April 15, 2013
Zahrah Nasir


The Punjab Government appears to - in the final run up to the elections, of course - be going all-out to try and con potential voters into believing that it actually wants to do something to cut down the eternal hell of loadshedding that the populace, especially those residing in the rural areas, are having to endure on a daily basis and this, mark you, way before the heat of the summer arrives to boil everyone alive.

The farcical introduction of a five-day working week that, in reality, means only four days, as very few people actually bother to work on a Friday anyway, was the first blast of a fanfare, which - unsurprising given the uselessness of this oft repeated measure - has fallen on deaf ears.

And now everyone is supposed to wait, with baited anticipatory breath, for a meeting of the Council of Common Interests (CCI) as scheduled to be held on April 23 when, no doubt, little of consequence will occur other than that officials will luxuriate in uninterrupted air conditioning, while they beat around the proverbial bush, which, in this instance, is the fact that central government owes billions and billions of rupees to the Pakistan State Oil (PSO) and the gas companies who supply the power producers.

PSO and the gas companies - central government owes in excess of Rs55 billion to the gas companies alone - cannot be expected to carry governmental bill bungling forever as they have their overheads to meet too and, especially in the prevailing economic climate, have already extended far more credit than is wise.

The ‘criminal consortium’ that has held sway in the guise of central government for the last few years could, one suspects, clear all of its outstanding dues to PSO and the gas companies from the amount suspected to have accrued in Swiss and other overseas bank accounts during its tenure. But this, it goes without saying, is not about to happen.

Therefore, as always, the far from ordinary - given what they have to put up with - working class is having to pay the price in a thousand and one different ways, and it is wrong of the Punjab government to expect people to shoulder any more hardship whilst allowing the central government to get off scot free - albeit an outgoing government or not.
Finding employment is no easy feat these days and while the income of those with steady jobs may be unaffected by a reduction in weekly working days, it is a very different kettle of fish for day labourers, who - as a direct result of ever escalating inflation - are no longer hired as regularly as in the days of yore.

And who, on the meagre amount they manage to earn through dint of blood, sweat and tears, are already struggling to survive way below the poverty line and amongst whom already serious levels of malnutrition are bound to rise, thanks to the supposedly power saving measures.

That, in reality, save nothing at all as shopping centres, bazaars etc all continue to waste power as extravagantly as ever.

It is only necessary to note the number of lights switched on, even in full daylight, in stores of all kinds, to see the truth in this and when the number of purely ornamental lights is added into the equation, it is immediately apparent that, instead of depriving people of a day or mores’ honest work, it makes far more economic sense to restrict, tightly, the number of lights any one store is allowed to have in operation at any one time. This is just for starters as wastage of electricity, when it is available of course, is an endemic part of the national psyche as is all-out power theft!

Dilapidated as the ancient and inadequate power supply system is, breakdowns are a regular part of life in this the so-called ‘land of the pure’ where, increasingly, everyone is out solely for themselves - the government, at all levels, being afflicted by this potentially terminal malaise too, but loadshedding simply because of governmental default - and this by a government screaming for economic improvements - is way beyond the pale.

In the face of ground realities and government ineptitudes, grand announcements such as those made upon signing an agreement with Iran about the long-awaited gas pipeline are utterly meaningless as, unless whatever government happens to hold the reins of power clears its massive outstanding debts, then loadshedding, will not, however tall claims to the contrary happen to be, come to an end in any foreseeable future or, will end only for the wealthy minority who can afford to go off-grid by installing, currently ludicrously priced, forms of alternative energy of the type which should, if manufacturers and purveyors were honest and upfront, be a cost-effective solution for all.

Concerns, as already voiced by the Punjab government, that power riots could disrupt the elections next month, are certainly well founded - relatively small scale rioting has already occurred for this very reason in places, including Bahawalpur, Kasur and Toba Tek Singh - as, with temperatures on the rise then tempers, already shortened due to economic worries, hunger and up to 18 hours out of 24 without power in rural areas of the province, are definitely on a very short fuse and burning. Unless the central government coughs up payment to PSO and gas suppliers, the impending explosion is bound to be huge.

The writer is author of The Gun Tree: One Woman’s War (Oxford University Press, 2001) and lives in Bhurban. Email: zahrahnasir@hotmail.com

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April 18, 2013
Hamid Alvi 1


A few large dams built in the 20th century for the generation of cheap electricity and even cheaper supply of irrigation water became the subject of public debate as did the proposed Kalabagh Dam on the Indus River. The reasons were not far to seek. With the development of the Indus Basin Project, the government of Pakistan had laid down the rule stating that whichever province helps to set up a power station to produce hydroelectricity on its soil shall be entitled to receive a certain amount of royalty from it. Under this arrangement, the Khyber Pakhtunkhwa (KPK) government has been receiving royalty on Tarbela Dam and are expected to receive the same kind of dole from another dam, Kalabagh, proposed to be built on the Indus.

Many outstanding features of the Kalabagh are located on the soil of KPK, but not the power station. If and when the construction of Kalabagh is undertaken, the site of the dam demands that the power station be installed on the soil of Punjab. The flow of the river leaves no other choice. However, the various governments of KPK consider the project of no use to them if the powerhouse is not placed under their command. Since then, an engineering theory has come to surface declaring Kalabagh unfeasible. It is argued that the embankment perceived would be so high (more than 100 feet from the storage level) that every Monsoon there will be disastrous floods in the agriculturally-rich area of Mardan and Peshawar valley.

Another reason given by the KPK officials to oppose the dam is that the water released from the reservoir will waterlog a large segment of the rich Mardan area. The bottom line of the KPK government’s stand is that its construction will destroy the province’s highly-productive farmland and a large part of the residential units. Punjab is suspected not to stand by the agreements on water sharing.

The objection raised by Sindh is equally unreasonable. Government officials handling the question are highly critical of the dam’s supporters, such as people and politicians of Punjab. It is said that their share of the Indus water will be curtailed, as water from Kalabagh will go to irrigate farmlands in Punjab. It is also pleaded by the Sindh government that coastal regions of the province require a constant flow of water down the Indus into the Arabian Sea, so that the flowing water can keep the seawater from intruding inland.

Such seawater intrusion would literally turn the waste areas of Sindh’s coastal land into arid dust. Poor flow from the river to the ocean will also destroy its coastal mangroves.
The ‘No-Dam’ crowd was challenged by the federal government whose engineers argued that since the height of embankment was going to be much higher than the storage level, the claim of anti-dam elements was totally unfounded. The government sources also deemed the KPK allegation about water logging of the rich Mardan land incorrect. The study conducted of the dam-affected area by both national and foreign experts have found no scientific truth in the stand taken by the KPK authorities. Supporting early construction of Kalabagh Dam, Mr Bashir A. Malik, former Chief Technical Advisor to the UN and World Bank, says: “If Kalabagh Dam is not constructed, Sindh and KPK will become drought areas in the years to come.” An equally strong pro-dam statement was made by former Chief Minister of KPK, Shamsul Mulk, stated: “The Kalabagh Dam would be helpful in erasing poverty from KPK, as it will facilitate irrigation of more than 700,000 acres of cultivable land. Currently, this land is lying barren yielding almost nothing.” Additionally, the dam would help generate 3,800 MW of electricity. To protect the main dam infrastructure, all installations would be placed 100 to 150 feet above the level of River Indus. It should be noted that the dam construction experts, who supported Kalabagh, were drawn from all the provinces of Pakistan. Their integrity is beyond question. More names are listed here to enhance credibility. These are Abdul Majid Khan, TECH Society President; Shafqat Masood, former IRSA Chairman; Mansoor Ahmed, former MD of Pakistan Atomic Commission and members of ‘Save Water, Save Pakistan’ forum.

