Pakistan continues to be afflicted by the worst power outages which have crippled the national economy. According to the Economic Survey of Pakistan, energy crisis is causing a 2-3% loss to GDP. Here darkness, literally, holds sway over the land. But, the crisis did not spark off all at once; the situation was in the making for a long time, and it took many years to reach this annoying stage. Had some corrective measures been taken keeping in view the future energy demands, the darkness would not have thickened this much.
A broad assessment of country’s energy sector reveals that at the heart of this multifaceted crisis is the lack of sustainable policy focus on the part of successive governments. They failed to address the problem in an institutional and proactive manner.
The incumbent government deserves kudos for devising a holistic National Power Policy 2013 which frames broad contours of energy policy, articulates the vision for power sector, highlights key challenges, sets major goals, suggests policy guidelines and devises processes to protect Pakistan’s energy interests. Making Pakistan self-sufficient in energy is the overriding objective the National Power Policy seeks to achieve. Though the Policy enjoys broad-based political support and ownership, the key challenge pertains to translating it into reality.
Pakistan’s power woes can be traced back to the energy mix the country has developed over the decades. A review of relevant data reveals that the energy mix stood at 50% hydel and 50% thermal in 1994-95. It started to change in favour of thermal source in the following years as the then government resorted to relatively easy and convenient mode of power generation through installation of thermal power plants by the Independent Power Producers (IPPs). The terms and conditions negotiated with the IPPs were to prove disadvantageous to Pakistan later. In year 2000-2001, Pakistan generated 70% and 30% of electricity from thermal and hydel sources respectively, whereas in 2012-13, the ratio stood at 66:34 (thermal and hydel).
This skewed energy mix is responsible for consistently high power tariff as the prices of oil have been soaring, thanks to political and geostrategic factors which were beyond control of successive governments. To avoid political fallout, they often subsidized the power tariff as the gap between per-unit generation and sell-off cost was significant. This practice created distortions in the system and increased supply-side constraints thereby leading to emergence of a phenomenon called ‘circular debt’.
The reliance on the costly sources for power generation becomes all the more criminal if seen in view of untapped hydropower potential the nature has blessed Pakistan with. According to studies undertaken by WAPDA, the country possesses an identified hydropower potential of 60,000 MW. We have only been able to tap merely 6900 MW so far. It is lamentable that we didn’t build any major reservoir after Tarbela and Mangla dams. This gives some idea of the policy neglect the water and hydropower sectors have suffered at the hands of inept policymakers.
A careful review of per unit cost of electricity generation from various sources for fiscal year 2013-14 (Jul-Feb) shows that hydropower contribution by WAPDA in the overall system was 21.7 billion units at an average cost of Rs. 1.3 per unit. Gencos (public sector generation companies being run on thermal) contributed about 9 billion units costing Rs. 15.5 per unit. Independent Power Producers (IPPs) added 31 billion units cumulatively at Rs. 15 per unit on average, whereas 0.9 billion units came into the system from other sources at the rate of Rs. 12 per unit. The above-mentioned per unit cost of electricity generation is exclusive of distribution and transmission cost adding which shall increase per unit generation cost to Rs. 16-18 on average.
The cost of generation by Gencos remained as high as Rs. 21.3 per unit and that of RFO, and HSD sources under IPPs touched Rs. 20.5 and 23.5 per unit respectively. There is a misperception that wind power would be far cheaper. As per available data, per unit cost of wind electricity went as high as Rs. 16.6. Just imagine where the power tariff would reach if the same quantum of electricity is produced from thermal and other sources. The consumers, in that case, might have to pay an average per unit tariff up to Rs 25. So if the consumers are getting a bit of relief now, it is due to hydel electricity.
Pakistan’s problem is not merely the availability of electricity. What we need the most in the wake of our expanding economy and increasing population is cheap, affordable and environment-friendly electricity. We can also get rid of scourge of circular debt once and for all only if we increase the ratio of hydroelectricity in the energy mix, decrease line losses and improve efficiency of the distribution and transmission system.
It is heartening to know that the present government has brought the spotlight back on development of hydropower and water sectors. Neelum-Jhelum Hydropower Project, Tarbela 4th and 5th Extension Projects, Diamer-Basha Dam, Dasu Hydropower Project and Bunji HPP hold the key to achieving energy security for the country through the induction of low-cost, clean and environment-friendly electricity in the system. However, arrangement of funding for these mega projects remains a critical question. In addition to seeking foreign investment for these projects, the government should do well to mobilize its own resources.
Pakistan’s future lies in harnessing vast hydropower potential that can ensure energy security. We need renewed policy focus, commitment of the government and massive investment into development of our water and hydropower sectors. In case of anymore dilly-dallying, we run the risk of adding to our woes much to detriment of our polity and long-term energy interests.