SUSTAINABLE SOLUTIONS TO THE ENERGY CRISIS

DR. MUHAMMAD ASIF
(feedback@pgeconomist.com)

May 2 - 15, 2011

Pakistan is facing the worst energy crisis of its history, which is intense, multi-dimensional, and costly. On top of severe shortfalls of electricity and gas, the affordability of different types of energy commodities has also become a major issue. The crisis is having enormous economic, socio-political, and strategic ramifications for the country.

To overcome the energy problems facing the country it is essential to formulate a comprehensive energy policy to be followed by stringent implementation. It is also vital to overhaul the energy departments. By running the installed power plants on full throttle, controlling transmission and distribution losses and other system leaks and by employing energy conservation and management measures the issue of load shedding can be considerably arrested.

For long-term energy prosperity, Pakistan's best hope is with the indigenous energy resources such as coal, hydropower, and renewable energy.

The prevalent energy crisis has made life extremely hard for the hapless Pakistanis as they face up to 20 hours of electricity and gas load shedding along with frequent disruptions in transportation fuel. The intense shortfall of electricity - crossing the 6,000 megawatt mark and recording an over 40 per cent deficit in the demand and supply equation - has left them struggling even to meet the fundamental needs like lighting, water, cooking and protection against extreme weather conditions. The resulting sleepless nights, disfigured daily routines and exacerbated financial conditions (also depriving over four hundred thousand from their jobs) have made life all but a set of continuous physical, financial, and psychological torture for them. This is indeed not the reward the conscious citizens deserve in lieu of the taxes that they pay to the government. The current crisis, from its early days, has come down very hard and has been inflicting enormous economical, socio-political, and strategic implications. The socioeconomic ramifications of the problem, for example, can be gauged from the official reports that suggest that over 400,000 industrial workers have lost their jobs and the country's industries are facing an annual monetary loss of over Rs240 billion.

Given the intensity and dimensions of energy crisis, solutions are required both on the short-term and medium-to-long basis. The article presents a set of appropriate solutions to tackle the problem in a robust and cost effective manner.

COMPREHENSIVE ENERGY POLICY

The energy problems of Pakistan can not be addressed without the development of a vibrant and coherent energy policy. It is equally important to ensure stringent implementation of the policy. There have actually been several energy policies in the country over the years. Unfortunately, none have been able to deliver. The country is yet to see a comprehensive and visionary energy policy. The energy policies produced so far have been quite narrow in scope. The famous 1994 power policy, for example, focused mainly on independent power production, ignoring other energy resources and technologies. In much the same way, the 2006 renewable energy policy, as the name implies, focused on renewable technologies alone. There have also been hydel policies and oil and gas policies. Nevertheless, all have fallen short of encouraging a robust and coherent approach to national energy issues. The need is to formulate an integrated and comprehensive energy policy that covers all major aspects including oil and gas, hydropower, coal, nuclear power, renewable energy, energy conservation and management, energy security and energy trading.

Meaningful implementation of whatever energy policies there have been is a major issue. It is not just a lack of commitment on the part of the pertinent authorities, but also political instability that has caused governments to change frequently. Poor implementation of policies deteriorates the confidence of foreign as well as local investors. The main point of a well-thought-out energy policy should lie in its long-term approach - it should be designed to cover at least 25 years, obviously incorporating periodic reviews that would enable decision-makers to correct any lapses. It can only be accomplished by containing a certain degree of rigidity as well as flexibility - the goals and targets, for example, must be categorical while the route taken to accomplish these could be flexible. The policy should be framed with all stakeholders on board, most importantly the mainstream political parties. Other political forces with provincial or regional manifestoes and advocacy groups also need to be taken into confidence.

Interprovincial harmony and agreement has to be at the heart of the policy. Once agreed upon, the designed policy should be given constitutional protection so that future governments do not jeopardize it for the sake of vested political interests, as has been the case in the past.