The opponents of the proposed dam are many, but they are shy of basing their case on scientific grounds. It does not take much to feel that they are long on rhetoric and short on rational argument. Consequently, they have to return to politics. The strongest political opposition comes from Sindh where the politicians shamelessly lie to the people, as they recount the vices of non-Sindhi governments. A significant theme of their public speeches is laced with criticism of Punjab. You hear the Punjabis being accused of stealing their share of Indus water. Sindh is a downstream riparian and kind of stuck with the fear that one day the Punjabis will divert the Indus and, thereby, deprive it of every single drop of water and starve the Sindhis to death. The main points of Sindh stand are given below:

n Their share of the Indus water will be curtailed, as water from the Kalabagh will go to irrigate farmlands in Punjab.

n Constant flow of water from the Indus is required to stop any intrusion from the Arabian Sea into Sindh’s coastal area.

n With the construction of Mangla and Tarbela Dams, the mainstream of Indus has significantly shrunk - far less water now moves down the stream than what it used to be.

n Silt deposited in the proposed dam would further curtail the water storage capacity of the Manchar Lake and other lakes fed by the Indus.

n It is not possible to accept the iron clad constitutional guarantee to secure Indus flow. Guarantees were offered by Musharraf.

Raja Pervaiz Ashraf, the last Prime Minister of Pakistan took no stand on the project, and instead of debating the issue at least at the Cabinet level, he abruptly cancelled it by saying that the dam will not be constructed. Apparently, he did it to help his Sindh cronies. He made no secret of his plans. He said that he was doing this because of opposition to the project from Sindh, KPK and other stakeholders. How about Punjab? Is it not a stakeholder? Punjab is currently using more Indus water than any other province. Mr Ashraf broke all the records of cronyism when he declared that Kalabagh Dam is no longer feasible. It is implied in the statement that there have been times when it was feasible. The PM, however, failed to disclose at what point in history was it ever feasible.

Another Prime Minister of the PPP, Yousuf Raza Gilani, a Punjabi, had a different point of view. He did not cancel the project, but instead pleaded for democratic solutions. In a public statement, he declared: “The fate of the project will be determined by a plebiscite.” Gilani’s statement coincided with extreme power crisis and acute water shortage. However, no action was taken by him to hold plebiscite.

International observers of world economy have spoken more than once and at various forums that the next world war is likely to be fought on the sharing of water resources. People can live without many things, but not water. In countries like Pakistan, we can live almost without anything. In fact, with scarcity of water, one has to give up almost every element of human consumption and live in a perpetual state of starvation. But even such a state has limitations and one cannot live forever with the shortage of water. It is a pity that we, in Pakistan, who have been blessed with natural resources, have never given priority to the availability of water. The multitude continue to live without the realisation that the day is not far away when a shower will turn off before an individual has completed his bath. Not much wisdom is required to understand the dependability on water. To meet the needs of our agricultural and human consumption, we must not waste any time to develop our natural resources. If what is flowing down the Indus, and available to the onlooker today, may not be there tomorrow. There is no guarantee that even the bed of the mighty river will not dry up sooner or later if no development is undertaken today. It is worth evaluating Bhasha Dam. This is not the time to seek fun from our misery, as General Musharraf almost advised us to do during his tenure of office. We cannot afford to play with dams or rivers when time itself is running out.

The writer is a freelance columnist.

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According to the USAID report on the ‘Causes and Impacts of Power Sector Circular Debt in Pakistan in 2008’, the circular debt was Rs161.21 billion that increased to Rs235.65 billion in 2009. Similarly, circular debt in 2010 increased to Rs365.66 billion and in 2011, this amount swelled to Rs 537.53 billion. During the current fiscal year circular debt increased to Rs872.41 billion.

The report revealed that poor revenue collection from the distribution companies in 2012 added Rs86.90 billion into the circular debt while another Rs72 billion was added due to poor recoveries by HESCO, PESCO, SESCO and QESCO. The USAID report further stated that Rs197 billion were outstanding by private consumers under electricity bills, which was the major reason of current circular debt.

The key to resolving the electricity shortfall issue is the gap in payments to thermal power producers for the purchase of fuel. This happens due to the ever widening gap in payment collection and payment for oil/fuel required. The government has been borrowing money mostly from the domestic sources to fill this gap through various forms. These loans are hurtful to the overall economy and not just the power sector in multiple ways, leading to scarcity of private credit/funds for overall industry to grow.

Loans either in form of direct loans or term certificates are to be paid back in-time along with profit and interest. To payback we need the payments from the final consumer, which are to be collected after consumption and then directed back to DISCOs and then the power producers; who eventually pay this amount to the fuel suppliers or the banks. The collected amounts are not sufficient to cater for payment of both, which eventually leads to power cuts and more borrowing. At the end of calendar year 2012 these loans had surged to almost four to five percent of the GDP.

The payment cycle of the power sector is burdened by the ‘alien’ sharing partner – the loan provider. On the other hand it is impossible to run the thermal power sector without further loans.

Solution: Borrow this money directly from the consumer by giving it incentives and electricity. This may not resolve the issue overnight but it will contribute to smoothening things out.

How can we do this: This can be done through selling advance electricity units to industry and private consumers at lower per unit price. There may be a possibility where purchase of advance units by public sector may also be allowed. As most government-based organizations get their funding in proportion to their share in annual budgets, it becomes irrelevant whether they pay for the year’s utilities at the start of the financial year or at the end. This will also discourage the collection losses incurred to power distribution companies.

Consumers from both the commercial and industrial sector as well as private sector are already spending this money on buying generators and fuel. If load-shedding could be brought down the funds used by individuals and businesses to cater for the high costs of running small domestic and commercial generators will automatically divert to purchase of future units.

Incentive for the high power consumer: The discount on per unit rate is to be based on saving of financial cost by the government and power producers. The schedule discount is correlated to the number of units purchased. Higher number for comparatively longer term unit purchases shall be given higher discount. Another incentive to attract commercial and industrial users is to allow the future units purchased completely deductible from the taxable income of the organization as reinvestment. The income tax payable through electricity bills may also be exempted against the forward purchase units. In this manner the private sector will be more interested in purchase of maximum number of future power units as a cost cutting and tax saving tool.

A detailed study on the comparative effects of the collection through forward purchase and current methodology will unveil the actual monetary gains of the process. However, the financial cost reduction is already evident which is paid by the consumer as well as the producers.

Growth Opportunities: The same model can be replicated for domestic and non-commercial users with a few exemptions of course. The government is already trying to cut down power losses and default in the collection, the forward purchase will also contribute in better collection of these losses. The same tool can also be used in better collection by applying conditional purchase of power units forecasted in developing/ licensing/approvals of new business/ industry/housing schemes etc. A detailed sector-based study is required to determine the exact window for application.

The purchased units can be made transferable through a secured mechanism. This will allow specific interest in purchase and resale of units. However, the resale has to be guarded by strong regulations restricting any artificial inflation.

Factors relating to future power production can be applied in reverse to determine the power sale prices of the advance/ future units. The foreign currency conversion forecast and future hedging too will have to be studied.

The industry can benefit by reduction in the cost of production and better power supply. This will encourage the private sector to invest more and strengthen the economy as well as reduce inflation.

The writer can be reached at: 786kidwai@gmail.com

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How the problem of load shedding spiralled out of hands

The Pakistan Peoples Party (PPP) is naturally apprehensive about the adverse impact of the unprecedented load-shedding during its tenure on its electoral fortunes in the coming elections. In frustration, it is making desperate efforts to mislead the nation through expensive full page advertisements that “if the PML-N government had not stopped 24,000 MW of power projects in 1997, there would be no load shedding today.”

Since this is a grave national issue whose real importance goes far beyond electoral politics, the truth must be fully explained.

Paradoxically, one of the most important underlying causes of today’s load-shedding was, in fact, the energy policy launched by the PPP government in 1994. With dazzling speed, within three months, the government issued 70 Memorandum of Understandings (MOUs) and Letters of Intent (LOIs) to Independent Power Producers (IPPs) for generating 13,000 MW. By 1995, out of these 70 LOIs, firm Letters of Support (LOS) were issued to 27 parties to generate 6,335 MW of electricity. Most of this capacity came into operation in the next 3-4 years, sowing the seeds of a major energy crisis for the future. This should be clear from the following facts:

The 1994 energy policy brought about a decisive shift in the Pakistan energy mix. In 1994, out of the total installed capacity of 11000 MW, 60 percent came from hydro electricity and only 40 percent from thermal capacity. In the next few years, this mix was reversed from 60:40 to 30:70 in favour of thermal capacity based on imported fuel. Every year, this ratio went down further to 20:80 in winter months as hydel generation was reduced due to lower water flows in the rivers.

