23 October, 2014 / 27 Zilhaj, 1435
A Pakistani barber shaves a costumer's beard under the light of a candle and a mobile phone, during a power cut in Islamabad. -Photo by AP
A Pakistani barber shaves a costumer's beard under the light of a candle and a mobile phone, during a power cut in Islamabad. -Photo by AP

Nawaz Sharif is expected to announce his energy policy in a couple of weeks. Pakistan needs an integrated national energy strategy which must be developed by independent experts free from the influence of organisations such as the World Bank which supported highly flawed policies in the past or of the local vested interests such as the Independent Power Producers (IPPs).

The energy crisis is not about the installed capacity because the structural reasons go far beyond just the circular debt, bad governance and corruption. A lesson learnt from the 2008 global financial crisis, when big banks were brought under the state control by the western governments, is that during extraordinary situations that threaten to destabilise an entire system, there is no alternative to state intervention no matter how undesirable it may be in ideal conditions.

Pakistan’s unfavourable high cost energy mix lies at the core of the energy crisis. Today, the plants using imported oil represent the single largest source of electricity generation due to a flawed policy of supporting oil-powered plants by guaranteeing a minimum return to the investors. The policy attracted investments only in the thermal power as it offered a quick and almost riskless way to make money due to the generous terms offered to the investors. The most difficult and challenging part, that is, managing the distribution was not privatised. This policy while adding thousands of megawatts to the electricity generation capacity also made Pakistan hugely dependent on the most costly source, that is, thermal power, especially on oil. As long as oil accounts for a major portion of the electricity generation, Pakistan will continue to be a high-cost producer of electricity, contributing to a persistently higher inflation rate, and its industry will remain relatively less competitive and hostage to the volatile international oil price. The widening gap between the high cost of thermal power and the regulated electricity prices aggravated the present crisis.

But is it fair to ask the public to bear the entire cost of what is arguably the strategic blunder of the state compounded by bad governance? As a country, the most rational and optimal choice would be to import electricity till such time generation capacity of non-thermal sources is increased because the domestic cost of thermal power is prohibitively higher. Advocates of free markets and trade should support this argument rather than make a case for financing the white elephants called the oil-based power plants.

While the government apparently wants to use more public debt to reduce the circular debt, it is hardly a solution. The borrowing should be used only as a short-term measure and must be accompanied by a comprehensive three-pronged strategy focused around:

A. Restructuring and rationalisation of generation sector B. Consolidation of distribution channels C. Investments in hydel, coal and nuclear energy

The most important part of this strategy would be a restructuring and rationalisation plan for the generation sector. This should include the following steps:

  1. The government should attach the highest priority to importing electricity from the neighbouring countries as a temporary measure to minimise the adverse impact of high cost energy mix. Around 1500MW or even higher could be available from India and Iran and has the potential of reducing the 4000-7000MW shortfall by 30-50 per cent.

  2. The government should aim to convert another 1500-2500MW idle capacity in the thermal sector into coal-based plants to bring down national average cost. Last year, Ukraine completed conversion of six thermal power plants to coal. To achieve this, most of the IPPs owned by the domestic companies should be bought by the federal government because they are not economically viable.

  3. The residual financing gap should be financed through tariff hikes and additional direct income and property taxes with the target of raising an amount equivalent to at least 0.50pc of the GDP. For this purpose, a financial emergency may be declared in accordance with Article 235 (1) of the constitution and the federal government should help the provincial governments to raise more revenues as they currently lack the capacity to do so.

The level of transmission and distribution (T&D) losses has ranged around 22pc due to a host of factors including old-age generation plants, low-voltage transmission and distribution lines, weak grid infrastructure, inaccurate metering and billing, and outright theft. The experiment to improve distribution through setting up different regional companies also failed.

Consolidation of distribution companies at the provincial level via four companies (other than the KESC) and making the provincial governments a major stakeholder should be considered, provided the companies are run by autonomous boards consisting of professionals from the private sector. The distribution network requires political and administrative support of provincial governments, professional management as well as huge capital investments.

