BRINGING CHANGE IN ENERGY MIX

COST OF ELECTRICITY GENERATION CAN BE CONTAINED BY ESTABLISHING HYDEL PLANT, USING COAL, AND INSTALLING WINDMILLS.

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
July 25 - 31, 20
11

At present, electricity outages hover around 12 hours in urban areas and exceed 20 hours in rural areas. Fertilizer units face mandatory closure for 45 days and 20 per cent curtailment in regular supplies.

In many cities and town gas supply to industrial units remains suspended up to three days in a week. CNG stations also face mandatory closure. Employees face massive retrenchment and prospects for new job opportunities are bleak. Energy related demonstrations are on the rise and often turn violent.

In such a scenario, achieving GDP growth target of 4.5 per cent and enhancing tax collection seems almost impossible to achieve. Therefore, there is an urgent need to overcome energy crisis or be ready to face anarchy-like situation.

First of all, it is necessary to understand the prevailing crisis, factors responsible for this and coming up with suggestions to overcome the crisis. However, one point must be clear that hike in electricity and gas tariff just cannot help in overcoming the crisis.

A comprehensive 'Energy Policy' has to be developed with the cooperation of all the stakeholders and details of the policy to be followed in letter and spirit. Let one point also be very clear that the prevailing energy crisis is the outcome of gross mismanagement and blatant disregard to good governance. It may also be kept in mind that demand does not exceed supply. Any shortfall in supply is because of failure to take immediate corrective step.

The present electricity generation capacity (including KESC and both the nuclear power plants located at Chashma) exceeds 25,000MW but generation hovers around 15,000MW. Power plants are being operated at disappointingly low capacity in an attempt to save fuel. It is true that hydel generation witnesses seasonal variation but there is ample water in the dams and the excuse of its limited availability is unacceptable.

To be honest the independent power plants (IPPs) are providing bulk of the supply, at times hovering around 6,500MW. Out of this more than half is supplied by HUBCO and KAPCO.

Hydel generation is around 5,000MW. About 650MW is being supplied by Chashma twins but most disappointing performance is of the generation companies operating under the umbrella of PEPCO. This clearly indicates that nearly 60 per cent of Pakistan's total power generation capacity is thermal based, mostly using gas and furnace oil. Since prices of crude oil are hovering around US$85 per barrel, the public has to bear the brunt.

The situation is real precarious because transmission and distribution (T&D) losses of electricity distribution companies hover around 40 per cent. Out of this, two-third is outright theft. No company in the world that faces nearly one-third pilferage can be economically viable.

Added to this is billions of rupees receivable. Since many of the entities fall under the category of 'essential services' their electricity supply can't be disconnected. Similarly, the illegal connections can't be removed because of the resistance by political and ethnic parties.

It is no secret that thermal power generation is most expensive and unless Pakistan's energy mix is changed, the country just cannot come out of the present mess. Hydropower generation costs the least but initial capital expenditure is very high. However, the added advantage is creation of additional water storage facilities and least creation of pollution. Since some of the mega projects face opposition, alternatively the government should go for smaller hydel as well as run-of-the-river type facilities.

It is believed that Pakistan's has not been able to convince the multilateral lenders to provide soft-term loans for the construction of hydel projects. One of the reasons is that multilateral lenders want to transfer the ownership of power generation, transmission and distribution businesses to the private sector.

Under this changed stance HUBCO was established in the private sector and 34 per cent share of KAPCO were off loaded. It was only recently that KESC was privatized. However, the benefit of privatization has not become evident as yet. The government is the biggest beneficiary of KAPCO, as it still owns 66 per cent shares of the company.

Pakistan has no alternative but to go for massive coal-based power generation. A lot of time has been wasted. However, with the entry of a private sector company into private-public partnership it is expected that the project may meet ultimate success. However, some of the irritants affecting progress of the project must be resolved at the earliest.

Pakistan should also benefit from the Indian experience, where nearly 10,000MW electricity is being produced through wind turbines. Pakistan has more than 1,200 kilometer long coastal line which is ideal for installing such turbines.

India has succeeded in achieving this mega target only because it entered into technology transfer agreements with the global leaders for the local production of these turbines.

Private sector of Pakistan should also try to enter into technology transfer agreement for local production of these turbines to facilitate installation of up to 5,000MW. Half of the output can be very conveniently consumed by Karachi alone.

Cogeneration can help in containing cost of electricity generation. Some of the industrial units have already deployed this technology and others must follow their footprints. By using this technology, electricity can be produced at a nominal cost. However, achieving the target may not be possible without ensuring availability of equity/debt for these projects.

In the recent past, PICIC Asset Management floated energy fund, aimed at facilitating power generation companies in resource mobilization. In the absence of development financial institutions in Pakistan flotation of open-end energy funds can help the entrepreneurs to avail a new window and help the country overcome lingering energy crisis.

Sugar mills can become the immediate clients as all of them have stream turbines and can produce steam at a nominal cost by burning baggage. These mills are capable of producing around 3,000MW electricity and adding more capacity can be made economically viable by increasing production of sugarcane in the country. The country can double the sugarcane production without bringing additional area under sugarcane cultivation.