In 1994-95, the price of crude oil was $10-15 a barrel and the price of furnace oil was only Rs.2540 per ton. As oil price crossed $100 a barrel from 2008 onwards, the cost of generating one unit at IPP thermal plant has increased manifold to Rs18 per KWh when produced on furnace oil and Rs24 per unit when produced through diesel, while the average sale price of electricity in Pakistan is about Rs9 per KWh. In other words, every unit generated by an IPP involves a subsidy of Rs9 to Rs15 per KWh. That is the root cause of the growing problem of circular debt. Since the government does not have the budgetary resources to provide this subsidy, this huge power sector deficit leads to circular debt, which forces utility companies to borrow from the banking system upto their borrowing limits. After that they do not have the cash to import fuel for the power plants. This fiscal year alone the power sector deficit is expected to contribute over Rs700 billion to the circular debt, and because of the enormous subsidy required, our current installed thermal capacity of 13000 MW (excluding hydel capacity of 6500 MW) is generating less than 6000 MW, causing long hours of load-shedding. So the real issue in load-shedding is not capacity, it is the wrong fuel mix brought about by the 1994 energy policy of the PPP government.

Another serious flaw in the 1994 energy policy was the curious decision to offer a fixed capacity price of 6.5 cents per KWh plus the actual cost of fuel as a pass through item. At that time the average cost of power generated by WAPDA was Rs0.90 per unit and the average sale price was Rs1.50 per unit. In an article which was published in a national English daily on 28 November 1994 (‘The Perils of High Cost Imported Energy’), I had warned that the average sale price will be more than double to Rs3.20 per KWh (10 cents) due to the IPPs. In actual fact, it has gone up six fold, without meeting the actual cost of generation.

The real challenge of a viable and sustainable energy policy is twofold: one in meeting the energy needs through maximum reliance on domestic hydel, coal and renewable resources and second in producing energy at a reasonable cost. The1994 Energy Policy ignored both these challenges, and by increasing dependence on imported oil, created a permanent fault line in the country’s energy system. India generates 70 per cent of its electricity from domestic coal, 12 per cent from hydro and only three per cent from oil. Bangladesh uses gas for 90 per cent of its energy needs and only 5 five from oil. Pakistan, on the other hand, is still dependent on oil for 40 per cent of its electric supply, with 29 per cent each from hydel and gas.

In the past decade, Musharraf government, while contributing to the growth of domestic demand for electricity through large scale provision of bank loans for the purchase of air-conditioners and home appliances, (share of domestic energy consumption had jumped to 46 per cent of the total by 2008), did not add any new capacity to the system.

Poor governance of the outgoing PPP-led coalition in the past five years has further compounded the problem of load-shedding. Transmission losses and electricity theft have reached record levels and size of unpaid electricity bills has been growing. These factors account for at least 10 percent of cumulative burden of circular debt despite 250 per cent increase in electricity tariff. The longer term problem of load-shedding can be solved only if we add to the system generating capacity at a cost that is less than the average sale price of Rs9 per KWh but in the past four years PPP government has added rental power at the exorbitant price of Rs25 per KWh. One can only imagine the size of the circular debt if the IPPs, lined up by PPP during 1994-95, were somehow producing 17,000 MW and not 6000 MW!

Another misleading portion of the PPP ads is the reference to Hubco Power Project. This project was initiated in 1991-92 under the first PML-N government and was completed in 1996. The PPP government which took over in 1993, amended the original agreement to give the company under the 1994 energy policy the full pass through cost of fuel in violation of the original agreement. When the then Ehtesab Bureau detected large kickbacks in lieu of this amendment, the announcement of 12 October 1998 was made in the press. But there was no interruption in the generation of electricity from Hubco. Similarly, the other headlines of June 1998 calling for “cancellation of all agreements with foreign companies” were an exaggerated version of the decision to review the pricing formula which PPP government had egregiously allowed to IPPs, in return for large bribes. No agreements were actually cancelled, but based on the report of an expert committee chaired by late Mr. Shaukat Mirza, some of the prices at which WAPDA was purchasing electricity from IPPs were rationalized.

I hope these facts will clearly show that even at election time there should be a limit on false accusations and distortion of historical facts.

The writer is senior vice president of PML-N. He has served as finance minister in 1990-1993 and 1997-1998.

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Summer is not an easy time in this part of the world. Sweltering heat doesn’t make it any easier for the people, and then there is power shortage. One can write pages and pages over the issue and still it won’t be enough to justify either the people’s anguish and dismay or the incompetence of the government in tackling a problem that has lingered on for over six years now, crippling industry, business and pretty much every aspect of our national life. Now things seem to have taken a new turn, that too for the worse, with country’s premier oil supply organisation’s creditworthiness being questioned.

The Deutsche Bank has written a letter to PSO over a default on an L/C, implying that the latter is losing its credibility in the financial market. That means unless payments are made promptly, the PSO might not be in a position to secure oil supply from international markets. The problem that has assumed gigantic proportions now is really an accumulated effect of various failed management policies in the field. With PSO not being able to provide fuel supply to power stations, power shortage would go nowhere but up. The main cause for this issue is an ever growing monster of circular debt. Then there are line losses, power thefts due to mismanagement, non-payment of charges by most FATA consumers, failure on the part of government departments and establishments to pay charges and subsidies on electricity. The fact that we usually have a big government, bureaucracy, armed services and other VIP areas that get totally free or highly discounted electricity, doesn’t help matters either. In other words, problems at both the generation and distribution sides have grown out of hand and need immediate solution.

The first thing to do is to ensure a proper coordination between the ministries of finance and water and power so that funds can be issued to PSO to import fuel. With Pakistan Electric Power Company, the intermediary that serves as a middleman between the power generation and power distribution companies, paying only 13 percent of what it owes, and the rest being paid by the finance minister, this coordination becomes even more important. Then there is the need to solve more complex issues of mismanagement in recovery of outstanding dues to various categories of consumers, and finding ways to enhance power generation capacity, considering that the peak of summer is still two months away, every megawatt of power generated would be needed, or else the government should prepare itself to brave a wave of angry and violent protests. The bright side is that the caretaker government has recently appointed an advisor finance, who is considered to be a competent economist, and one could expect him to take immediate action before things take a turn and plunge the country into darkness.

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The National Electric Power Regulatory Authority (NEPRA) was formed in 1997 to protect consumers’ interests in electricity provision and to ensure an efficient and competitive environment for the electricity generators and distributors, but it has, so far, not been able to achieve anything. The power sector (dominated by WAPDA and KESC) is still affected by institutional and organizational weaknesses, with inefficient and non-optimal tariffs, higher than acceptable system and line losses and deep rooted of corruption. NEPRA is weak in administrative governance because it is not an autonomous institution and has not been able to carry out the desired functions effectively. In addition, NEPRA is lacked in professional expertise to supervise and control the power sector and establish a rational and equitable pricing regime.

What one wonders more than anything else is that NEPRA failed in its institutional ability to even remove power tariff anomalies and the biggest of them is that the farm income is altogether exempted from payment of tax? Even then big landlords share subsidy on agricultural sector with small farm-holders for whom the facility was primarily envisaged. The elite in Pakistan, even otherwise, pay little or no tax at all and this factor alone is responsible of an unhealthy economy. The caretaker administration seems mindful of these structural weaknesses in the power sector and has proposed an upward revision of all the tariffs but left the matter for the next elected government to decide. Nevertheless, the minister for power Dr Musaddiq Malik rightly said at a news conference on Friday that the power sector required massive restructuring process to put the electricity system on a sustainable path. The ministry intends to also leave a road map for the next government to benefit from; and remarked that if the new government wanted to implement, it would bring about a positive change.

