RESOLVING THE ENERGY CRISIS

(Edited version published in “The News” May 13, 2010)

The total installed power generation capacity in Pakistan is about 20,000 MW. At any point in time about 75% of it is normally operational. Pakistan’s demand is around 15,000 MW. The operational capacity and demand seem to match. Why is it then that we are only able to produce a little over 10,000 MW these days leading to huge load shedding and industry closures? There are a variety of factors. The 6,000 MW potential from hydel sources is not generating more than 2,200 MW due to water shortages. Gas shortages for IPPs and Gencos have resulted in another 1,000 MW shortfall. The circular debt owed to power producers, oil marketing companies and gas utilities is another factor.

Pakistan benefitted from the economic peak from 2002-2007 with GDP growth averaging 7% per year, per capita income doubling and the exports increasing by over a 100%. But while the economic planners were doing a good job, the energy planners of that regime could not keep pace. The new government has not been able to come up with any crisis management plan either. Half its term is already gone and besides accusing the previous government for all the ills of the country, the only energy policy we have seen is rental power plants. This policy has been declared non-transparent and in-capable of meeting the shortages of power by the Asian Development Bank. The current energy summit only brought out, primarily, energy conservation measures.

All the ten new IPP plants currently being commissioned were financially closed in the last government, despite the fact that the IPP policy of that time left the entrepreneur at the mercy of NEPRA for tariff determination. The IPP policy of the PPP government in the mid nineties might be blamed for non transparency but the fixed tariff basis on which proposals were solicited is something we should move towards. Six hydro power plants on which work is currently going on, five in the public sector and one in private sector, started in the previous government.

Another flawed policy of the last two decades was of successive governments disallowing WAPDA to up-grade its existing generation infrastructure nor to set-up new power plants while waiting for it to be privatized. This, coupled with an in-adequate IPP policy and lack of political will to go for big hydel projects, has landed us in the current state of affairs. The last government towards its end started the policy of rehabilitating existing public sector power generation infrastructure and allowing WAPDA to set three power plants at Nandipur, Chichokimalian and Guddu. Guddu was financially closed in 2007 but since then the new government has not been able to financially close the other two projects in the public sector.

The Rental Power Plants (RPPs) were supposed to generate 2,250 MW of very expensive energy. Not a single MW has come on line to date. The government has not formulated any plan to utilize the vast Thar coal resources or for additional gas production or made any progress towards trans-national pipe lines (Iran-Turkmenistan-Qatar). India in the meantime maneuvered its way into the Iran pipeline project only to use it for extracting the civil nuclear power deal from the U.S. They are least bit interested in this pipeline deal now and have succeeded in pushing Pakistan at least five years back in completing this project. The U.S. has now publically advised Pakistan to drop the IPI gas pipeline. There is not a single project in thermal, gas, coal and hydel power generation or development of primary energy sources which this government has initiated. In fact, projects that were ready for awarding, which would have significantly bridged the energy gap, have now turned into disasters.

The previous government, in a very transparent manner, brought together the world’s leading energy consultants to work on Mashal LNG project. LNG is not an openly traded commodity like sugar, wheat or oil. LNG supply contracts are very complicated processes where no exact mechanism exists. In a very professional manner, the integrated project, which would have provided LNG to the country on a long term basis and would eventually have resulted in an LNG terminal in Pakistan, was floated. Two major international LNG players came forward. After proper due diligence, one bidder was recommended. For over two years, the new government did not award this project and sat on it for reasons best known to them, while the country suffered enormous gas shortages. What the government did do eventually was to unbundle this integrated project and issue a tender for short term purchase of LNG. No where in the world is LNG sold or purchased through such tenders. In 2007 the LNG market was a buyer’s market and if the new government had awarded the contract, considerably cheaper LNG could have been available in Pakistan. This act of the government has undermined the entire LNG project. Even after the Supreme Court decision of nullifying this contract, we will be lucky if serious global LNG companies would still be interested in Pakistan. Without such supplies we are clearly heading for gas load-shedding which will be worse than the load-shedding the country is facing now.

What is required now is to have an optimum energy mix based on maximization of indigenous coal and hydel power generation. Priority should also be placed on renewable energy sources like wind and solar particularly in remote and rural areas. The country’s current energy mix is Oil 31%, Natural Gas 51%, Coal 5%, Hydel 12% and Nuclear 0.7%. What we should strive for is Oil 20%, Natural Gas 51%, Coal 15%, Hydel 20%, Nuclear 4% and renewable 1%. Optimal capacity utilization from IPPs must be ensured. The IPPs which were set-up in the mid 90’s are beyond the front loading periods of their tariffs. Also, the more the power purchased from them, the lower will be the tariff. Contrary to popular belief that Thar coal is an inferior coal, technology exists in the world where such coal can not only produce energy, but in the process also natural gas. The brackish water in the Thar area can be converted into potable water during the process. Up to 10,000 MW eventually can be generated from Thar coal. Every sugar mill in Pakistan is capable of producing energy which can be sold to PEPCO, based on a process called co-generation. Co-generation uses technology where baggase, a by-product of sugar manufacturing, and coal can be used to generate energy. As a modest estimate, 2000 MW can be added to the system through this source. The tariff for such energy projects should be attractive enough for entrepreneurs and financial institutions to finance.

Pakistan has an estimated hydel potential of close to 50,000 MW. Only a little over 6,000 MW has been installed. The big dams in the pipeline are Bhasha, Bunji and Dasu. Pakistan should have built a big dam every decade. Mangla was built in the sixties and Tarbela in the seventies. Unfortunately, in the last 3 decades not a single big dam has come into existence. If the various political parties of this country can arrive at a consensus on as controversial an issue as renaming of NWFP, could they not, if they were really concerned about Pakistan’s future, have reached a consensus on Kalabagh. One large dam is required just to overcome the losses due to silting in the existing dams. Any further dams would enhance the water storage capacity of the country.

Almost 8,000 MW can be generated through small / medium hydro units on rivers and canals. Pakistan has developed good capability of nuclear energy both for peaceful and strategic purpose. We must explore ways and means of increasing the share of nuclear energy from 0.7% to 4% per year. Seeking a civilian nuclear energy agreement from the U.S should be our top priority. All the water and power sector projects like Gomal Dam, Mangla raising, Thal flood water canal, Kachhi Canal, Rainee Canal, Satpara Dam, Kuram Tangi Dam, Mirani Dam, Sabazkai Dam, Jinnah Barrage, Allai Khawar, Khan Khawar, Duber Khawar, Malakand-III and Neelum Jhelum Hydro Electric Projects, were initiated in the last government. There are a number of other sites, in various stages of study, for water reservoirs and power generation, both on Indus and Jhelum rivers and off-channel, which should be pursued vigorously. Also, there are small and medium storage sites in all provinces of Pakistan which must be pursued. Bhasha dam should be the number one priority of this country at the moment.

But all this needs vision and capacity in a government, which is not to be seen anywhere at present.

The writer is the Secretary General of Pakistan Muslim League and a former Federal Minister.