May 12 - 18, 2008

Pakistan's development vision for an expanded economy, increased industrialization, and elevated standards of living will demand enormous amounts of energy; and the links between sustainable development and energy will require major efforts for long term energy security.


Pakistan is facing an electric power deficit of up to 4000 megawatts (MW).

The electricity consumers in Pakistan are likely to suffer a blight of nine to 11-hour load shedding during summer months caused by multiple factors, the most important being the demand-supply gap. At present, demand for energy exceeds supply, and power outages and planned power cuts (euphemistically termed load-shedding) are common. In addition to the economic costs, energy shortages can foster political instability. June 2006 saw angry public protests over repeated power failures. A widespread power outage across much of the country three months later triggered panicky rumors of a coup. This unrest may be only a foretaste of things to come. More than anything, this represents the failure of long term energy planning.

Energy is one of the most important inputs for the country's socio-economic development. The uninterrupted supply of energy to fuel the nation's economy should be the highest priority for the country's economic managers.

It is a sad reflection of our governments and civil societies that we have allowed the situation to get as bad as it is today, crippling industries and the day to day life of citizens.

The need to address Pakistan's present and prospective energy requirements and ensure a practical, viable solution to meet these has never been so pressing and urgent. In absence of war-footing action, Pakistan's energy situation is expected to get worse in the years ahead.

The country has an estimated hydro power potential of 42,000 MW, of which, as of June 30, 2005, the current installed capacity was just under 6,500 MW. These include dam sites and run-of-the-river projects ranging in capacity from several thousand to a fraction of one MW. The government is also seeking investment in hydro power generation.

To attract private sector investment in power generation, the Private Power and Infrastructure Board (PPIB) is playing the role of facilitator and is currently processing 45 potential projects with an 11,900 MW capacity, at a total cost of $11 billion. These projects include coal, gas, oil, dual fuel, and hydro power plants, with expected commissioning between 2007 and 2014. Pakistan's estimated coal reserves amount to 185 billion tons, out of which the single largest field, amounting to 176 billion tons, lies in Thar, a desert region of Pakistan. This field was discovered in 1991 and remains undeveloped, except for some exploration and infrastructure development by the Pakistani government. Thar coal, which is lignite, translates into 250 billion barrels of oil based on 60 percent recovery.

The biggest impediments to using this coal for thermal power are its high moisture content, ranging between 30-55 percent, and the lack of water, crucial for steam generation. One proposed method of alleviating these problems is to extract the water from the coal and use it for steam generation, at least in part. The Pakistani government has been inviting private companies, both local and international, for further exploration, study and establishment of coal-fired power plants. In the past, MOUs have been signed for 1,800 MW of capacity with an Australian group and a Chinese group which has since run in to problems. The government has also invited EOIs (Expression of Interest) for a 450 MW plant at the Lakhra field, and two private sector companies have been issued LOIs (letters of intent) for a 350 MW capacity near other coalfields.

In the alternative energy arena, Pakistan has implemented a few small scale projects for wind and solar power. Pilot projects with a total generation of 100 MW of wind power are being implemented, involving five private sector investors. Once the target is achieved, the government plans to gradually increase the capacity to about 10,000 MW by 2030. It has been estimated that a wind corridor near Gharo, Sindh, has a potential of 50,000 MW. (1)

An interesting analogy would be to look at the perspectives of different stakeholders about the state of affairs and future for power generation in Pakistan.

-Mukhtar Ahmed: Government's perspective

-Shaid Burki : A technocrat and perhaps World Bank's Perspective

-Asad Umar : Investor and Private Sector Perspective

Mukhtar Ahmed, energy adviser to the previous Pakistani prime minister, explores the energy challenges facing Pakistan and lays out the energy policies of the last Pakistani government. Observing that 40 percent of Pakistani households are not even connected to the electrical grid, Ahmed warns that over the next 20 years, the country's overall demand for energy will increase by 350 percent. During this period, the percentage of Pakistan's total energy needs met from domestic sources will fall from 72 to 38 percent.

Ahmed writes of the need to develop an integrated energy development plan combining energy imports, the development of indigenous energy resources, a more diversified energy mix, and programs emphasizing greater energy efficiency and better management. In the near term (gas imports via pipe line is never near term) gas imports via pipeline can deliver energy at competitive prices. The government gives a high priority to tapping the energy resources of Pakistan's neighbors, Ahmed asserts; several projects for the import of natural gas from the Middle East and Central Asia and of power from Tajikistan and Kyrgyzstan are under consideration. Moving from the near to the medium term, Pakistan will need to develop the rich coal deposits of the Thar Desert as well as nuclear power. The cornerstone of the government's long-range policy, Ahmed states, involves a shift from a predominantly state-controlled industry to an arrangement where the private sector plays a leading role in the development and management of the country's energy program.

