ENERGY SHORTAGE TO HAMPER GDP GROWTH
Pakistan has experimented with hydel, thermal and nuclear power to some extent and in the next phase a three-tier policy has to be developed.
SHABBIR H. KAZMI, Special Correspondent
Feb 26 - Mar 04, 2007
Pakistan's power sector is a case worth studying. It is a country having capacity to produce about 40,000MW of hydroelectricity but does not have funds to finance such projects. The country has huge coal reserves but has been failing in using these for power generation. On top of every thing delay in construction of dams has forced the country to go for thermal power generation but rising crude oil is sky-rocketing the cost of generation. The prevailing situation is the result of myopic vision, driven by firefighting approach, making ad-hoc arrangements to overcome the shortage. Unless efforts are made to understand the issue in its totality, the nation would continue to indulge in new experimentation but failing in ensuring delivery of uninterrupted and free-of-surges electricity at affordable cost.
The government aims at achieving 10% GDP growth rate. It is evident that the biggest hurdle in achieving the target is the widening gap between demand and supply of energy. On one hand gas reserves are fast depleting and on the other hand crude oil prices are on the rise and expected to hover above US$ 55 per barrel. Lately, a number of power plants were switched over from furnace oil to gas but it seems that now the switchover has to be from gas to coal. Whether, the critics like it or not the future fuel for power plants has to be coal, particularly the indigenous one.
As regards hydroelectricity production, construction of dams would on one hand help in overcoming water shortage and on the other hand facilitating power generation at nominal cost. The only problem is that these projects have longer gestation period and also higher capital expenditure. However, low recurring cost justifies construction of these projects. Another key issue is that hydroelectricity projects often run into political controversies. The worst example is Kalabagh dam. Even Ghazi Brotha project was resisted.
Nuclear plants are considered to be the cheapest source of power generation throughout the globe. However, many countries are putting pressure on Pakistan to rollback its nuclear program. Despite repeated clarifications from the Pakistan government the US preferred to sign an agreement with India to facilitate establishment of nuclear power generation facilities but was adamant to reciprocate Pakistan. Pakistan still has an option to acquire the technology from China and Chasma project is moving at a satisfactory pace.
Having reached the conclusion that the total installed power generation capacity in the country is insufficient to meet the growing demand the prime effort should be to overcome this as soon as possible. According to some latest reports the magnitude of this shortage is around 2,000 MW during peak load hours. But on top of this the point of concern is that electricity is available to only 40% of the population and per capita consumption of electricity per annum is 300 kWh, which is extremely low.
According to some critics, the estimated shortage is based on limited information. The system is characterized by a high degree of suppressed demand. Based on conservative projections regarding annual average increase in the demand the rate of growth comes above 8% per annum. Based on this growth rate the demand would exceed 50,000 MW over the next 25 years, which means that approximately 25,000 MW of additional generation capacity will be needed up to the year 2020.
Pakistan has experimented with hydel, thermal and nuclear power to some extent. In the next phase three-tier policy has to be developed. In the short-term strategy IPPs based on furnace oil have to be established but minimum size has to be above 1,000MW to attain greater synergy. The medium term policy should encourage coal-based thermal power plants, using indigenous coal. Under the long-term policy emphasis should be on hydel power generation and nuclear power plants.
It is heartening that construction of dams is going on at a faster pace. These dams would help in power generation as well as regulating discharge of water throughout the year. There are two views. One group of experts believes that mega projects should be constructed, whereas the other group says that smaller dams should be constructed to minimize displacement of people and saving millions of acres from submerging under water. However, the added advantage of smaller projects is that not only loss of cultivable land would be minimum, but electricity transmission and distribution losses would also be low.
One tends to get the feeling that the Power Policy depicts an old saying 'putting the cart before the horse' - the reason being that the real losses in transmission and distribution were mainly because of their depleted condition. It may be true that power generation was inefficient and a bit higher but it was mainly due to poor maintenance of the generation equipment. The state-owned utilities WAPDA and KESC were not able to discharge their liabilities because of electricity theft, huge receivables turning bad debts and poor cash flow.
While the policy put a cap on adding new generation capacity, extra burden was put on ailing utilities in the shape of power purchases from IPPs. It is on record that prior to privatization of KESC almost all the units purchased from IPPs went towards transmission and distribution losses because the number of units billed were even less than self-generated units. One has reasons to believe that the situation is not different in case of WAPDA. The only cover up is the consolidated financial statement of the white elephant.
One may also say that the policy of selling bulk electricity to industrial units at higher rates, compared to commercial and domestic consumers, forced the industrial consumers to opt for self generation. Even big commercial buildings like FTC, PSO House and others also preferred to put up in-house power generation facilities. This change of mix of customers has left mostly those consumers who are supplied electricity at subsidized tariff i.e. domestic and agriculture.