While some make a case for the so-called intermittent or alternative energy sources like solar and wind power, the supply from these sources is highly variable and can only supplement the three main sources of energy (fossil fuels, hydro, and nuclear). Therefore, in the long term, the government must not allow any more oil-based power plants and should focus on hydel (specially through smaller dams), coal, and nuclear energy because only a radical shift in the current energy mix can provide a lasting solution to Pakistan’s crippling energy crisis.


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Comments (36) (Closed)


gangadin
Jun 22, 2013 02:56pm

How to deal with energy?

Exactly the way this barber is doing.

Kamal Gupta
Jun 22, 2013 03:15pm

Seems to be a tough situation. Hydel takes a long time to come on stream, and most of the areas are earthquake prone. Import of power from Iran may face global hurdle. India isn't power surplus either, though the recent govt decisions to (a) allocate more gas to power plants to fire up an extra 26,000 MW, and (b) allow imported coal based power plants to increase tariff based on fuel prices to fire up an extra 30,000 MW, could help in creating a surplus.

My guess is that Pakistan should go in for imported coal based coastal power plants, since the rail network for transporting coal inland is not too robust. Nuclear is another option. Pakistan would be having the tech, but will global suppliers be willing to sell sensitive equipment, esp seeing the way A Q Khan stole secrets?

farhan
Jun 22, 2013 03:20pm

First Govt should force Politicians, industrialists, Govt officials and other powerful people to pay their outstanding dues.!!

No matter how much electricity Pakistan produce; if its powerful citizens are not paying for the electricity they are using then we will never be able to solve this mess!

ahmedj
Jun 22, 2013 03:49pm

There are several plans to counter present energy crisis. Mostly these plans are long-term proposals. For immediate relief one has to plan immediate and intermediate action. Some ideas are

  1. Prohibition sale by law and phase out of conventional bulbs manufacturing. Allow import and introduce LED Light Bulbs. These modern bulbs bright up to 30,000 hours using just 3 to 4 watts of power with the onus on energy efficiency.

  2. Tax subsidy for bulb making factories with incentive of upgrading their manufacturing ability to energy saving bulbs. This also include tax free permission on import of modern machinery for a specific duration.

  3. Utility Bills charges introduction on day/night varied rates. This will facilitate commercial and domestic usage. Higher rates for day and lower for night.

  4. New laws to introduce building regulations. Power producing companies and Sui Northern & Southern to initiate schemes for the masses to build and develop already existing buildings and improve energy efficiency of their property. The improvement would include the following:

a. Double glazing for doors and windows

b. Walls, ceiling/roof insulation

c. Hot water pipes insulation

  1. Present old style conventional gas and electric geysers production and import of its parts to stop forthwith. These old geysers are installed outside in cold which wastes energy and the pilot burner has to remain switched on all year around. There is no concept of energy efficient heating system for water and heating purposes in Pakistan. New combi boilers which are installed indoors needs to be introduced from the local manufacturer and abroad. Iran and China are expertise in this field in our region.

  2. At present there is no check on gas/electricity consumption on govt buildings. A survey to be conducted of all government buildings/departments and based on appraisal, fixed units of electricity and gas consumption to be made permissible to the building per month. The excess use of units would penalise the officials. In the Armed Forces, there is a formula to allocate and authorise usage of appliances including lighting/bulb even to a room on its size and dimension.

  3. In cities where there is no humidity factor in summers like Quetta, Multan, Bahawalpur & Gilgit use of desert-air-coolers is encouraged instead of air conditioners. Central cooling system powered by one big huge air-cooler with air ducts in a building is common in Iran and

Saeed
Jun 22, 2013 04:49pm

Demand side management measures, like subsidizing LED lights, and energy efficient products will help too.