Reliance on indigenous energy resources must be at the heart of the designed energy policy. The steadily rising demand for fossil fuels in combination with their low reserves is bound to usher in a new energy era in the world. Given the volatility in oil prices and fierce competition for access to its deposits, global geo-politics is set to be ever more driven by the energy factor. The likelihood of all-out wars over energy resources cannot be ruled out. In such a scenario, it is critical for a country like Pakistan to rely on indigenous resources as far as possible.

REVAMPING OF ENERGY DEPARTMENTS

A large number of energy departments have been created in the country over the years. They have however largely struggled to respond to the challenges facing the country as is also evident from the current state of affairs. Parallel to the governmental/political interventions, their own institutional weaknesses are to be blamed for the dismal condition of the energy departments. Their refurbishment is of the utmost importance in any attempt to improve the national energy scenario.

As a starting point, the departments have to be freed from political pressures-they have to be given a reasonable level of policy and decision-making autonomy, which is not the case at present. The limitations of financial and technical resources, which have traditionally constrained their progress, also need to be addressed. Lack of funds has often delayed not only orchestration of crucial new projects but also timely overhauling and up-gradation of the existing ones.

Similarly, the ageing infrastructure, particularly in terms of an inefficient transmission and distribution system mainly roots from lack of funds. The performance of the energy departments have been greatly undermined by customary lack of commitment and poor management. The consequent wide-ranging administrative inefficiencies and financial irregularities must be eradicated to bring about a positive change in the national energy equation. Arrangements have to be made to ensure across the board transparency. Particular attention needs to be paid to areas like project bidding and development, and tariff determination. An appropriate level of automation should be introduced in order to minimize the involvement of the human factor in issues prone to corruption. Carefully calculated structural changes in departments, to seek improved productivity, can be pursued. Priority in doing so should be to lessen bureaucratic layers rather than the other way round.

In view of their technical nature, energy departments must be run by engineers and professionals rather than bureaucrats and non-technical people. Dealing with areas like project planning and development, energy management and tariff determination should be the job of hard core professionals. Lack of coordination amongst different energy departments is another major issue that undermines the progress of energy sector. In order to improve the overall productivity of this sector and to ensure coordinated and coherent results, ideally, there should be a single entity to oversee all forms of energy technologies.

MISCELLANEOUS SOLUTIONS

SHORT-TERM SOLUTIONS

The existing power generation capacity needs to be fully capitalized. The current crisis has largely been exacerbated by underutilization of thermal power plants. Estimates suggest that during the summer months of last few years the thermal power plants have underperformed by over 4,000MW making the electricity shortfall acute. Only by having the installed thermal power plants run on full throttle, the current deficit could be substantially lessened. The circular debt that has greatly skewed the financial capability of thermal power plants to run on full throttle needs to be sorted out. Unless this problem is addressed, the existing power plants cannot operate on full throttle.

More than 3,000MW of power generation can be added by revamping WAPDA's old thermal power plants such as Shahdara, Faisalabad, Multan, Jamshoro, and Guddu power stations. This is a far cheaper, quicker, and secure option in comparison with both the rental power program and independent power plants.

The losses in the power sector are required to be curtailed. System losses that ideally should be 6-7 per cent are nearly 23 per cent in WAPDA and over 40 per cent in KESC. In some of WAPDA's controlled areas, the losses are also over 35 per cent. A major chunk of these losses come from electricity thefts that can be relatively easily controlled. Around 1,500-2,500MW of electricity can be additionally made available by controlling thefts in the form of kunda culture, meter tempering and other forms of illegal connections.

Over 20 per cent of the national energy can be saved by implementing meaningful energy conservation and management program. The existing energy consumption practices in all sectors including industry, household and trade and commerce are extremely inefficient. According to the Planning Commission of Pakistan, the energy utilization per unit of GDP in Pakistan is more than double to that of the world average and more than five times that of Japan and the UK.