The prime minister’s adviser on finance, Dr Shahid Amjad Chaudhry said at the same news conference , that his government had decided to inject another Rs45 billion and 150 million cubic feet of natural gas into the power sector to increase electricity generation by about 3,500 megawatt before the May 11 parliamentary elections. The adviser said that ministries for finance, petroleum and water and power had reached an agreement that about 1,500MW of power could be brought into the grid immediately and another 2,000MW could be added in about two weeks. This would reduce the current shortfall by over 75 per cent. The current shortfall stands at about 4,600MW as the system was generating about 9,200MW against a demand of 13,800MW.

However, there seems no justification in keeping on to allocate huge to the energy sector while its structural weaknesses remain intact. More funds will be like dumping the public money in a dead well. To remove these anomalies most of the irritants will have to be removed on a priority basis because energy crisis is accounting for slowing the national growth. According to one conservative estimate every day with power load-shedding is adding a loss of at least Rs5 billion to an already fragile economy of the country. What ails the energy scenario is primarily because corruption in WAPDA and its nine supply companies is rampant and system and line losses are much higher than internationally accepted wastage of electricity at the generation, transmission and supply stages. Pakistan suffers these losses at a huge 35 per cent while they are allowed to be not more than 10 per cent the world over. Only Islamabad Electric Supply Company remains with the upper loss limit of 10 per cent while other companies have them between 25 and 35 per cent. If these losses are brought down even by 50 per cent, the country would be able to save substantial electricity to lessen power load-shedding by half. The generation shortfall invariably remains to the extent of one-thirds of the national requirement and this more or less is the size of the shortage.

Giving the much needed autonomy to NEPRA is also one of the basic requirements so that this institution is able to discharge its duty for which it was established. The same goes for alternative energy sources. Pakistan has yet to enhance its thermal power potential by using the Thar coal to the maximum possible limit. Likewise, no amount of nuclear energy has been added to the system for decades and the Pakistan Atomic Energy Commission continues to produce only 472 MW of electricity much below what the PAEC should have been producing to meet the energy deficit.

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The caretaker government on April 30 lowered the prices of petrol by Rs4.7 and diesel by Rs2.5 a liter respectively. The decision will be welcomed in the background of oil prices going down globally and the administration passing on the benefit to the people. However, the caretakers enhanced the electricity tariff by Rs1.34 per unit effective May 1without any apparent reason. This uncalled for and unjustifiable decision will affect the entire population of Pakistan as all households, big or small, are lit by electricity. It becomes a case of what the right hand giveth (for a reason) the left hand taketh (for no reason. Consequently, the government has directed the National Electric Power Regulatory Authority (NEPRA), which had sought an increase by Rs1.37 per unit, to notify the new tariff as fuel adjustment surcharges. NEPRA had sought a higher increase on the plea that the generation of additional 6,000 Megawatt of electricity had incurred an expenditure of Rs54 billion in March this year.

The National Assembly's Standing Committee on power was told in November last year that the Pakistan People's Party-led government enhanced power price by 113 per cent during its five-year tenure. The price of electricity now being charged is Rs5.79 per unit up to the first 100 units and Rs8.11 for power consumed beyond 100 units. On an average, it costs consumers about Rs6 a unit. This price was only Rs2.78 per units in March 2008 when the PPP-led coalition government took over. The power tariff increase may also be linked to the International Monetary Fund for the promised Extended Fund Facility of $5 billion, to which the caretaker administration has also agreed "in principle", but deferred a firm decision to the next elected government. The IMF has pleaded, among many other things, that the entire subsidy on electricity, worth around Rs400 billion, should be withdrawn. True that most of the subsidy is being misused, especially on agriculture because big landlords also share this concession along with the small land-holders and the poor tillers for whom the subsidy is meant for, a total withdrawal of this facility is bound to hit even the lifeline consumers. However, the IMF and also the World Bank, have questioned Pakistan's definition of 'lifeline' consumers who are allowed only the consumption of only 50 units which is neither practical nor acceptable because no household, no matter how small it may be, can live on the classification which is cruel joke to the poor.

The power tariff increase is also bound to further escalate the cost of living in a situation where at least 30 per cent of the population lives below the poverty line and find it extremely difficult to keep body and soul together. If the caretaker administration can leave any possible agreement with the IMF on the Extended Fund Facility, the power tariff increase is also a policy matter that must be tackled by the future government.

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Pakistan’s energy mix: power and politics

On November 28, 2014, Minister of State for Petroleum and Natural Resources Jam Kamal Khan claimed that there will be a 50 per cent increase in primary energy demand between 2014 and 2030. Forewarned should ideally mean one should then be forearmed, but when it comes to fulfilling this demand, progress is being made at a snail’s pace. What has changed in recent times, however, is the diversification of energy sources. From relying mainly on hydro and oil power, Pakistan has now progressed to harnessing alternative energy to meet the energy shortfall. Behind various energy sectors are dynamics of their own: is the resource public or private? What are the politics surrounding it? Is it viable in the long-run or is it a temporary fix?

Only a mix of energy sources can power Pakistan, but each source presents its particular set of both practical and political problems
Hydro

The gush of waters from the Himalayan glaciers to the low gradient Arabian Sea provide this part of the region with the unique opportunity to exploit a mammoth source of potential energy. In its early history, Pakistan managed to harness hydro potential and then depended heavily on that in the decades to come.

Completed in 1967 as a consequence of the Sindh Water Treaty, Mangla Dam was the first big step towards converting this opportunity into strength. The multipurpose reservoir had been built on River Jhelum, within the jurisdiction of Azad Jammu and Kashmir (AJ&K) with an installed power producing capacity of 1,000 MW.

Subsequently, Tarbela Dam had been constructed on the waters of the mighty Indus in Haripur District at the periphery of Khyber Pakhtunkhwa. The project started functioning in 1976; four tunnels had been carved out and fitted with generators with an installed capacity of 3,478 MW.

Mangla Dam is the ninth largest, while Tarbela is the largest earth-filled dam and the second largest overall in the world. It was a huge accomplishment; arguably the most significant infrastructure development to-date in our post-colonial heritage. This duo of dams has been a saviour for Pakistan’s energy needs, without whom the present day crisis would have been infinitely worse..

Afterwards, the only major contribution came in the shape of Ghazi-Barotha Hydropower Project, a run-of-the-river hydropower facility developed in 2002, again on the River Indus, but this time within the precincts of Punjab, near the town of Attock. The installed capacity of Ghazi Barotha is 1,450 MW.

With these three, our history of developing mega hydro projects ends and the sorry tale of political controversies, administrative ineptness and lack of politico-economic vision starts.

Although hydropower plants are considered to produce the cheapest electricity units, they are also the most capital intensive. For a country like Pakistan, it is not possible to undertake such big projects without the financial support of international development agencies — a fact which brings in its own share of peculiarities and challenges.
The envisioning and abandoning of Kalabagh Dam, with the proposed installed capacity of 3,600 MW, exposed the underlying dissonances within our power-sharing structure and provided small provinces the chance to express their grievances about the allocation of resources.

On the upstream, the polity around KPK, regardless of their affiliations, had been anxious about the submerging of their cities as a consequence of building the dam. The huge outstanding amount due on the federal exchequer on account of Tarbela royalties also added to their scepticism.

In the downstream, the people of Sindh felt their consent was not being taken in the matter nor were apprehensions of the potential desertification of their lands being allayed. The bitterness reached such levels that some pro-Kalabagh dam elements did not shy from dubbing the challengers as traitors. In Sindh, meanwhile, the nationalists went so far as to advise masses that their water may become infertile because its ‘power’ would have already been drawn during the process of electricity generation! The result was that Kalabagh remains a non-starter.

Despite the noise, there has been consensus among stakeholders that hydro power is the most important tool for Pakistan to achieve a sustainable energy future. Since no fuel is needed as such, the variable cost of production remains significantly on the lower side when compared to other sources, and therefore acts as a shock absorber to keep burgeoning consumer bills in control.

This is probably also one of the reasons why Pakistan enjoys the highest electricity penetration in the region: 93.6pc as compared to 88.7pc in Sri Lanka, 78.7pc in India, 76.3pc in Nepal, and 59.6pc in Bangladesh.

