ENERGY CRISIS COST THE ECONOMY OVER $8BN

KANWAL SALEEM
Nov 02 - 08, 2009

Despite decline in power demands with change in weather, the country is still facing energy crisis, as load shedding continues unabated leaving negative impact on industries and businesses.

People are spending 3-5 hours a day without electricity in the cities and 6-8 hours in the rural areas. The energy crisis has already cost the economy more than 8 billion dollars in 2008.

Experts of power sector told Pakistan and Gulf Economist that despite claims of the government, it would not be possible for the government to overcome power shortage by December this year and load shedding would continue in year 2010.

Currently, Pakistan Electric & Power Company (PEPCO) is facing shortfall of around 2500 MW and to overcome this shortfall load shedding continues. According to the Pakistan Electric Power Company (PEPCO) sources, the load shedding is being resorted to due to decline in power production from hydel sources. It may be noted that the PEPCO is expecting to overcome the power shortfall by December this year with the installation of 19 Rental Power Plants (RPPs), likely to generate 3500 MW.

However, the industrialists are challenging the claims by stating that the PEPCO would not be able to get more than 450MW out of RPPs. Further, they have feared that introduction of RPPs to the system would also burden the textile industry, as it would have to share Sui gas with the RPPs.

According to Federal Minister for Water & Power, Raja Pervaiz Ashraf, as many as 13 RPPs having power generation capacity of 1992 megawatts were being set up in different parts of the country and most of them would start power generation by end of November this year and other in the first quarter of 2010.

Besides, 2070 megawatts public sector power projects are also in pipeline and will generate power in next few years, he said. He said that power generated through rental plants would be of Re.1 per unit costlier than electricity generated through other sources such as Independent Power Producers (IPPs).

According to him, the government was taking various steps to overcome the 3500 to 4000 megawatt power shortfall, which includes launch of new projects in public and private sectors besides rental power projects. Power conservation plans are also being implemented which include day light saving, use of energy savers and LEDs.

Sources in Alternative Energy Development Board (AEDB) said that national power system would have over 42 MW power produced from alternate sources by December.

According to them, the Board is set to pour 35 MW electricity produced from Biogas, 6 MW from wind and 1 MW from micro-level hydro projects operated by its various stakeholders and private power producers by December this year.

The first 6-MW wind power plant of commercial scale in country's history was inaugurated on 19th April 2009 and Micro Wind Turbines of below 10-KW, 125-KW and 20-KW have been installed in Karachi, Landhi, and Kallar Kahar respectively.

Experts believe that line losses are major concern and by overcoming them power shortfall could be minimized. During 2006-07, Wapda suffered line losses of up to 21.4 percent, 13.2 percent, 13.6 percent, and 36.9 percent of the total distribution in Balochistan, NWFP, Punjab and Sindh respectively.

In 2007-08, Wapda had to suffer line losses of 20.8 percent, 34.5 percent, 13.2 percent, and 35.9 percent of the total distribution in Balochistan, NWFP, Punjab and Sindh respectively.

In 2008-09, the line losses were reported as 20.1 percent, 35.3 percent, 13.1 percent, and 34.7 percent in Balochistan, NWFP, Punjab, and Sindh respectively.

Oil refineries have told the petroleum ministry that they would be forced to shut down their operation if the Pakistan State Oil did not pay to them Rs53 billion.

According to a letter written by the refineries to the ministry, the PSO has to pay Rs18 billion to Parco, Rs13 billion to Pakistan Refineries Limited (PRL), Rs8 billion to National Refineries (NRL), Rs10 billion to Attock Refinery and Rs4 billion to Bosicor.

Sources said the overstretched debts of PSO had overburdened the company. The debts included Rs35 billion (Pepco), Rs20 billion (Hubco), Rs9 billion (Kapco), and Rs2.4 billion (PIA), and miscellaneous receivables of Rs3 billion.

According to PEPCO's spokesman, the power company had always accorded top priority to induction of industrial excess power i.e., power available with the industry, after it had initialized the same at its own works.

After ascertaining that not much actual excess power is available and that such power is fully used up, the company buys the power provided through redundant capacity lying idle with the industry on account of its having shifted to much cheaper gas fired captive power plants or grid supply through the various DISCOs. In other words, much expensive power is purchased from the industry to reduce the power deficits.

This is in presence of the fact that the industry, much away from its core business, has entered into the business of power generation and is in a comfortable mode as supply to the DISCOs in a profitable venture. Furthermore, the purchase of 250 MW or so power by DISCOs from captive power producers operative in the textile and sugar sector of Pakistan is clear indication that PEPCO has extended an unprecedented cooperation in interconnection of most of the redundant power plants to its system.

It can also be an effort on part of some of the interested parties to peddle such power, where the exorbitant interconnection charges make the whole affair a non-starter due to excessive financial cost, the spokesman added. More so, when all these costs are to be borne by the DISCOs, and eventually translated into the tariff for our customers.

The arrangements at PEPCO's end also include cost of such purchase by DISCOs to be included in the overall Energy Transfer Rate (ETR) of the Central Power Purchase Agency. Through this arrangement, a high level of comfort has been made available to DISCOs regarding any possible upward movement of their tariff. This has added upon the DISCOs resolve to buy comparatively expensive power. This, however, is based on a vary judicious concept and priority vis--vis captive power available and that could be immediately connected to the system through supply to adjoining industries and which would be weaned-off the grid supply subsequently.

Further, captive power could be connected to grid supply/DISCO's LD system on immediate basis. Captive power would need interconnection for more than one-kilometer line and that could be fed to the existing DISCOs/commercial customers on the least-cost-basis. Captive power requires heavy investments for interconnection but has substantial generation capacity to meet the expense likely to be incurred. Captive power is available in the standalone basis and, at the moment, cannot be connected to the grid supply. Such power would be placed on hold for future uses.

The PEPCO has also been propagating its needs and resolve to induct expensive captive power and consequently EOIs were invited through notices in the national press too. Unfortunately, not much interest was shown as a sequel to these notices.

The spokesman further said that the revision of Fixed Cost Component from Rs 1.26 to Rs 1.53 was again another indicator of cooperation extended by PEPCO. Moreover, DISCOs have made every possible effort to evacuate power from captive power producers, provided it is technically viable to further facilitate the industry to cogently enter into the power generation business and assist the power sector in its endeavor to mitigate the ongoing crisis.

As many as four industrialists have started work on their projects with completion in 6 months. Similarly, PEPCO is in touch with the sugar mills and distillers, which hopefully too would be able to chip in with some power by December 2010 under this Policy.

The spokesman elaborated that PEPCO, entrusted upon by government of Pakistan to eliminate load shedding from the country, is working on all short and long-term solutions. Therefore, DISCOs have always given due consideration even to a single MW offered by captive power producers through their redundant RFO capacity and will continue to facilitate the industrial sector particularly the textile and sugar mills in this endeavor to participate in the national effort. However, interests of the customers will dictate the basic principles for inducting captive power.