Growing up in a semi-urban area in Punjab I can barely recall a summer without extended hours of electricity load-shedding. The supply of natural gas becomes equally unreliable in winter.
Industrial and commercial consumers in the region continue to suffer from the chronic scarcity of affordable and reliable energy supply. Despite the fact that energy insecurity has put our economic and national security in peril, successive governments have failed to resolve this lingering challenge.
At the heart of the problem is inept decision-making which did not prioritise devising and implementing a long-term energy development plan. A few efforts in this regard remained indicative at best without concrete policy measures.
Our notable achievements in the energy sector therefore include some jugaad-style initiatives, launched invariably. The most recent example is the National Power Policy 2013-18.
The policy embodied ambitious targets for electricity demand and supply management, good governance, and energy efficiency etc. But it was a set of reactive policies formulated in haste, lacking the basics of a viable strategic plan.
Although the government rightly identified the most pressing issues, which could not be more obvious, the solutions were perhaps prescribed with a rather short-sighted goal to win the 2018 general elections.
Unsurprisingly, the government did not achieve majority of targets by 2018. Even worse, PML-N’s boastful success, ie the addition of thermal power capacity, exacerbated the systemic risk as the commercial performance of the sector remains awful.
Moreover, increasing reliance on imported coal and gas will have continuing impacts, which leaves us to wonder if there was ever a sensible assessment of various indigenous sources of energy.
Thermal power plants were imported draining billions of dollars of scarce forex reserves. Fuel imports and profit repatriation will deteriorate the balance of payment for decades to come. The International Monetary Fund (IMF) estimates that these outflows may reach $4.5 billion a year by FY2024-25.
Apparently, the PML-N government took a cue from the PPP’s 1994 Power Policy. The stark similarities are alarming considering the high price the nation and the economy are paying for the ill-conceived enthusiasm to promote oil-fired power generation in the 1990s.
Regardless of the level of sincerity involved in their articulation, such policies cannot resolve our energy woes in a cost-effective, reliable and sustainable manner. Unless the government takes a long-term view of the energy sector and implements an integrated energy development plan, our ambitions for economic prosperity may remain too far-fetched.
A few efforts were made earlier to develop an integrated energy plan (IEP). These include the IEP 2009-2022 targeting 17,392 megawatts (MW) of hydropower and 17,400MW of wind and solar power capacity by 2022.
The IEP 2011, developed with assistance from the Asian Development Bank, was the most comprehensive and inclusive energy planning exercise the country has ever seen. Both IEPs were shelved.
The International Renewable Energy Agency (IRENA) noted the absence of an IEP as the most fundamental challenge faced by the country’s energy sector. The agency emphasised the need to build on the foundations of past endeavours and develop a strategic plan with participation from public and private sector stakeholders.
For a robust IEP, policymakers should take an expansive view of both demand and supply sides of the equation. Consumption patterns and future needs of all consumer segments should be assessed along with the potential implications of our energy choices on the consumer.
For instance, industrial and transport sectors drive nearly two-thirds of the country’s annual energy consumption. Since these two sectors rely heavily on imported input fuels, various supply and price shocks exposed their vulnerability to downside risks and paralysed economic activity in the country. Therefore, the issue of over-reliance on imported sources of energy must be tackled meticulously.
To optimise the energy resource and technology mix, several factors need to be considered, including economic, technical, social, environmental, political and institutional. The last two became even more crucial in the wake of the 18th Amendment which empowered the federating units to enact their own energy policies.
The Word Wind Energy Association noted that the provincial units lack institutional capacities, which are further hampered due to insufficient resources and the absence of a national coordination plan.
Morocco faces a similar challenge; the risk of macroeconomic instability due to the 90 per cent share of imported fuel in the country’s energy mix. The government decided to decrease its reliance on imported fuels and to promote indigenous sources of energy. It is now targeting 52pc of power generation from hydro, solar and wind power by 2030.
A more ambitious, and more successful, example is of Denmark. The country became so anxious of its energy independence after the 1973 oil embargo that it went on developing its wind resources for power generation. Today this nation of less than 6 million takes pride in being a world leader in wind turbine technology, which generated power equivalent to 44pc of the country’s electricity consumption in 2017.
This is not to suggest that these examples can be extrapolated to Pakistan, but to underline the importance of strategic thinking in policymaking. It has been seen that countries which develop their energy policies in the context of national economic development plans fare better than others like us who are confined to reactionary, jugaad-style mechanisms.
Due mainly to the critical importance of the energy sector and its widespread implications on the various sectors of the economy, national security, and the environment, more governments are reassessing their energy strategies than ever before.
Energy independence, climate change, cost-competitiveness and technological advancements are the mainstay of today’s energy policy debates which aim at defining the future of energy security.
Since the government is developing a long-term electricity development plan, which was initiated toward the end of the last government’s tenure, it is necessary to underline the importance of the aforementioned principles. Otherwise, it may be yet another plan, yet another set of recommendations, and yet another wasteful bureaucratic exercise.
— The writer is an analyst specialising in energy policy and political economy. He tweets at @sohaibrmalik
Published in Dawn, The Business and Finance Weekly, November 12th, 2018
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