The game plan: A few pointers for solving Pakistan’s energy crisis

Published: June 9, 2013

There is no magic wand that the government can use to resolve the energy crisis. Decisions taken today will make an impact a couple of years later.

WASHINGTON: 

Pakistan is grappling with an energy crisis of epic proportions. Here are some solutions:

Short-term measures

Coal:

Ramp up coal mining and production, and convert existing thermal power plants to use coal as fuel.

Coal contributes to less than 1% of Pakistan’s generation, even though the Thar mines contain the world’s third-largest coal reserves. By comparison, coal contributes about 40% of total energy generation globally. Even ‘green’ countries like Germany are in the process of installing coal-powered plants. In generating electricity, coal clearly remains the choice of first resort.

Circular debt:

Pakistan has a circular debt in the electricity generation and distribution chain worth $5 billion, simply because the National Electric Power Regulatory Authority has proven ineffective in monitoring generators and utilities. In the West, regulatory commissions are led by energy specialists. Fixed tenures, autonomy from political interference, as well as empowerment to punish generation and distribution companies minimise chances of gaming of the system.

A strong regulator checks and balances; a weak one allows governments to run rampant. They then set tariffs as they see fit, send linemen to collect kickbacks from electricity thieves and give away electricity freebies to vote banks. Utilities go bankrupt, their slate is wiped clean, the debt re-emerges, and round and round we go.

The government must create a cadre of energy specialists who are sent to the West to study regulatory mechanisms. When they return to Pakistan, they must be allowed to set up regulatory commissions that function without fear or favour. Civil service generalists will want to grab the opportunity of overseas junkets, but the government should choose young and idealistic people with little baggage. And it should pay them handsomely: the benefits accrued will far outweigh their salaries.

Power distribution:

Decouple agricultural and consumer supply networks in rural areas from each other, otherwise households benefit unfairly from the less-expensive agricultural tariffs. Gujarat in India has bifurcated the two networks to increase electricity revenues substantively. The model should be easily replicable in Pakistan.

Import of fuel:

The Iran-Pakistan (IP) Gas Pipeline is a no-brainer. Sure, the US will exert political and economic pressure, but what if one of these days the international community reaches an accord with Iran? Won’t the policymakers in Pakistan then have egg on their face if they ditch the IP now? Other than the US’ interests, India too frets over the security situation in Balochistan. But if Pakistan’s establishment can secure the country’s nuclear arsenal, surely it can protect another critical asset.

The IP pipeline becoming the Iran-Pakistan-India-Bangladesh pipeline would be a boon for the entire region. Natural gas, which has extensive use in power generation, transportation and manufacturing, can also be imported from abroad. The Indian ambassador to the US recently urged America, which is sitting on a glut of natural gas, to allow its export. In case America agrees, Pakistan should also be ready to benefit from the decision.

Long-term measures

Shale gas:

Shale gas is a form of natural gas that is obtained from sedimentary rock through a process called hydraulic fracturing. The US is witnessing a boom in shale gas production, and Pakistan too has substantial proven shale gas deposits. The technology is field-tested and easily acquired; there is no reason to delay shale gas exploration.

Smart metering:

Install smart meters to curb electricity theft. Losses due to outright theft and unpaid bills approach nearly half of all electricity generated in Pakistan. What business can ever run like this?

At their current price of Rs10,000 apiece, smart meters can return the investment made in them in about a year. Sweden, which has very minor electricity theft as compared to Pakistan, gains a third of a percent in annual GDP from smart meters. On the other hand, the energy crisis costs Pakistan about four percent of its GDP – smart meters alone can make a major difference.

Slum dwellers steal power through illegal connections, but they are less culpable than the bourgeoisie who payoff meter readers to record lower readings or refuse to pay bills altogether. Naples, Italy’s third-largest city with a population of around a million, had a similar problem, but smart meters have been effective in curbing theft and tampering with meters and supply lines.

There is no magic wand that the government can use to resolve the energy crisis. Decisions taken today will make an impact a couple of years later. But if the government does not bite the bullet now, then it might as well be waiting for nothing.

The writer runs Sierra Consulting, an energy and policy advisory firm, and comments on clean energy and South Asia.