Johar
Jun 22, 2013 05:46pm

The author got great points and hopefully will be act upon. Solar, geothermal and wind are some other areas needs full attention.

iqbal nafar
Jun 22, 2013 06:24pm

Its so easy to say to put blame on private electricity plants which they set up based on Government Policy at that time. Let's learn not to pass the losses to to others. What's needed is to recover the unpaid amount from Provincial Governments and private people without giving in, stop the theft of electricity with a heavy hand, end corruption as stated many times in the energy sector, develop quickly hydro power units, import of cheap electricity if possible for sure, gradually reduce subsidy over a 5 year period, divert furnace oil / natural gas from inefficient plants to efficient plants and there be many more ways.

Anneeq
Jun 22, 2013 06:40pm

Lets get one thing straight here, its a crazy idea to give any country an effective switch to the nation's energy especially India!!!! The idea is crackers, especially since we're not particularly popular in the world and get blamed for any terrorist attacks in the world....

The future for Pakistan should be renewables, particularly solar thermal. Im just so baffled as to why this really hasnt kicked on in Pakistan, the country is BOILING hot for most of the year. It doesnt take a lot of imagination and engenuity to come with a system where you take large amounts of water from the Rivers and the sea into large container vessels and harness the sun's energy to boil the water and use it to generate electricity. Think of it this way, if we can build an atom bomb thisl be a piece of cake....

They can also use sewage to make electricity by drying the water of teh sewage (using the sun) and burning the waste, make proper use of the nalaas. There are a lot of sources for can be utilised in this great country, it just needs a leader with an innovative mind and strong resolve to radically change the norm of using the fossil fuels....

pathanoo
Jun 22, 2013 06:44pm

PRIVATIZE IT.

Raziuddin
Jun 22, 2013 09:58pm

Present short fall of Power is 4000 MW and same amount is lying dormant in with WAPDA/PEPCO and IPPs. If there is will one can get them up and running in days not weeks. But where is the will...........

Muhammad Akram Khan
Jun 22, 2013 10:41pm

Pakistan blindly invested several billion dollars for developing power plants of over 23,000MW capacity, which hardly generate 15,000MW. The said low output is due to the fact that over 90 percent of Pakistan's plants, comprising natural gas fired, oil fired and hydro are unreliable. Hydropower is inherently unreliabe because it depends on vagaries of water flowing in the rivers and on the irrigation demand. Gas fired plants are unreliable because of the shortage of indigenous gas. Oil fired power plants have become unreliable due to unaffordable price of the imported oil and the poor balance of payment position. Last year, despite 12 hour daily load shedding, Pakistan spent over US$5 billion on the oil required for power generation.

Pakistan cannot convert the existing oil fired plants to coal firing because that conversion requires huge investment and very long time for constructing the requied infrastructure for handling the coal and for replacing boilers and auxiliaries of the oil fired plants. Pakistan has to continue with its existing gas and oil fired plants until the development of new coal fired plants based on indigenous Thar coal.

Since last 15 years there were many reports warning about the gas shortage and the looming high price of oil. Neither the government of Pakistan nor independent power producers or IPPs and their lenders heeded those warnings because none of them cared about public interest. They protected their interests very well with the help of power purchase agreements.

Pakistan generates over 100 billion kWh electricity per year out of which 70 to 75 billion kWh is actually billed. The remaining electricity is either lost in the power system or is stolen by the likes of Mohammad Husain. The actual recovery is far less than the cost of generation. Those who contest or fail to pay their power bills are much bigger fries than Mr.Husain of your article and they along with IPPs caused much bigger loss to the power system. The short term measure for mitigating the load shedding is in the reduction of the said losses.

Ravi Ingale from University of Pune
Jun 22, 2013 10:48pm

Some Pakistani media then make talk show in Lahore, on India. How India is threatening them on their energy crisis with "Ziad Hamid and Hamid Gul" when they would get electrical connection from Amritsar.

Then some Pakistani Intellectual people like "Parvez Hoodbhoy, Hasan Nisar, Nizam Sethi" will slams their comments.

Pervaiz Lodhie
Jun 22, 2013 11:32pm

Very easy where most important is the light. All you needs is Rs4000 completely designed and Made in Pakistan Solar charged LED Shahbaz Lantern that gives light equal to 7 to 8 candles, no pollution, lasts 12 plus hours on one day charge and keeps on working for years harnessing FREE energy from the plentiful sun in Pakistan. This is a instant solution for high percentage of Pakistanis.

