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Will energy shortage be overcome?

Updated April 03, 2017

Pakistan continues to face an average shortage of 4,000 megawatts in the power sector owing to a substantial disconnect between installed power capacity and actual generation.

Due to energy shortage, industrial and commercial entities have installed back-up diesel generators, while households use battery-powered Uninterrupted Power Supply (UPS) apparatus, often at significantly higher costs.

Small and medium-sized indus­trial and commercial enterprises and households which cannot afford these high-cost alternatives have frequently been at the rough end of the stick.

Despite hydropower being the cheapest source of electricity for Pakistan, the prohibitively high capital costs to supplement the existing hydro resources has distorted the hydro-thermal ratio in the power generation mix and resulted in a significant increase in energy cost.

In the absence of cutting edge technology and transmission network challenges, the indigenisation cost of solar and wind-based power is untenable.

Pakistan has also been looking forward to electricity imports from central Asia to mitigate pressing power shortages.

Central Asia-South Asia Electricity Transmission and Trade Project (CASA) through which Tajikistan and Kyrgyzstan will supply 1,300MW of electricity to Pakistan during the summer season, was formally launched last May. The fragile security situation in Afghanistan has already led to upward cost revisions in the project which will ultimately have an impact on the final tariff.

However, Prime Minister Nawaz Sharif’s plans — to add to the national grid and overcome the acute electricity shortage by 2018 — have been boosted by the large funding received under the China-Pakistan Economic Corridor framework.

The project has essentially provided coal-based (especially Thar coal) energy financing which Pakistan was seeking to replace costlier generation. Reportedly, 19 energy projects valuing $34bn have been identified as ‘early harvest’, prioritised by the CPEC Joint Cooperation Committee.

Primarily coal-based power projects, with a cumulative capacity of about 5,000MW, would be operational during 2018. The government expects that this generation, added to the output from some other non-CPEC projects, will all but overcome the envisaged 8,000MW demand-supply gap.

There are apprehensions that major power projects may not come on stream as per announced schedule due to a variety of factors including technical, physical, and financial limitations.

There are also questions about how well the weak and unreliable Transmission and Distribution (T&D) system will cope with this new influx of energy and whether there is enough infrastructural support to transmit it across the country.

Currently the system is barely able to cope with the existing power generated. Transmission lines, cables and transformation copper parts are dilapidated due to inadequate upgrading, repair and maintenance; while most transformers are over-loaded with little or no maintenance by the cash-strapped government-owned distributors.

To improve system resilience, under the CPEC, an 878 kilometre long 4,000MW transmission line is to be constructed for power dispersal from south Pakistan to Lahore and Faisalabad in the North. This key link in the transmission infrastructure is expected to be in place by end-2018 at the earliest.

Power sector analysts, however, believe that the timelines of power generation and transmission have not been coordinated effectively.

No new infrastructure initiative is planned to transmit power to energy-starved Balochistan which currently does not have the capacity to absorb energy beyond 500MW.

Also the government´s desperation to end power shortages has led to investors being offered far too generous tariffs, saddling consumers with some of the most expensive electricity in the region.

While new generation projects can help alleviate the physical shortfall once completed, they have been negotiated without being subjected to competition to provide electricity at an optimum cost. The government has in fact offered up to 34.5pc annual return on equity contributions under the CPEC and loans have been obtained at 6pc interest rate, excluding insurance cost.

The energy sector will continue to be a major focus in the lead-up to the 2018 elections since resolving this crisis figured prominently in PML-N’s manifesto.

Due to almost 5pc greater electricity generation by independent power producers (IPPs), the average duration of load-shedding in urban areas has currently been reduced to 2-5 hours per day, as compared to the 6-10 hours when PML-N assumed control.

However, chunks of rural areas continue to remain off-grid and those that are connected suffer through prolonged power outages.

The government is still looking for quick fixes to the mega crisis. Since taking office, the government has repeatedly stated its intent to overcome load shedding in time for the next poll, likely in May 2018. However, the PM’s regular stock taking of the progress notwithstanding, the inadequate and obsolete T&D network and partial progress in addressing the deep structural issues casts a shadow over the viability of the timeline.

There is growing anxiousness among PML-N leaders about the extent to which the government will be able to tackle load shedding before they hit the road for the general election campaign.

The government is low on credibility as regards its pronouncements about solving energy constraints. Only one-fourth of the Public Sector Development Program (PSDP) budget for water and power projects has been released in the first eight months of the ongoing fiscal year.

The Thar coalfields were declared a ‘game changer’ last April with the potential to generate 100,000MW of electricity. The same is true for the liquefied natural gas (LNG) agreement with Qatar. The outcomes that have followed have been decidedly modest and show the sheer opacity under which the entire power sector operates.

Even information on the basic nature and intensity of the energy crisis as shared by concerned authorities is often inconsistent. Transparency is needed in every area of the sector so that a reliable picture can be built of its state of affairs.

According to a Nationwide Public Opinion Poll, conducted last August by the Pakistan Institute of Legislative Development and Transparency (PILDAT) on assessing citizens’ views on ‘quality of governance’ in Pakistan, only 38pc of the respondents expressed satisfaction with the performance of the federal government to improve the electricity situation. A much higher proportion (58pc) believes that the present government is unlikely to solve the energy crisis.

goldenstar2005@hotmail.com

Published in Dawn, Economic & Business, April 3rd, 2017