Pakistan’s extremely blessed to have abundance of coal, natural gas and water resources and all these could very well be the main fuels at different points of time, now and in future. But, it is also true that Pakistan has been faced with power crises and its multiplier effect on the economy for decades. There are basically two main issues: Transmission & Distribution (T&D by DISCOS) and generation. Solutions for the two divisions are very different given, of course, the distinct nature of the two businesses. The solution to take care of the generation is a bit more complex and strategic/long-term in nature; while the issues of Power Distribution companies (DISCOS) are more operational/managerial in nature and are fixable in the short to medium term. The element of large funding requirement, however, in both the cases, is common.
The primary requirement in T&D is to fix the structural and the management issues which could be pursued in two stages/phases. In the first stage, there’s serious need to take these entities out of the clutches of National Transmission and Dispatch Company Limited (NTDC), undertake certain structural changes, and provide them independence in terms of management and operations. Practically housing all these entities under NTDC, albeit administratively, makes the whole business of NTDC ungovernable. There’s genuine need of capacity building in National Electric Power Regulatory Authority (NEPRA) like rest of the power sector.
Secondly, there must be ‘tailor-made solution’ for each entity; ‘one-size-fits all strategy’ won’t work. Every DISCO has its own unique features and specific issues; generic or overlapping items/issues will be very few. The process of privatization remains the key and must be handled in the most professional and transparent way. The Privatization Commission has to ensure active participation from interested parties through specific roadshows in selected countries/regions, particularly China (and other Asian countries), Turkey, Saudi Arabia, the UAE, Qatar, London, USA, etc., on a one-on-one investor basis. Only direct selling will ensure maximum extraction of value.
While suggesting any solution on the generation front, one need to keep affordability (costing/pricing) and availability (net thermal efficiency/usage) of resources/electricity in view. There are no quick fixes to this problem at hand but surely some options could help in addressing this issue quicker than the others. The quantum of the issue is so large (demand-supply deficit of 6000-7000 MW and growing) that the solution has to be such that it would address this deficit adequately, e.g. Alternate Energy Fuels — Wind, Solar, Waste-to-Energy, Run-of-the-River, etc. — could be one of the supplemental fuels but can’t possibly be the main fuels to address this large gap. These fuels are essentially long-term solutions (12 years and beyond) and will always be limited in scale due to capacity utilization/technology.
That essentially leaves Coal, Natural Gas, and Water, as possibly the most viable options. However, in short to medium term, contrary to the popular belief about Coal, Natural Gas is the most viable fuel to address this large power deficit in the quickest possible way at the most affordable costs/pricing. The typical lead time for setting up coal-based power plants is 4-5 years, and building medium-sized dams is 7-10 years, whilst a gas-based power project could be converted into 9-12 months, or even earlier, on an already producing field/mine. It’s important to mention that the conversion of existing Diesel/Residual Fuel Oil (RFO) based power plants to coal, may be the quickest solution to the problem (15-18 months period), but it has a glass ceiling of 3000-3500 MW.
Given total estimated 66+ Trillion Cubit Feet (TCF) of explored and unexplored gas reserves in Pakistan: existing reserves are approx. 29 TCF whilst our annual utilization is approx. 4 BCF. The unexplored reserves are estimated to be in the vicinity of approx. 37 TCF. This is pretty sizeable and that’s onshore only. We have huge opportunities offshore and, of course, shale gas which is an expensive source of exploration and must be taken in at a later stage. The availability of natural gas for power, therefore, can easily address the current deficit. It can also contribute substantially towards the future energy needs through rationing of the existing resources and better Exploration and Production (E&P) activities.
Another area which needs rationing is domestic consumers (second largest user of natural gas – north of 18%). This segment needs to be diverted away from natural gas usage to power and/or solar, particularly for domestic heating. The new large real estate projects should not be allocated gas or electricity. They need to find their own power generation solutions, ideally solar or wherever possible wind. Solar-driven domestic heating initiatives to be made mandatory for all future requirements. There shall be fiscal benefits, both in the forms of taxation and concessional credit, for encouraging utilization of solar as the fuel.
Stated above is a solution to address the immediate power shortages for which the estimated timeline is 1-3 years. For the medium-term (4-6 years), coal, particularly that which is locally mined. The long-term (7 year and beyond) solution vests in hydropower projects. To achieve a proper fuel mix, alternate fuels to the extent of say 1/4th of that, is an absolute essential from the long-term energy security perspective. This can be achieved at the lowest possible costs, which should not cross single digit ever. This thesis makes the argument for consolidated Energy Ministry (merger of Ministry of Water and Power and Ministry of Petroleum & Natural Resources) more cogent. There seemed to be divergent priorities/views of the two Ministries — for example, the allocation of natural gas to power sector is low on the priority list of the MoP&NR, while it is, and should be, top of the MoW&P priority order. The resolution of the circular debt issue can also be best managed and resolved, if the two ministries are consolidated.