Shahid Javed Burki, for many years a senior World Bank official who also served briefly as finance minister of Pakistan, provides a historical context in which to place Pakistan's current challenges. For nearly six decades, he writes, no Pakistani government made a serious effort to prepare for the country's energy requirements. As a consequence, Pakistan has been saddled with ░∞weak institutions, inappropriate pricing policies and insufficient public sector investment. The net result, Burki observes, citing the government's own figures, is that by 2030, energy demand in Pakistan will be almost 64 percent greater than projected supply. Unless Pakistan moves to address this shortfall, he warns, the country will inevitably pay a large cost not only in an economic sense, but also in terms of a rise in Islamic extremism and slower progress toward political democracy. Burki criticizes the previous government for resorting to ad hoc measures to deal with Pakistan's energy needs and for failing to address deep-rooted structural problems in the energy sector. The government's so-called strategy for placing the country on a sustainable path of development is, in fact, ░∞no more than a long wish-list of projects and intentions.░ Pakistan must develop a ░∞comprehensive strategy░▒ for meeting its energy needs over the next quarter century. Such a strategy would offer realistic approaches for addressing the widening energy supply-demand gap and, among many other things, would require greater political will than the government has displayed to date to overcome resistance to the construction of the dams that will enable the country to exploit its enormous hydroelectric potential. Burki also places considerable emphasis on the development and exploitation of new technologies, such as those that could turn cellulose into energy, as a means for Pakistan to meet its coming energy requirements.

Asad Umar (ENGRO) notes that until the early 1990s, the private sector's participation in the energy sector was limited largely to exploration and production. Over the past decade, however, a number of new companies, including prominent international corporations, have become major players in Pakistan. Privatization of formerly public sector entities has dramatically changed the energy landscape in recent years. Umar emphasizes four roadblocks keeping private enterprise from playing an even larger role in the energy sector: the unstable political situation and emphasize that a lack of access to modern energy services is inextricably linked to poverty and to a country's failure to meet the basic needs of its people, including food, attendant law and order problems in Baluchistan; delay in the privatization of public sector energy companies; the political controversy and provincial disagreements associated with storage-based hydroelectric power generation projects; and overlapping responsibilities of the Private Power and Infrastructure Board and the National Electric Power Regulatory Authority. Umar remains optimistic; however, predicting that the role of the private sector will expand in the years ahead, as the government continues its policies of privatization and deregulation. (2)

Looking at the scenarios, it is evident that it is not all gloom and doom.

In the past we have seen grand plans and ideas from government and WAPDA which could not be implemented. In real terms it has cost the nation at least US10 Billion in cost escalation, lost revenues from export and lower GDP. In addition outage, and load shedding has brought misery to millions of ordinary Pakistanis.

Pakistan has tremendous potential for having a sustainable energy policy, if appropriate planning measures are put in place.

In my opinion the following steps are worth looking into if we are to have a viable, secure energy development plan.


The first priority should be to develop Thar coal at the earliest. This shall not only save billions of dollars in foreign exchange in replacing imported fuel but shall also be instrumental in uplifting the socio-economic life both in rural and urban Sindh

In this context Pakistan should examine closely the 4,000 MW green-field coal-fired plant in India to be located near Mundra Port, Gujarat that the Tata has just foreclosed in conjunction with part of the financing from IMF. Although it is based on imported coal from Indonesia, the technology could also be used for Thar coal. This is India's first private sector power project using supercritical technology; most energy efficient plant in the country .Awarded by Ministry of Power through tariff-based competitive bidding in December 2006 at it is interesting to note that the agreed levelized tariff is US 5.65 cents per kWh.

In order to accelerate the Thar Development, GOP should go ahead with its plan to keep the development of Thar Coal Mining separate from power generation. Coal is a precious globally traded commodity and the forecast is that the demand and prices shall be steady for next 50 years, thus the Coal Mining in itself is a viable project


Smaller DE units to over come immediate shortages: These units are cost affective and can be up and running within 12 moths. DE is perhaps the only immediate solution to overcome power shortages in short term in Pakistan. Rapid deployment of small scale decentralized energy solution that can begin to provide immediate relief while the country debates longer term large scale solutions that will also require upgrades to transmission and distribution networks. By generating locally, the country will not need to expend resources in grid upgrades and expansion


The era of making larger dams is now obsolete. In Pakistan case it is mired in political and provincial politics and we have seen that from last 30 years despite several governments making strong commitments have not been able to mobilize the Kalabagh and similar larger dam projects.