With the overwhelming energy challenges facing Pakistan in general and the intense shortfall of electricity in particular, apart from setting up new power generation plants, it is imperative to embark on a meaningful and coherent energy conservation program in order to use the available energy more productively. Energy conservation can ease the burden upon the national grid. Through increased efficiency, for industrial and commercial users, it can result in increased profits. It is also noteworthy that energy saving is like energy generating and is the cheapest possible solution to energy shortfalls.

The prospects of onsite power generation in large industrial units should also be explored. There is a significant potential for and captive power generation in industries like sugar mills which needs to be tapped.

MEDIUM-TO-LONG TERM SOLUTIONS

Coal is a promising candidate that can substantially help Pakistan overcome its energy challenges. The fact that coal accounts for less than one per cent of the total electricity generation implies that coal reserves in the country are virtually untapped. Coal can offer huge strategic and economic benefits to Pakistan. It can not only help the country meet its electricity and gas needs with ease but can also make a considerable contribution towards meeting its oil requirements. By providing large amount of indigenous and cheap energy, it would improve the energy security of the country.

Hydropower is one of the most important sources of energy for Pakistan. It is by far the most economical source of electricity. According to WAPDA statistics, the average annual electricity production cost from hydropower is less than 8 per cent of that from thermal power. Despite such a distinctive financial edge over other forms of electricity sources, Pakistan has done a great injustice with this vital resource - only 15 per cent of the available potential resource has been exploited so far. As a matter of fact, there are at least 7 potential hydropower projects with capacity in multi-gigawatts (GW). It is absolutely crucial for the country to strengthen its hydropower base by building a number of large as well as small dams without any further delay.

Renewable energy is globally recognized as an important source to meet the present and future energy requirements. Various forms of renewable energy especially wind power has already been streamlined to play an important role in the supply mix of a number of countries across the world. Pakistan has enormous potential for different forms of renewable energy including solar energy, wind power, and biomass. Renewable energy is traditionally regarded as an expensive form of energy. In recent years, the prices of the conventional forms of energy (i.e. fossil fuels) have experienced an unprecedented growth.

The average annual price of a barrel of crude oil, for example, jumped from US$12.3/barrel to US$91/berrle in 2008. After a period of relative relief in the latter half of 2008 and earlier half of 2009, the crude oil prices were on a rise again and it is forecasted that the prices could hit the US$200/barrel mark in near future. Owing to the fact that the base load of Pakistan's power generation comes from thermal power plants, the electricity prices in Pakistan have jumped by more than 100 per cent over the last couple of years alone. These trends are going to have a positive impact on the economic viability of renewable energy technologies. Pakistan thus needs to tap its rich renewable energy resources in order to generate indigenous and environmentally friendly energy.

Reliance on imports of energy technologies is another costly affair that requires attention. Presently, in the absence of a local relevant technological base all types of energy systems i.e. thermal power plants, nuclear power plants or hydropower facilities have to be largely imported. In the case of renewable energy technologies, the state of affairs is further unsatisfactory. The situation is not only having a negative impact on the generation cost of energy but also add to the imports burden of the country. Amid numerously emerging new technologies, such as advanced nuclear systems, renewable energy systems, and fuel cells, in the medium to long-term scenario, the energy sector is going to experience a fast changing and expanding business environment. In order to be well-positioned to tap upcoming business opportunities, local industry would have to overcome its complacency. Rather than relying on consistent hardware-import, as has traditionally been the practice, emphasis should be placed upon technology transfer and reverse engineering so that a few years down the line the country is capable of locally producing the desired level of energy systems.

Pakistan also lacks in terms of qualified human resource. To ensure a sustainable energy future, a strong human resource base is imperative. Universities have a great role to play producing competent and qualified engineers and professionals with expertise in a diverse range of energy areas. They should produce experts in the areas of both conventional and non-conventional energy systems, energy trading, energy conservation and management, energy security, and risk assessment.

(The writer of this article is the Lecturer, School of the Built and Natural Environment, Glasgow Caledonian University, Cowcaddens Road, Glasgow, G4 0BA, UK. He can be contacted at dr.m.asif@gmail.com.)