Short, medium and long-term solutions to Pakistan’s energy issues

The ongoing experience of shortage of electricity and high cost of production has fully demonstrated that without cheap electricity and energy resources, sustaining a population
of 170 million (growing at the rate of around 2/2.5 annually) and trying to achieve high
and sustainable economic growth of 7 per cent to 8 per cent is not possible

Energy issues faced by the country may be divided into three broad categories. First is about meeting existing shortage of around 3000mw (reduced from 4500mw recently) without causing unnecessary delay. The second category of medium-term can be spread over during next three to five years, from now, and its focus should be on meeting an annual increase in demand of around 12.0 per cent. The last category is about meeting energy requirements from medium-term onwards. It calls for producing cheap electricity according to a projected demand based on increase in domestic and commercial consumption in the next 30 years.

Energy requirements and potential

Pakistan is a low energy consumption country, on an average per capita consumption of around 15mbtu compared to emerging economies of China and Malaysia. Their per capita consumption is 54mbtu and 104mbtu respectively. It clearly reflects that with the expansion of economy and increase in domestic consumption, demand for energy through different resources will increase substantially. The country has a great potential, as high as of generating 0.1 millionmw through natural hydro and coal resources and renewable wind and solar resources. New gas fields and resources such as purchasing natural gas from Iran and CARs have to be tapped to meet domestic and commercial needs in short to9 medium terms. Real constraints to harnessing natural and renewable energy resources are in reliable forecasting, planning and execution, which will require huge investment particularly its foreign component and acquiring advanced technologies.

It is not for the first time that the country is facing a fait accompli in shortage of electricity. It faced a similar problem during mid-90s also. A rush was then made through IPPs (Independent Power Producers) to compensate for the deficit. IPPs with a capacity to generate more than 6000mw were installed. It boosted the capacity to generate around 17000mw by 1999 through a mix of hydro-power stations; gas and oil fired power plants. Capacity to generate electricity was further beefed up to 19420mw by 2007. Hydro-electricity generation is 6800mw, maximum. Most of remaining generation is done through gas and oil fired power plants. Generation by nuclear power plants is bare minimum of a few hundredmw. There are a few subtle constraints such as high cost of furnace oil as was the case a few months earlier when its price shot up to $ 147 per barrel.

Short-term issues

Electricity generation is reduced by around 60 per cent, to around 2500mw during winter. It creates a short fall of around 4000mw that can be comfortably made up by IPPs but this winter they are not producing electricity to their optimum level primarily because of ‘circular debt’ that increased to Rs400 billion a few months earlier. Presently it is reported to be at Rs150 billion. Circular debt is a sort of debt among four stakeholders that is, oil purchasing and electricity distributing companies like PSO and Pepco respectively, IPPs and consumers mostly large public sector organisations because of non-payment of mutually outstanding dues to each other.

The short-term crises could have been averted had the government taken prompt and well thought measures soon after resuming power ten months earlier notwithstanding the fact that it inherited a large amount of circular debt from the previous government. It is to be noted that 17 IPPs with a capacity of 6229mw are presently producing 4404mw that too after Rs16 billion were paid under instructions of presidency that led to generation of around 1500mw a few days earlier. It has helped in reducing load shedding. The government now plans to wipe out outstanding Pepco’s outstanding debt of Rs150 billion within next six months, according to financial advisor to the PM. That is likely to ease the situation and load shedding would be further reduced.

Medium-term issues and solutions

The government is quite hopeful that shortage of electricity would come to an end by end-December, 2009. In medium-term perspective, it is to ensure that increase in demand estimated at around 12.0 per cent is fully met and all measures in this respect are taken well in time. The government has embarked upon adding 1002mw to the existing capacity through six rental power plants, planned for Faisalabad, Sialkot, Multan, Guddu and Quetta. The project is likely to be operational by mid-2009. It plans to add 502mw of hydro-power by 2011 and planning is also underway for 22 IPPs with a total capacity of 4608mw to become operational by 2012. In addition to these projects, the government is tapping renewable energy resources particularly the wind. A 50mw battery has already been installed by a Turkish company in Sindh. Addition of more than 6300mw to the existing system within three to four years would suffice to meet power needs during next three to five years. But, this alone is not a point of satisfaction to meet energy needs.

The government should take into account a host of other factors that have over a period of time added to energy crunch being faced at present. These factors are: heavy losses in distribution and transmission due to line losses and theft, inefficient use of energy by industry and domestic users and over use of energy by transport sector. Heavy losses due to transmission, distribution and theft are estimated around 30.0 per cent. The percentage is quite high compared to other countries, where theft of electricity is not a norm. The government should update the system gradually to reduce loss of energy that can be brought down to around 10 per cent to 12 per cent, around 1500mw, according to experts. It would be a big saving and could save the government from investing heavily in power generation by contracting foreign debt.

Industry uses around 30.0 per cent of total power generated and around 45 per cent of total electricity generated is used for domestic consumption. Use of energy in old machines and lack of awareness of efficiently using it in industry and for domestic consumption causes substantial loss that might be difficult to quantify but can be definitely reduced. Similarly transport sector uses around 28.0 per cent of energy. It wastes energy due to old transport and improperly tuned engines. The country could benefit substantially if all these allied issues were addressed through public awareness and implementing tough measures for fuel efficiency.

Long-term perspective

In long-term perspective, focus should be on producing cheap electricity by using domestic resources of coal and hydro power and renewable resources of wind and solar energy. Dependence on oil and gas should be reduced to bare minimum because of fluctuating prices of former and domestic needs of latter. Pakistan has huge hydro-power potential of around 40000mw that remains untapped fully. It is perhaps the cheapest source and highly dependable within well defined limits. Presently, hydro-thermal ratio of 30:70 of generating electricity has a heavy tilt in favour of thermal component that has its own problems as have been witnessed recently. This ratio should be changed to 50:50 in the first leg of long-term planning. The emphasis should then shift to replacing thermal component by renewable energy resources that have a lot of potential. Wind energy alone has a potential of generating 50000mw with an estimated investment of $30 billion.

The government has taken the long awaited initiative of producing hydro-power. Kalabagh is a dead issue primarily because of political reasons. Construction of Basha dam has started but it will take a few years before the project starts producing electricity. In addition to it eight large and small hydro-projects are in the pipeline with a capacity to produce 3821mw. The pertinent point is that all these projects should be completed on time to enhance electricity generation capacity. Investment in hydro-power generation is also high.

Coal is yet another valuable domestic source of producing electricity. Coal deposits in Thar are one of the largest in the world. They have a high component of sulphur that can be cleaned and electricity can be produced by converting coal into gas. The technology is slightly expensive but is environment friendly. A feasibility report was prepared by the Chinese in 2005 to produce 3000mw at a cost of 5.8 cents per unit but the project could not be started due to cost factor. They were offered 5.3 cents. The project is once again in the news. It is time for government to take initiative of going ahead with the project.

Conclusion

Energy security through diversified resources is one of the necessities for development. The ongoing experience of shortage of electricity and high cost of production has fully demonstrated that without cheap electricity and energy resources, sustaining a population of 170 million that is increasing at around 2.5 per cent increase annually and trying to achieve high and sustainable economic growth of 7 per cent to 8 per cent is not possible. At the same time, neither poverty alleviation can take place nor can the economy withstand adverse forces. The only and the best option would be to harness domestic resources though prudent investment and acquisition of technology.

Source: The News, 26-Jan-09

 

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