, better coordination, suitable geo-strategic scenarios and above all harmony among all the member countries would be instrumental to achieve energy independency for stable and sustainable socio-economic growth.

Leave a Reply