Pervaiz Lodhie
Jun 22, 2013 11:42pm

Very easy where most important is the light. All you needs is Rs4000 completely designed and Made in Pakistan Solar charged LED Shahbaz Lantern that gives light equal to 7 to 8 candles, no pollution, lasts 12 plus hours on one day charge and keeps on working for years harnessing FREE energy from the plentiful sun in Pakistan. This is a instant solution for high percentage of Pakistanis.

kck
Jun 23, 2013 01:40am

This is an excellent analyses of power production in Pakistan. You have included small dams along with other alternative. Pakistan should consider home made solutions rather than relying on mega dams which are of interest to World Bank and foreign companies which create jobs for their own countrymen, One of the state employee who sits next to me is the Dam Engineer. Most of the dams here in his jurisdiction are tiny, small dams and produce power - this is USA. I wonder why we in Pakistan are following foreign consultants and foreign loans who support mega dams. We have talents in Pakistan and we should use these DESI experts for solar, wind and small dams for producing power.

Moby
Jun 23, 2013 02:27am

Whatever happened to the car that ran on water that the press was announcing so loudly? Supposedly multiple ministries, agencies, and various other enlightened beings had analyzed that technology and pronounced it genuine. Something like that ought to make a big dent in our energy worries.

Mahmood
Jun 23, 2013 03:41am

Good Analysis.With so much sunshine house owners should be encouraged to go for Solar power,now that panels are getting cheaper and some of the electricity generated can be fed back into the main grid and as an incentive the owners should be paid back.Over a time the housholder will get back his ivestment from installing solar power.This is how it is occuring in Australia.

Ammad Ali
Jun 23, 2013 02:02pm

Great analysis. One more addition of discussion on nuclear energy would have made it more informative.

MSA
Jun 23, 2013 04:42pm

@Mahmood: This is occurring in USA also.

MSA
Jun 23, 2013 04:45pm

@Johar: Solar and wind are attractive because you cannot run out of wind and solar resources.

Nazim
Jun 23, 2013 04:58pm

@Ammad Ali: Agree.. this is the best analysis I have read so far..The government must pay attention and seek advice from such people as Mr. Yousuf Nazar

Razzaq
Jun 23, 2013 05:09pm

@Mahmood: Australian and the UK pattern will not work in Pakistan because the main grid system has many faults added with incompetent manpower in charge. However, in my opinion, if solar power kits are allowed to import tax free, an individual could have it installed in his house without the interference of government same way as satellite dishes, generators and UPS. The only problem will arise the protecting the vested interest of those share holders of IPPs. An individual will not need Wapda or KESC once he is self producing the power he need.

malick
Jun 23, 2013 06:23pm

Energy issue is too old for get it just do not waste your energy.

Mohsin A.
Jun 23, 2013 11:11pm

I get surprised and disappointment while reading some of the comments that talk about 'public interest'. Here's the reality. No one is willing to fund infrastructure development in Pakistan due to the political risk. Pakistan is a very high-risk country and hence requires an 'extraordinary return' on investment.

The only real way to solve the problem is to privatize it and allow the private investor to make a superb return. Without the IPP policy of 1990s (which some here have alluded to as being too generous ), we would have been sitting in the dark 10 years ago.

I hope the upcoming energy policy provides extraordinary incentives to developers and investors to build capacity at a war-footing. The public, politicians, and specially our supreme court will have to understand that this problem will not be solved due to 'public good' or 'love for the country', but sheer availability of excessive economic return for investors (foreign and domestic).