Fostering of cross border energy investments and promotion of regional energy trade in order to take full advantage of the energy resources available within the region and its neighborhood are important elements of the solution to our energy problem. This is being increasingly recognized both by the region's political leaders and its business community. The current Iran-Pakistan-India Gas Pipe line is an important step toward Pakistan's long term energy security.

A recent report of World Bank entitled Potential and Prospects for Regional Energy Trade In the South Asia Region░ě thinks that such widespread regional energy trade provides a win-win situation to all the participants and is a logical and rational public policy choice because of the mismatch between energy demand growth and energy resource endowments.

Relatively smaller economies (Tajikistan, Kyrgyzstan, Turkmenistan) and Iran have hydropower or hydrocarbon resources far in excess of their energy demand. Pakistan has energy demand growth far outstripping domestic supply and in the foreseeable future the demand-supply gap would become wider unless the domestic supplies are supplemented by imports.


By one estimate of Pakistan's private energy systems, thermal efficiency in energy generation system tends to be around 32-35% when the global average is around 54%. In simplistic terms we could thus have a 60% improvement in energy generation by simply switching to newer production technologies. Distribution losses in these systems tend to be around 23%, whereas the technical losses should be no more than 3%. By this estimate Pakistan could increase its energy availability by a staggering 80% simply through more efficient distribution systems that could be updated at a fraction of the cost of mega-energy generation projects being proposed.


With little additional investment and retrofits some of the older units can be geared to generate more electricity. Also IPPs should be encouraged to work to their optimum and there should be a constant dialogue between government and them as how to manage under the present volatile oil and gas prices.




Pakistan should convene a ░ĂPakistan Energy 2008░ě Conference. Pakistan's energy tariff and policies are investor friendly, offers very good ROI, it is secure and covered by guaranteed power purchase agreements. There is keen interest from global/national investors and government has to facilitate a single window operation, helping investors identify opportunities, make available draft of Power Purchase Agreements (PPA), explaining the policies on Capital and Profit Repatriation, the Security Package and transparency in government dealings with IPPs. The invitation list should include private and institutional investors, Development Financial Institutions (DFIs) Power Companies, Plant Suppliers, Turnkey Contractors; Governments officials from friendly countries and world recognized technology experts. The Islamic Funds from Middle East are presently very much interested in Pakistan's Power Project and government should seriously look at the opportunities and send personal emissaries to initiate dialogue with them. Government should also be pro active in trying getting direct support and preferential funding from G8, USA and friendly countries from Middle East for the development of its power sector for meeting the energy needs of the country. This is central to Pakistan's sustainable development.


Pakistan should look at all options including Solar, Wind, (industrial domestic and agriculture) waste. There has been substantial improvement in technology and cost for Alternative Energy. In this respect the government should try to access the funding from Development Financial Institutions (DFIs) for providing incentives to encourage further private sector investments

Another important area is to examine the reason for non implementation of several polices and plans that various government in Pakistan have announced with such conviction and gusto. One of the major reasons was the lack of Governance in the Policy Process. The policy-making process in Pakistan retains an overwhelmingly expert driven flavor, revealing only a few elements of a transparent and participatory policy-making in the electricity sector. Considerable weaknesses remain in the governance process. There is insufficient clarity about how the decision process will unfold; it remains unclear how input from consumers are taken and used. There is problem of insufficient opportunity for public deliberation on these policies

In general, very little information about the basis for new policy initiatives is shared with the public

Parliaments and legislative committees need to undertake a more informed and robust debate on the implications of implementing techno-economic reforms from a public interest perspective by the legislature. A range of citizen, expert and government input should be considered, and supporting documents should be publicly available prior to the final decision. Making the records of these debates publicly available can enhance the transparency and accountability of legislative processes.

Clear processes for developing electricity policy need to be set up, and these procedures should be communicated widely, beyond sector insiders and industry actors well in advance so that people understand their opportunities to be involved. Systems to document the policy development process can be put in place at relatively low costs to enhance transparency about inputs into the decision, and improve accountability.

Greater public debate and scrutiny of these technical issues can help make the inevitable trade-offs between competing interests clear, and avert costly deadlocks. Transparency about the general terms of power purchase agreements is critical to ensuring that public interests are being protected, and can help curb corruption at the project transaction level. Similarly, when governments choose to sell publicly owned assets, greater transparency about how the sale price is determined can help ensure that the country is getting the best possible deal. An independent expert review of consultant recommendations can help a government make a considered decision about how best to respond. In many cases, civil society organizations and independent researchers may be able to provide new analysis, or identify innovative approaches to dealing with challenges. (3)

1 & 2 FUELING THE FUTURE: Meeting Pakistan's Energy Needs in the 21st Century

Woodrow Wilson International Center