All of Pakistan’s hydropower projects, with an installed capacity of 6,720 MW, are understandably located in upcountry: 3,849 in Khyber Pakhtunkhwa, 1,699 in Punjab, 1,039 in AJ&K, and 133 in Gilgit-Baltistan. The hydel electricity pie in Pakistan’s total power generation capacity is around 30pc, which is pretty impressive and almost double the world’s average. If the untapped potential could be harnessed, this share can be improved further, or at least, should be maintained for decades to come.

Although hydropower plants are considered to produce the cheapest electricity units, they are also the most capital intensive. For a country like Pakistan, it is not possible to undertake such big projects without the financial support of international development agencies — a fact which brings in its own share of peculiarities and challenges. The other major challenge in the successful implementation of hydro projects is the (lack of) cohesion within various official entities involved — federal and provincial ministries, Nepra, Wapda, PPIB, etc. — which often find themselves trying to achieve conflicting goals.

The Neelum-Jhelum Hydropower Plant — 969 MW; Tarbela Extension IV — 1,410 MW; Tarbela Extension V — 1,320 MW; and Karot Hydropower Project — 720 MW are some of the mega projects which are already into the implementation phase and should be completed within the next two to three years. If not, the PML-N will find itself in the deepest of waters in the next general elections scheduled in 2018. In addition, Diamer-Bhasha Dam — 4,500 MW; Dasu Dam — 4,320 MW; and Kohala Hydropower Project — 1,100 MW are in the early completion phase and need policy continuation to be completed within the stipulated timeframe.

Oil

Unlike hydropower and indigenous natural gas, oil is our major handicap as it is mostly imported both in the shape of crude oil and finished petroleum products. In 2014-15, Pakistan imported $11.7 billion worth of petroleum which accounted for around a quarter of country’s total trade bill.

Among key petroleum products, which are produced by refining the crude oil, diesel is mainly used for mass transportation and to run tube-wells, petrol is primarily used as auto fuel, and furnace oil is chiefly consumed in power plants. In the past, High Speed Diesel (HSD) — or simply diesel — enjoyed budgetary subsidies which were taken off gradually to make way for an open market regime. With the arrival of CNG, petrol — which is called Motor Gasoline in the industry jargon — witnessed subdued demand growth for a brief period before bouncing back as a result of robust growth in the automobile sales and CNG shortages.

It is furnace oil — or fuel oil (FO) — which needs special mention in the context of Pakistan’s energy landscape. The use of furnace oil substantially increased in our later history due to the propping up of thermal power plants at the turn of the century.

Installing an FO-based power plant is arguably the most tested, cheapest, and quickest methods of producing electricity in mass quantities. Also, furnace oil is considered cheaper as it usually sells at a ‘discount’, rather than at a ‘premium’ as in the case of diesel and petrol, over its input, i.e. crude.

In addition to the setting-up of thermal power projects under the traditional WAPDA establishment, the concept of Independent Power Plants (IPPs) also arrived in Pakistan in the ’90s with all its accomplishments and controversies. On the one hand, the successful implementation of the public-private venture of that magnitude — with salient features like two-part tariff, non-recourse project financing, sovereign guarantee, etc — was touted as a success story by the international developmental agencies.

Lately, local production of condensate — a lighter mixture of hydrocarbons which can be refined to produce petroleum products — gained momentum and together with the crude oil surpassed the level of 100,000 barrels per day (bpd) as compared to around 67,000 in 2012.
On the flip side, dealings with IPPs took centre stage in the power show between PPP and PML-N during that era. Shouts of kickbacks also resonated till the mess was finally settled with the help of international arbitrage. Amidst that ruckus, the fact that the country had been exposed to a tremendous and an unprecedented financial risk, and needed an adequate cover, was downplayed by the policy makers and implementers.

After an extended period of sluggishness, international oil prices rose unabatedly during 2002 to 2008, witnessing around a fivefold increase. Consequently, price of furnace oil (FO) in Pakistan also showed an increasing trend which disturbed our energy equation.

The impact was so strong that even the military backed and financially shrewd administration of Shaukat Aziz could not pass the increase in power generation cost to consumers. Budgetary subsidies to cater for the difference in the cost and the consumer tariff were not enough either and got busted shortly. The FO experience was so bitter that even the word became an unwanted mention around the ‘power’ corridors and thus the subsequent new ventures were put on the backburner.

Lately, local production of condensate — a lighter mixture of hydrocarbons which can be refined to produce petroleum products — gained momentum and together with the crude oil surpassed the level of 100,000 barrels per day (bpd) as compared to around 67,000 in 2012.

Although the quantity is not enough to suggest that we can get rid of the imports, however, it can still narrow down some of our energy gap in addition to saving the foreign currency.

The present lack of local refining capacity to cater for the locally produced hydrocarbons is a challenge which needs to be overcome to capitalise fully on this development.

The recent decline in oil prices caused a substantial decrease in the cost of furnace oil which in turn brought down the average per unit cost of electricity. In the short run, consumers will benefit from lower bills, power sector will benefit from improved capacity utilisation, and the government will get a respite from the monstrous circular debt. To find a long-term and a sustainable solution, lessons learned from the last episode must be taken into account.

Almost all of our oil imports come from the single source, i.e. Middle East, which was further narrowed down after we stopped buying the commodity from the neighbouring Iran post sanctions.

Here, it would be interesting to note that Indo-Persian oil trade continued, on deferred payments, during the same period while we don’t even look prepared to cash in from the possible reopening of the Iranian market. Without denying that we enjoyed favourable terms from friendly suppliers in the past, diversification of the supply base shall be considered for a sustainable future.

The low oil price scenario presents an opportunity to find a sustainable energy solution. This has to be done with a sense of urgency because with the present energy mix the country is still exposed to the upside risks of the international oil prices.

Nuclear

Commissioned in 1972, the Karachi Nuclear Power Plant (KANUPP) was the country’s first breakthrough in this sophisticated yet potentially hazardous technology. Aimed to provide electricity to the megacity of Karachi, the 137MW project was setup at Karachi’s coastline with the help of Canada, a country which is more popular here for immigration opportunities than strategic partnerships. It is believed that Dr Abdul Salam, the Noble Laureate, was the pivot behind that leap forward.

Since its inception, KANUPP went through many ups and downs, revamps, and technical glitches but managed to continue its operation and also provided country’s nuclear researchers with an essential guinea pig.

In 2000, the 300MW Chashma Nuclear Power Complex CHASNUPP-I was commissioned in Punjab, which was the first of a string of projects being constructed with the help of China at the same site. The second project, 300 MW CHASNUPP-II, already came online in 2011 while 340 MW each CHASNUPP-III and CHASNUP-IV are expected to be completed in 2016 and 2017 respectively. After their completion, the contribution of nuclear electricity in Pakistan’s power generation mix will surpass the 5per cent mark.

Planned to be alongside the old KANUPP in Karachi, 1,100 MW each KANUPP-II and KANUPP-III are the multibillion dollars projects expected to be completed early next decade with the help of China. Setting-up a nuclear power plant is extremely capital intensive but the operating cost is almost negligible, when compared to other options, which makes it viable in the longer run. However, an atomic power plant rings alarm bells, at times due to environmental reasons, especially if the site is located close to a heavily populated city like Karachi.

Coal

Coal is an obvious missing link in Pakistan’s energy mix. Compared to the world’s average of 41pc, and 56pc, 66pc, and 42pc in India, China, and USA respectively — despite the environmental concerns — contribution of coal in Pakistan’s power generation has been negligible, almost zilch.

The first notable coal discovery was made in the 1980s in Sindh, at Lakhra and Sonda-Jherruck, neither of which could make an impact on the county’s energy landscape. The convenience of the earlier installed hydropower and the abundance of gas were perhaps the reasons why we had been complacent towards the ‘poor-man’s fuel’.

That the Thar coalfield, discovered in 1991, possesses among the largest coal deposits in the world, simply added insult to injury. It has been now two-and-a-half decades, with a mixture of civilian and military governments, but the nation is yet to see a single unit of electricity from these mammoth lignite reserves flowing into the national grid.

