[Maarten Van Horenbeeck] [International Relations and Political Science]



Energy Solutions for Pakistan

Maarten Van Horenbeeck
maarten@daemon.be


Abstract

This paper reviews Pakistan's struggles to maintain an effective power supply for its citizens. It investigates the roots of the current energy crisis, provides a literature analysis on the reasons for the issue, and finally proposes a number of policy solutions to improve the current situation. It also reviews some of the current government decisions intended to lighten the lack of electricity supply into major cities in Pakistan, and evaluates their proposed effectiveness.

Keywords: Pakistan, electricity, power supply, energy policy

Pakistan's power struggles

The average citizen of Pakistan deals with approximately 8 to 14 hours of "load shedding" each day, during which no electricity is provisioned. The root cause of this is an electricity shortage of approximately 5000 Mw (Alter and Syed, 20011). This shortage has significant impact on the potential of the Pakistani economy. Jamil and Ahmad performed a comprehensive study on the relationship between electricity consumption and economic growth, and identified that there is a unidirectional causality between economic output and electricity consumption and price (Jamil and Ahmad, 2010). Hence, a lack of a stable electricity supply impacts development of Pakistan as an economic power.

Investigating the root causes of this dilemma, we find that in 2003-2004, Pakistan generated 19,478 MW of electricity, an increase of 9.6% over the previous year (Muneer and Asif, 2005). The majority of electricity generation in Pakistan originates with thermal plants, at 63,972 million kWh, 31,953 from hydro plants and 2,288 from nuclear power plants (Khan and Qayyum, 2009). Khan and Qayyum note three additional points of interest: In this sense, it is clear that Pakistan has significant limitations on domestic power generation.

In many ways, the situation in Pakistan compares to that of another South Asian country, Nepal. Ratna Sansar Shrestha identified Nepal as a country which suffers from load shedding, mostly caused by a mismanagement between supply and demand. Similar to Pakistan, Nepals' government promises the issue will be addressed in the next few years, quoting a number of large impact new power generation projects. (Shrestha, 2010). Shrestha found these to be unconvincing, and recommended revisiting the investment process to ensure genuine developers participate, rather than licenses being issued to developers who have no clear track record of success, leaving power generation licenses unused. He also found that isolating transmission lines would have a much lower cost (50 million rupees) than bringing online a new power plant (1 billion rupees) with capacity to cover existing transport losses, which are at 25.15%. Finally, Shrestha proposed a "smart tariff" plan to discourage electricity usage at peak times.

Pakistan's answer: the National Power Policy

In 2013, the government of Pakistan published its National Power Policy. This policy flags as current challenging the supply and demand gap, resulting in load shedding, in addition to an inefficient power transmission system, recording losses of up to 23-25% and the high cost of electricity generation using thermal fuel sources. Its policy states as an explicit aim to address the supply-demand gap by 2017 (Government of Pakistan, 2013). Its plan aims to achieve this by: Little independent analysis is available of Pakistan's National Power Policy. In addition, the document, while theoretically correct, offers little information on how it will achieve these goals. While it spells out the additional power which will be brought online in new plant projects, it does not provide clarity on the level of commitment the government has made in bringing them online.

Can Pakistan meet its future energy needs?

If no action is taken, the situation in Pakistan is unlikely to change. The population growth in Pakistan is 1.7% year over year. In addition, electricity consumption per capita grew from 358.61 kWh in 2000 to 449.25 kWh in 2011 (World Bank, 2014). Yet installed capacity of electricity generation in fact decreased from 19,450 to 19,420 MW between 2006 and 2007, and annual growth of primary energy supply increased only moderately, from 4.18% to 4.33% over that same year (Khan and Qayyum, 2009).

Pakistan is also limited in its ability to draw new energy sources. Its central location between India, which has a politically troublesome relationship with Pakistan, and Iran, a regional energy superpower which is under international embargoes, do not permit easy import of either electricity, or affordable primary energy sources.

At this rate, it is unlikely Pakistan will be able to accommodate its growing economy. Not addressing this gap would make it a regional holdout, in an otherwise successful community. In 2014, Pakistan ranked 10 th on the "Fragile States Index", between Haiti and Zimbabwe. Pakistan has a stronger economy, but one which is limited in its growth due to its deprivation of energy (Fund for Peace, 2014).

