Energy requirements of Pakistan have been historically characterized by insufficient power generation. Emerging economy and ever increasing masses have faced a demand supply gap of power sector. Rupee devaluation has serious implications for electricity system, since the fossil fuel imports are a key economic drain. Fossil-fuel based power generation in Pakistan accounts for 60% of the total production for which oil supply is untenable. Besides eroding foreign exchange reserves, heavy dependence on oil import weakens control over the fuels supply chain. This imprudent fuel mix for power generation kicks off a vicious circle. Energy losses at each stage of value chain cause insufficient recoveries that lead to power outages. Consequently, there is a hike in electricity tariff and the resultant circular debt.
Following are certain dimensions of the energy crisis of Pakistan:
During last 5-years, inefficient transmission and distribution have caused system losses in the grid for Rs.145 billion per annum.
Annual expenditure of Pakistanis amounts to US$ 2.3 billion on candles, kerosene lamps and battery powered flash lights. Energy shortages impact 500000 households with unemployment, since the businesses are forced to shut down. Energy consumption at household level grows with an average yearly rate of 10%. At least 51 million people i.e. 27% of the population are without access to the electricity. Burning of wood as a cooking fuel is causing deforestation that is increasing 2% per annum.
However, with the advent of PTI government, energy challenge has been coped with certain unprecedented measures while keeping political compromises at bay. The energetic Minister for Energy Mr. Omar Ayub Khan has dedicated his all-out efforts to grapple with the crisis. His crusade against the elements involved in power theft is progressing well and so far around 5000 people have been arrested including many influential individuals. In the first 8 months, there was increase of Rs.81 billion in collection and Rs.58 billion from theft control. Zero load shedding was witnessed at Sehr and Aftar. Owing to these effective measures, circular debt is on the wane from Rs.38 billion per month to Rs.26 billion. The Energy Minister is determined to bring circular debt to zero with lesser reliance on subsidies. Additional Rs.100 billion is also part of the plan to be recovered from the old receivables. The approach to handle the energy problem has already made a remarkable difference. Mr. Omar Ayub Khan has rightly planned to introduce a country wide system of automatic metering with the motive to bring about efficiency in the power sector and halt power pilferage. Current composition of electricity generation and capacity is presented below.
Figure: Pakistan Electricity Market Composition 2017/18
Sources Electricity Market Composition 2017/18
Capacity Generation Capacity Utilization
GW % of Total TWh % of Total
Oil, Gas, LNG 18.6 57.2% 82.4 61% 48%
Coal 2.7 8.4% 11.9 8.8% 59%
Nuclear 1.3 4.0% 8.7 6.5% 79%
Hydro 8.2 25.4% 28.2 20.9% 44%
Solar 0.4 1.2% 0.7 0.5% 22%
Wind 0.9 2.9% 2.1 1.5% 29%
Bagasse 0.3 1.0% 1.1 0.8% 40%
Total 32.5 100% 135.1 100%
Import from Iran – – 0.5 – –
Source: NEPRA, IEEFA estimates
Minister for Energy identifies that the flawed policies of previous regimes have resulted in 60% reliance on the imported fuel for electricity generation. Therefore, action plan has been accelerated to raise the renewable component in energy mix to 25% by 2025 and then to 30% by 2030. Dependence on imported fuels has also been aimed to be scaled down from 41% to 30% in five years and further to 20% in ten years’ time by using hydel, renewable and local fuels like Thar coal. In continuity of its substantial progress in energy sector, the following suggestions are made to the government:
1. China is world leader in generation of wind and solar energy. Its experience can be utilized in CPEC energy projects.
2. Out of 1.2 million irrigation pumps in Pakistan, 90% are running on diesel. These should be replaced with solar irrigation pumps.
3. Around 17% of total electricity can be saved if old devices are replaced with energy efficient solutions such as LED bulbs and inverter ACs etc.
4. Then, less energy can be consumed by improving and modernizing transmission and distribution network, and by introducing smart grid solutions and smart cities.
In a nutshell, overcoming the circular debt by the end of 2020, automatic metering, electricity theft control, recovering overdue receivables, focus on renewable sources of energy would certainly secure sustained supply of power to adequately cater the current and future demand of Pakistan.
The writer is Country Manager JSC Subsidiary Bank National Bank of Pakistan in Kazakhstan