The closest it reached to materialisation was during the last military regime, when a 600MW turnkey project was stalled due to the tariff rift between the Chinese sponsors and Wapda — the earlier demanded 5.6 US cents per unit while the later insisted on 5.3 US cents per unit.

Compared to the world’s average of 41pc, and 56pc, 66pc, and 42pc in India, China, and USA respectively — despite the environmental concerns — contribution of coal in Pakistan’s power generation has been negligible, almost zilch.
Nuclear physicist Dr Samar Mubarakmand proposed the idea of Underground Coal Gasification — an alternative to conventional coalmining techniques. Despite criticism by his contemporaries, and his complaints of lack of seriousness by the government, his team announced generating the first megawatt earlier this year, albeit off-grid. No matter which technology is used, the primary stumbling block has been the logistics or evacuation of power, because of the lack of transmission network to the far flung Thar Desert. Unfortunately, there still seems no concerted plan to sort that out without which pinning hopes in the much touted potential of Thar coal will be unrealistic.

In the international market, commodity prices experienced extended battering after the financial crisis of 2008 with coal being the chief victim. Lower price levels prompted the local business community to pitch imported coal as a quick fix, especially after seeing the cement sector exploiting the opportunity.

Gadani Power Park also came into the limelight before moving to the backburner due to the lack of a well thought-out strategy. Conversion of existing fuel oil fired power plants first to imported coal and then to the indigenous variant had also been deliberated and in some cases the idea is under implementation also.

These developments may help in diversifying our energy palette provided they are executed in time and taken as more than mere stopgap arrangements.

Natural Gas

On March 26, 2015, the first ship carrying Pakistan’s imported LNG arrived at Port Qasim, Karachi from Qatar. The vessel carried 147,000 cubic metres LNG in the first-ever consignment sent to Pakistan.
On March 26, 2015, the first ship carrying Pakistan’s imported LNG arrived at Port Qasim, Karachi from Qatar. The vessel carried 147,000 cubic metres LNG in the first-ever consignment sent to Pakistan.
The first major discovery of natural gas in Pakistan was made in 1952 at a remote and then less-known location in Balochistan called Sui. The small town turned into a household term soon after, so much so that the term Sui Gas is still used as a synonym for natural gas. It was a significant commercial discovery, even by international standards, and came as a perfect gift for the newborn country. For decades to come, the nation did not need to even think about the energy woes. And it didn’t.

The find propelled the laying down of a country wide high-pressure transmission and low-pressure distribution network of gas pipelines.

The Sui Gas Transmission Company Limited was formed in 1954 to take care of the southern parts of the country. In 1989, it was transformed into the present day, scandal-hit Sui Southern Gas Company (SSGC). Sui Northern Gas Pipelines (SNGP) was incorporated in 1963 to take over and extend the network to the upcountry. It was made sure that the commodity was delivered at the doorstep to each and every urban as well as industrial centre.

It is argued that Pakistan still possesses one of the world’s most extensive inland natural gas supply infrastructure with a mind boggling total length of around 140,000 km — enough to circle the whole world at-least three times.

The failure to implement a reliable LNG import mechanism, which is a proven short-term solution of filling the demand-supply shortfall internationally, is only a symptom of bigger issues in our governance structure.
Major discoveries soon followed in Mari and Kandhkot, but these had to be kept idle in the initial years because of lack of demand. The latest string of big finds came in the last decade of the 20th century at Qadirpur, Zamzama, Sawan, etc.

Interestingly, although the share of Sui in the overall national gas production reduced significantly over the years, it still enjoys an uncontested popularity especially among households, most probably because of the nomenclature of the utility companies. Almost all of the major post-Sui gas discoveries were made in the lower Indus sedimentary basins tilting the balance of gas power from Baluchistan to Sindh.

Over the period, scope of gas utilisation was also inevitably expanded from the domestic to fertiliser, industrial and commercial sectors to fully reap the benefit of it without caring much about the efficiency and the conservation.

On the flipside, the people of Baluchistan remained deprived of this resource, while elite industrialists and the urban middleclass across the country counted their blessings.

As for Sindh, while parts of the province managed to attract infrastructure investment most of the province, including areas surrounding the gas fields, remains a frustratingly pessimistic picture of poverty, neglect, and misery. Whatever the reasons were — colonial mindset of the federal establishment or sheer incompetence of provincial representatives or both — the bottom line was the deficit of trust between the people and the system simply increased. Whether the 18th amendment will be able to bridge that and trigger a turnaround is still up for debate.

On the gas demand supply front, It was all hunky-dory until the advent of the 21st century, when, in the pursuit of high economic growth, the regime of General Musharraf, with his financial whiz Shaukat Aziz, decided to set up a series of dual-fuel power plants in addition to switching the transportation sector, partly, to Compressed Natural Gas (CNG).

The low cost, efficient, environment friendly nature of natural gas, relative to other fossil fuels, along with the guaranteed foreign currency returns on power generation plants also helped in the bankability of such projects and attracted investment.

Power generation cost from the indigenous gas is not only the lowest, after hydro, but it is also considered to be the most economically optimum utilisation of the resource. On these lines, Furnace Oil (FO) based power plants were also switched to natural gas during the last military regime, to help keep both the import bill and electricity bills, macroeconomic and microeconomic factors respectively, under control.

Gas suddenly became such a favourite input for power production that even permeate gas, which is also called low-BTU gas because of its low heating value and which is otherwise not sellable through the conventional network, was also made full use of.

Resultantly, natural gas consumption accelerated — from 1,742MMCFD in 1998-99 to 3,181MMCFD in 2004-05 — and so did the rate of depletion of national gas reserves. Currently, the average gas production is estimated to be around 4,000MMCFD while the supply-demand gap is thought to have reached 1,000-1,500MMCFD and is expected to widen-up to 4,000MMCFD by the year 2020 unless significant new production comes online.

In order to bridge the future gap, the case for a transnational pipeline to import the commodity from gas rich countries in the region had already been established even before the crisis.

In 1996, Inter State Gas Systems (Private) Limited was established with the initial mandate to import natural gas through Iran-Pakistan-India (IPI) Pipeline project which was then expanded to include Turkmenistan-Afghanistan-Pakistan-Iran Pipeline project.

Regardless of the potential of bringing change in the lives of around a couple of billion people or more, both these projects soon became pipedreams due to a combination of internal capacity constraints and external geopolitical sensitivities.

Amid all the brouhaha about the energy shortages, and with no solution in sight, arrived the magical solution-turned-scandal proposition of Liquefied Natural Gas (LNG). As the term suggests, LNG is essentially a natural gas which is liquefied for the purpose of transporting overseas through specially customised vessels before re-gasifying it at the destination port.

The re-gasified LNG, or R-LNG, may then be injected into the already developed gas infrastructure of the importing country.

The failure to implement a reliable LNG import mechanism, which is a proven short-term solution of filling the demand-supply shortfall internationally, is only a symptom of bigger issues in our governance structure which has weakened due to years of carpetbaggery, incompetency and nepotism.

There had been question marks on the commercial feasibility of the imported fuel also which may need to be reviewed with the falling commodity prices worldwide.

Despite all the negativity, natural gas is one of our major internal strengths with the capacity to support the economy and to bring down poverty levels. Aggressive exploration activity needs to be encouraged to relinquish the extractable reserve pool. Rather than putting the blame on low gas prices, which is also debatable, people at the helm should also realise that our existing gas infrastructure was laid down to capitalise on the internal resource and may not withstand the import influx which requires adequate planning and capacity building.

Wind and Solar

Pakistan has made notable inroads in recent years in harnessing wind potential by setting up private power plants around Gharo and Jhimpir wind corridors in Sindh. Around 200MW has been added to the national transmission system, with much more in the pipeline, helping the share of alternative sources in the national energy mix breaking the goose egg.

Planting a wind farm is immensely capital intensive and even if there is no fuel cost as such, per unit cost of electricity generated from wind turbines is no way consumer-friendly.