Policy solutions

Decrease the reliance on foreign partners

Due to the complexity of Pakistan's regional situation, Pakistan must to a great degree be independent from other energy suppliers in the region. If it depends on Iran, US policymaking, which regards Pakistan as a regional ally, or Iran's reaction to it is likely to affect its energy imports. In 2010, the United States formally requested Pakistan to cease a partnership with Iran on an oil pipeline (Panda, 2013). In addition, relationships with neighbor India are cold. While an agreement was settled in 2014 for Pakistan to import 1,200 MW of electricity annually (Bhutta, 2014), imports are likely to be affected by domestic politics in either partner country.

Hence, Pakistan must to a great degree be responsible for its own power generation.

Leverage natural resources with great capability

As demonstrated earlier, close to half of Pakistan's energy generation currently originates with hydropower. Pakistan has significant additional potential to exploit this natural resource. Pakistan has approximately 42 GW of potential hydropower output, and currently only 6.5 GW is being leveraged. Pakistan's largest hydropower project, Tarbela, has a total generation capacity of 3478 MW, which is approximately the current gap between supply and demand (Asif, 2009).

Unfortunately, hydropower plants are both expensive to deploy, and cannot be brought online quickly. In addition, they often have significant ecological impact which needs to be carefully assessed.

In the early 90's, Pakistan implemented a set of reforms which encouraged smaller power generation organizations, so called "Independent Power Producers" or IPP's to generate a stable electricity supply by guaranteeing purchase prices. However, this encouraged the IPP's to bring online smaller scale, effective power plants which were easy to bring on- and offline, such as fossil fuel based plants. (Qudrat-Ullah and Karakul, 2007). Such small scale suppliers are incompatible with the massive investment required to bring online hydroelectric power capability. As such, the state of Pakistan, through its Water and Power Development Authority, is likely to carry the brunt of this investment. On a positive note, once completed, hydropower is one of the cheapest energy sources available (Asif, 2009).

Increase effectiveness of energy transportation

With losses of around 25% on power transmission, compared to 6% in the United States or 8% in Saudi Arabia (World Bank, 2014b), much of the electricity production-demand gap could be addressed by optimizing electricity transportation.

Part of this loss can be reduced to electricity theft, or so-called non-technical loss. In 1998, 1188 individuals were arrested for stealing electricity, and 100,993 instances of theft were identified. (Smith, 2004). Mitigations for electricity theft which can be considered include smart meters, as well as additional criminalization of electricity theft, such as pointing out it is illegal on monthly electricity bills (Tasdoven, Fiedler and Garayev, 2012).

Technical loss can be addressed through implementation of upgrades to the electricity network, such as using high quality service wire, use of isolated conductors, and other technical measures (Alam, Kabir, Rahman and Chowdhury, 2004).

Ensure security and stability of the energy supply by developing an energy mix with long term decreasing cost

Given the high risk of increasing cost involved in importing energy from abroad, Pakistan would do wisely to develop domestic power sources which do not get more expensive over time. This will allow it to gradually build out more capacity as needed, leveraging the profits of its domestic electricity sales. Outside of hydropower, discussed previously, which brings online massive capacity in large development projects, there are also other opportunities at its disposal, which can provide more measured relief. Wind power, in the southern coastal Sindh and Balochistan provinces alone, has an exploitable potential of about 11,000 MW (Mirza, Ahmad, Majeed and Harijan, 2006).

Portfolio-based planning techniques, such as illustrated by Awerbuch (2004), allow the Pakistani government to select an energy mix where parts of the portfolio mitigate against cost increases of other parts of the portfolio. Today, Pakistan is still very much reliant on thermal plants, many leveraging costly, and as we have illustrated, "risky" imported fossil fuels. Pakistan however has a good opportunity to diversify further- with hydro plants in the north, and wind power opportunities in the south. This paper recommends Pakistan to focus on the deployment of these renewable energy sources, not for environmental reasons, but because the additional stability they offer to the security of Pakistan's electricity supply, and the decreasing cost they have over time, reducing Pakistan's financial investment in its energy acquisition.

Conclusion

Pakistan has a number of challenges in provisioning power to its domestic constituency. The most major of these is a lack of power generation capability, which is exacerbated by the difficulties of importing energy into Pakistan. This paper identifies that a strong focus on domestic power generation, leveraging the natural resources of Pakistan, such as hydropower, is best placed to provide long term relief. In addition, it identifies that addressing the very high loss factor on electricity transmission would provide additional, more immediate relief. Action can be taken to address both non-technical and technical loss. These mitigations would provide short term relief while additional capacity is brought online.

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