Nazim
Jun 24, 2013 02:10am

@Razzaq: Solar won't work..for most Pakistanis, It is still expensive and it's available only during day time...for 90% needs, we still need coal or gas as the article suggests. I agree we need to import electricity as well as coal

Nazim
Jun 24, 2013 02:10am

@Muhammad Akram Khan: Coal can be imported. Given the capital cost of conversion, government should intervene as Ukraine did

Brig (Retd) Waheed Uz Zaman Tariq
Jun 24, 2013 09:43am

The foreigners will sell you electricity at their will. Iran likes to do so and can help is its vicinity in South west of Balochistan including Gawader and Turbet. If you extend that supply beyond that we have t condiser security risk. From Tjikistan, Chitral area may be helped but beyond that thelinehas to pass over Lawari Peak, which is a nightmare, in that difficult terrain. India has its own way of trade which might night be guaranteed with continuity at this point of time and when it switches it out, is at her discretion. Major threat is from power theft which is the dark side of the picture. What we can do to recover bills from FATA area and far flung disturbed regions is one challenge and second is by the connivance of corrupt linemen and public. I feel that there should be no mercy for the culprits. People shold divert to low power devices and change the style of buildings where no air conditioning may be required like our ancestors did in the past. Our water flow and waterfalls have not been fullymexpolited and there is tod potentail for that. Small privatized, local plants with private distribution may be of great help.

RS
Jun 24, 2013 10:48am

Stop these analysis crap ending with useless propositions often in last para. Country has seen enough of these kind of bogus solutions presented by so called 'analysts'.

Nationalize the electricity and give all producing, distribution and servicing units under democratic control of workers... shortfall will finish in few days.

Muhammad
Jun 24, 2013 11:20am

Nothing could be done as Big Fish are involved in bulk import of Generators and battery manufacturing. if Power Crisis are resolved in PK, then where they will sell Their imports , they will face a heavy loss, so Power Crises does not seems to be getting resolved by any Govt.

jugnu
Jun 24, 2013 02:46pm

The author has given valued suggestions for improvement of the power crisis but this debacle cannot be defeated unless and until we as a nation are committed to do so. We are very much polarized and biased among ourselves and not yet ready to rectify that menace. The greatest problem of electricity crisis is its theft. About 70 percent of the line losses are in-fact due to electricity theft and non payment of electricity bills. If we as nation make up our mind to get rid of this humiliating and teasing condition then we must devise ways to stop electricity theft and make defaulters to pay with overhead surcharge either they are individuals or departments/institutions or even provinces. We often know how many illegal connections are running in the street but do not bother to stop that and ultimately suffer. I suggest that government in addition to the above mentioned suggestions, should hire local and foreign consultants that can devise policies to stop theft from the system and introduce a system like pre-paid to stop the delayed payments problem. Also introduce exemplary punishments to the departmental officials found in any sort of corruption or facilitating in the electricity theft. The media should also keep on playing its role of awareness to the masses of the real problems of Load Shedding

MAlvi
Jun 24, 2013 03:10pm

@Mohsin A.: The cost to the consumer should not be prohibitive, though.

MAlvi
Jun 24, 2013 03:18pm

@kck: Solar panels can be installed anywhere, but the problem is flat roofs. In other countries, the roofs are sloping and suitable for installation.

Kamal Ahmed
Jun 24, 2013 03:50pm

@Mohsin A.: Private or public, oil-powered plants are a problem..the govt steals, rich don't pay taxes..we could have addressed this problem but vested interests are a problem. Chinese financed Ukraine's coal plants

qasim karim
Jun 24, 2013 04:02pm

Solar power can provide lights to thousands of rural and urban families across the country but this can be achieved by providing loans by the banks with initial 20% deposit and five year repayment terms. The repayment costs are covered by cost savings on electricity bills. The benefits are environment benefits ( Less CO2 EMISSIONS) and the country economy will improve due to lesser fuel bills and subsidies.

a
Jun 24, 2013 07:11pm

WOW. People actually don't say it as a joke anymore when they mention that we live in stone ages. I don't see us coming out of it anytime soon. Corruption at its best. Start load shedding at the parliament house, governor house, president's house and load shedding will finish within minutes.

Shiraz Piracha
Jun 25, 2013 07:41am

@MAlvi: Solar works only during day. For 99% of people, its capital cost is just too high. This is why other Asian countries mostly use gas or coal.