Lower oil prices further pose a threat to its viability in the middle term. Although there are no doubts on the value it adds for a sustainable energy landscape, technical complexities limit the role of wind energy to a secondary source, rather than being an independent substitute, worldwide.

In Punjab, there has been a newfound activism for solar power park being proposed at the brink of the Cholistan Desert.

Similar to wind, solar power also needs huge upfront investment which is supposed to be offset by the absence of fuel cost. However, it is even more technically complicated as it tends to destabilise the central transmission system.
This is true that this form of renewable energy has been popular in recent times, but without an adequate need analysis and understanding of the inherent risks the venture could degenerate into another Nandipur.

Similar to wind, solar power also needs huge upfront investment which is supposed to be offset by the absence of fuel cost.

However, it is even more technically complicated as it tends to destabilise the central transmission system, or in technical terms is difficult to synchronise.

In some developed countries, solar is being used to de-stress transmission systems, through encouraging countryside consumers installing it domestically using the net metering mechanism.

Elsewhere, solar has also been used in far-flung off-grid locations to bring down the poverty index.

The bottom line is that while Pakistan’s energy problems must be resolved, this must be done so while maintaining a careful balance between political compulsions and practical considerations.

Source: Pakistan’s energy mix: power and politics
Published in Dawn, Sunday Magazine, October 4th, 2015

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The world is changed by your example, not by your opinion !

Pakistan’s power crisis: Trans-Mission Impossible

Poor governance, incompetence, lack of transparency, distribution and transmission losses (a euphemism for theft), have made powering Pakistan a transMission Impossible.

A recently released book by the Woodrow Wilson International Centre for Scholars (Wilson Center) reviews the energy crisis in Pakistan and raises the question if there is a way out of Pakistan’s endless energy crisis?

A careful read of the book reveals that while there may be a way or more out of this mess, there are, however, no shortcuts. Given the challenges and structural constraints, Pakistanis may have to live with the energy shortfall for decades, if not more.

Edited by Michael Kugelman, Wilson Center’s expert on South Asia, the book represents a serious effort to understand the determinants of Pakistan’s energy crisis. The edited volume benefits from the views and expertise of eight specialists who have researched Pakistan’s energy challenges.

The book’s value as a reference text is rather limited, owing to the less than adequate referencing. Still, given the paucity of research on the same in Pakistan, Wilson Center and Michael Kugelman must be commended for this timely publication.

The Challenge
The blackouts (loadshedding) lasting for hours are the most ominous sign of the energy crisis in Pakistan. The reason is simple: the demand for electricity in Pakistan exceeds supply by 5,000 MW. At its worst, the shortfall could be as high as 8,000 MW. The installed electricity generation capacity is around 22,000 MW.

It surprises me a great deal that energy experts in Pakistan define the shortfall as the difference between the installed generation capacity and the actual production. This approach erroneously assumes that the installed capacity is sufficient to meet the total electricity demand in Pakistan. Given that a large segment of the population is not even connected to the grid, their power needs are not being accounted for in the stated shortfall. Furthermore, it is again erroneous to assume that those fortunate ones connected to the grid will not consume more power (latent demand) if it were available in addition to the installed capacity.

One wonders why Pakistan cannot generate sufficient electricity to meet the demand. The answer to this simple question is rather complex.

Affordability:
First is the affordability challenge. Thanks to poor planning and governance, Pakistan generates very expensive electricity. The cost per unit kilowatt-hour (kWh) of generated electricity in Pakistan is around 14 cents (14 Rupees). Consumers, on average, pay 11.50 Rupees per kWh. The systematic subsidy, which is almost 15 per cent of the cost, adds up to billions in losses.

But this is not all. There are distribution and transmission losses, which in Pakistan is a polite expression for theft. Across the country, 22 per cent of the generated electricity is lost due to theft and some transmission losses.

Collection:
Collection is another challenge, where the distribution companies fail to collect outstanding dues from consumers. The recovery rate ranges between 80 per cent to 90 per cent. Dr Musadik Malik, who holds a doctorate in Pharmacy and advises Prime Minister Nawaz Sharif on energy, offers an analogy that I have adapted below.

Let us assume that Pakistan generates 100 units of electricity. The system loses 22 units to theft. Thus, only 78 units reach consumers. We further assume that the distribution companies collect approximately 85 per cent of the amounts billed to consumers. The system, therefore, recovers revenue for only 66 units of the 100 generated.

Now comes the subsidy. Since it costs 14 cents to generate a unit of electricity, and the average tariff charged is 11.5 cents, the system recovers revenue at full cost for a mere 54 units.

Effectively, the total loss from transmission losses, theft, recovery, and subsidies is 46 per cent. This leads us to the other self-inflicted financial wound, i.e., the circular debt.

Circular debt:
Each year, it adds up to billions of dollars. Why, you may ask. According to the CIA World Fact Book, Pakistan generated 94.65 billion kWh in 2011. Since it costs the system 14 cents to generate a kWh of electricity and the real recovery rate is merely 54 per cent, the total annual circular debt is estimated at US$6 billion.

Some energy experts may argue that the circular debt is not that large. They may be right. The amount of circular debt will be lower if less power is generated, losses due to theft are lower, and the recovery rate is higher. However, even when transmission, distribution, and theft losses are down to 10 per cent and the recovery rate rises to 95 per cent, the annual circular debt, owing to the subsidy, will still be around US$3.9 billion for 95 billion kWh.

The circular debt, therefore, is the amount the State fails to collect from consumers and transfer it to the State’s oil-procuring agencies. This stops oil shipments to independent power producers, who halt the production, but continue to receive payments from the State for the installed capacity rather than for generated electricity.

Why the subsidies?
We are told that the subsidies are required to protect the poor. This is partially true. The complete truth is that the subsidies protect the profit margins of the very rich involved in generating power at such expensive rates. Even in the South Asian neighbourhood, Pakistan generates one of the most expensive electricity at 14 cents per unit.

The high cost is a result of using petroleum or its derivatives for power generation. Generating electricity with coal or gas is much cheaper. The real question to ask is why Pakistani planners recommended oil-based power plants to independent power producers, and at the same time committed to providing cheaper oil and buying electricity at higher tariffs. I’d submit that the circular debt is not an unexpected development but an inevitable consequence of poor economic planning.

Coal and Gas to the rescue
Experts believe Pakistan’s energy crisis may have a solution in coal or gas. Thar coal is being touted as the answer to Pakistan’s power crisis. Thar’s 175 billion tons of coal reserves have given several authors in the book the hope for a long-lasting solution. I admire their optimism.

However, in earlier writings for the Dawn, I had shown that when it comes to Thar, we may be counting our chickens before they hatched. Only 2.7 out of the 175 billion tonnes of Thar coal are categorised as measured (proven) coal reserves. The rest of the reserves (172 billion tonnes) fall under hypothetical (undiscovered), inferred, and indicated category.

Other experts believe that despite there being a shortfall in Pakistan of two billion cubic feet, natural gas offers the potential to generate electricity at affordable costs. Also, almost 11 per cent of natural gas remains unaccounted for in Pakistan.

The recent agreement between Iran and Western powers opens the possibility to build a gas pipeline to Iran and link it with India and China. The recent Chinese announcement of $35 billion investment in power infrastructure in Pakistan has earmarked loans for the Pak-Iran-China gas pipeline. Cheaper gas may mean affordable electricity for Pakistan.

What to do?
The Wilson Center publication offers advice on how to address the energy crisis in Pakistan. The book highlights the need for better governance of the power sector and the need to eliminate redundancy in regulatory authorities.

Improving governance in Pakistan is easier said than done. The challenge is a lack of qualified personnel to regulate these complex entities. While ‘experts’ are plenty in Pakistan, qualified experts are in short supply. Individuals with training in energy economics and infrastructure engineering are few, and even fewer in the public sector. Without the desired human capital and presence of political will, it is unlikely that governance will improve in the short-run.

Pakistan’s energy mix has to be altered to reflect the resource-constrained realities of the nation. Pakistan’s reliance on expensive imported oil has worsened the energy crisis. Unlike India and China, Pakistan generates very little power from coal. The call to shift to coal and gas makes sense.

The book, however, does not mention nuclear as an option. Belgium, France, Lithuania, and Slovakia, generate more than 50 per cent of their electricity from nuclear. Some may argue that nuclear is not the cheapest alternative. Still, not having any mention of nuclear in the book seemed odd to me, especially when Pakistan already generates a fraction of its electricity from nuclear.

Experts strongly recommended the need to limit losses during transmission, distribution, and because of theft. The switch to smart, temper-proof metres being installed in Islamabad and Peshawar is a welcome development. MicroTech, a Pakistani firm specialising in smart metres, is providing the technology to limit theft in the system. At the same time, assistance from the US AID for smart metres to monitor the national grid covering 9,000 feeders is a timely development to modernise the command and control structure.

Even though the book was published before the heatwave in Karachi that killed over 1,200 people and exposed the inadequate performance of the city’s privatised electric supplier (K-Electric), experts were reluctant to call for an outright privatisation of state-owned distribution companies.

A recent report by the regulator, NEPRA, revealed that K-Electric, despite its tall claims of adding thousands more megawatts to its generation capacity, is limited to carrying no more than 2,200 MW. What’s the point in expanding generation capacity, but not being able to distribute the power?

The State’s omnipresent intervening role in power politics in Pakistan hampers reform in the energy sector. Even when K-Electric has been privatised, its establishment can still not rationalise its workforce without intervention from the State. The lack of law and order in Pakistan implies that any attempt to lay off surplus workers will likely meet a hostile reaction, thus allowing the State to step in and pull rank.

Violence also ensues when tariffs are raised for electricity, natural gas, or gasoline. The authors urge the government to raise tariffs for natural gas to the wholesale levels in the UK, i.e., $8-10 per million British Thermal Units (BTU). At the same time, they urge doubling the industrial tariff for natural gas to $10 per million BTU.

The motivation behind the call to raise tariffs is to curb the excessive consumption of natural gas in Pakistan, which results from the inherent subsidy that keeps prices low. Doubling tariffs will likely have political repercussions. It is hard to imagine any incumbent government anywhere surviving such drastic increases in the price of utilities.

There are, however, no shortcuts to an electrified future of Pakistan.

The authors mention the 900 MW solar power plant near Bahawalpur and the Gadani 6000 MW project as examples of new capacity being added to the system. Large power plants will take anywhere between 5 to 10 years to come online. Improving governance and curbing theft should not take that long.

Murtaza Haider is a Toronto-based academic and the director of Regionomics.com.

Source: Pakistan’s power crisis: Trans-Mission Impossible
Published in Dawn, July 24, 2015

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The world is changed by your example, not by your opinion !

Developments in the energy sector

By Atta-ur-Rahman

There have been amazing developments in the energy sector, and we are well on our way to replacing conventional energy with clean renewable energy. The entire power sector has been shaken up by the plunging prices of renewable energy.

Costa Rica, a small country in South America, met 100 percent of its energy needs for 76 consecutive days in 2016 entirely on renewable energy sources. More and more countries are going in this direction, and it is very likely that within 20 years, the use of oil as source of energy would have become insignificant with the emergence of disruptive innovations in the low priced renewable energy sector. Offshore wind turbines are a growing source of energy in many countries, as are solar farms relying on mirrors to heat up liquid salt to run electricity turbines, or low cost photovoltaics.

A world record was set in a tender for a large solar park in Abu Dhabi recently with the Chinese solar module manufacturing giant ‘JinkoSolar’ making a bid of what is the world’s lowest price for solar energy of $0.0242 (2.42 cents) per KWh. The record low price before that was set in Chile in August this year – of $0.029 (2.9 cents) per KWh. Even at this low price, JinkoSolar expects an annual return of seven percent.

The drop in solar prices, by 80 percent in the last five years, has changed the entire landscape of the energy sector making it very competitive compared to fossil fuels. The solar park set up in the Cholistan desert by Pakistan with Chinese assistance recently is more than five times this price.

Solar cells use the energy from the sun to produce electricity. The sun’s energy is in the form of photons. The photons excite the electrons in the solar cells from one energy level to a higher energy level, resulting in the flow of electrons through the material. The electricity thus produced is direct current (DC) that can be used to light bulbs or operate other electrical devices such as fans etc. that can operate with DC electricity.

The exciting developments in renewable energy technologies are being fuelled by continuous research. For example, new types of solar cells have been developed by scientists at the University of Southern California (USC). These cells are suspended in liquid and can therefore be painted or printed on glass or plastic surfaces. The tiny solar cells are so small that you cannot see them with the naked eye – just four nanometers in size – so that some 250 billion such cells can be fitted on the head of a needle.

Since they are so tiny, they can be printed like a newspaper so that mass production is possible very cheaply. Before long we may have solar powered windows and walls instead of solar panels. Commercially available solar cells are normally made up of crystalline wafers of silicon and have efficiencies between 14 and 18 percent. The latest ‘multi-junction’ solar cells developed use other materials, have much higher efficiencies – between 38 and 42 percent – but they are more difficult and expensive to produce.

Another exciting development in solar technologies is that of printed solar cells – that can be printed on a standard ink jet printer. Although the efficiency of these printed cells was only about five percent initially, it has now risen to above 20 percent. The cells are ‘CIGS’ solar cells, so called because they contain copper, indium, gallium and selenium. The ultra-thin film solar cells can may even be built into roofing materials to convert the sunlight into heat and electricity for house lighting/heating and water heating.

Solar-cell technologies are expanding by leaps and bounds. Spectrolab, a subsidiary of the Boeing Company started production of the most efficient solar cell in the world with a conversion efficiency of 39.2 percent a few years ago. These cells have more than double the energy conversion efficiency than the normal commercially available solar cells. About 60 percent of the world’s satellites are powered by solar cells manufactured by Spectrolab.

A recent breakthrough in this field has been the development of low-cost ‘quantum dot’ solar cells with improved efficiencies that can be sprayed on surfaces such as roofs or windows. Quantum dot solar cells are made of tiny particles (nano-particles) of semiconductors. These can be readily painted on surfaces and do not need the formation of cumbersome and expensive solar panels for installation and use.

Initially, researchers at Stanford had used organic materials to prepare the nano-particles but now scientists at the University of Toronto have found that more efficient quantum dot solar cells can be produced with inorganic materials. Researchers at the University of Toronto have built the first colloidal quantum dot solar cells certified to convert sunlight into electricity with greater than 10 percent power conversion efficiency.

Can we run cars on old newspapers or on orange peels? The answer now appears to be yes! One of the most abundant raw materials found on our planet is cellulose. This is a major constituent of wood, leaves, cotton and most plant materials. Scientists have for long been on the hunt for bacteria that could convert cellulose to butanol. Butanol could then be used as a biofuel to power car engines. Now the breakthrough has occurred.

A team of scientists at New Orleans’ Tulane University has discovered a biofuel producing strain of bacteria that can convert cellulose, such as that found in old newspapers, into butanol. Butanol has several advantages compared to ethanol as a biofuel. It can be used directly without modification of the engine.

Another related development has been the discovery of German scientists at the Fraunhofer Institute for Interfacial Engineering and Biotechnology (IGB). These scientists have found a novel way to run cars – by using orange peels and other fruit/vegetable waste. These materials are well suited to fermentation, which results in the generation of methane. The methane can then be used to power cars or for cooking and heating at home.

Pakistan must give the highest priority to education, science, technology and innovation in order to benefit from these recent developments. The ‘Knowledge Corridor’ being developed with the US, through an initiative of the HEC and the Ministry of Planning, is an excellent initiative.

However, it will not succeed unless it is ensured that no US visas are granted to Pakistani students in the US for at least five years after they complete their studies abroad. This was done when as the chairman of the HEC I had initiated the world’s largest Fulbright programme in 2006. Otherwise, the Pak-US Knowledge Corridor will amount to nothing more that Pakistan aid to the US.

The writer is chairman of UN ESCAP Committee on Science Technology & Innovation and
former chairman of the HEC.

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To succeed,look at things not as they are,but as they can be.:)