Published in The Express Tribune, June 10th, 2013.

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Reader Comments (25)

  • Nadir
    Jun 9, 2013 - 11:45PM

    Yawn! And in a country where people are unwilling to pay their bills or taxes how is the state supposed to pay for all of this?Recommend

  • just_someone
    Jun 10, 2013 - 12:59AM

    Coal available in Thar is sort of useless for a country like us that has almost no innovative economy and one that is not rich. To bring thar coal into use for electricity generation requires development of modifications for run-of-the-mill coal plants. The high lignite content of thar coal is a big challenge. Either we develop these plants ourselves or we buy these plants from other countries. These will be more expensive that regular coal plants since they will need modifications.
    We should ramp up coal-based electricity production but we also need to know that we will be using mostly imported coal. This is subject to price increases in the future since China and India are demanding coal is hoards. This policy can hence backfire just like the 1992 policy which advocated oil-based plants at a time when oil prices were around $15 a barrel. Ex-ante that policy made sense just like the coal one does right now. But we have no clue what will happen ex-post. We know ex-post that policy was a disaster. So we should hedge our bets and work on other alternatives aggressively to insure against future price increases of coal.Recommend

  • Rafi Ka Deewana
    Jun 10, 2013 - 2:21AM

    The end of energy crisis will make it one step closer toward overall peace. Some enemies of Pakistan (hint: India is not one of them) will not want peace as it’ll hurt their cause. So, I would expect a few power generation facilities blown apart!

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  • skhan
    Jun 10, 2013 - 3:58AM

    Pakistan is gifted with the 3rth largest coal reserves in the world!!
    Are we saving all this Coal to do Bar B Q ?

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  • anwar
    Jun 10, 2013 - 4:48AM

    Per sq. Kilometre Pakistan has more energy experts than any other country in the World. The world usually leaves the energy planning to Professional Engineers not politicians and economists. We should do the same. Of course those responsible for the “circular debt’ situation to fester should be punished.

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  • Nauman
    Jun 10, 2013 - 5:00AM

    I found the article utterly lacking in practical aspects of solving this crisis both in the short term and in the longer term. The consultant seems to have completely ignored timelines of his proposed solutions! The solutions need to focus on 1) optimization of the current generation capacity, with focus on fixing “cash inflow problems,” generational losses, optimized distribution, removal of cng incentives for vehicles, ensuring the plants are well maintained and generating to their rated capacities, etc. 2) short term solutions: is conversion to coal a short-term solution? Or should there be massive focus on building solar or wind capacity for supplying locations prone to large transmission losses? 3) mid- long term solutions need to focus on, perhaps as the writer suggested, conversion back to coal (although, I have read that the quality of coal in Pakistan is very poor)…. which could have severe environmental side affects. For a country like Pakistan…..new powerplants (coal, nuclear, hydro) need to be started immediately…..who is working on that? The plans could take 1-2 years and funding another 2. Add construction and commissioning and you are 7-10 years from a finite increase in generation capacity from new non-renewable sources.
    PAKISTAN NEEDS SHORT-TERM SOUTIONS IN EFFECT NOW!

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  • TM
    Jun 10, 2013 - 5:25AM

    The reason is the theft of energy and non payment of utility bills in Sind. Baluchistan and Fata. Unless Govt. tackles these issues, whether you generate excess power or not. the problem will keep on worsening. We, the honest paying consumers are paying much higher tariff than most of the 3rd world and develop countries consumers pay. No leader in Pakistan talk about this issue as they will lose their vote bank. If this situation continues, Pakistan will not survive. Our leaders know this fact but being hypocrites, they never pay attention. If theft and non payment issue is tackled, we can eliminate loadshedding in 3 months as the generation capacity is there but no fuel because of non payment. People of Pakistan should demand from Nawas and Imran to pay attention to eradicate theft and non payment culture.

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  • Mj
    Jun 10, 2013 - 8:54AM

    It is false that Pakistan’S Thar area contains the third largest world reserves. It is time we give this exaggeration a rest.

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  • KH
    Jun 10, 2013 - 9:20AM

    @Mj:
    I beleive you have been to Thar and have examined the reserves, so how much is it as per your analysis.

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  • Arshad
    Jun 10, 2013 - 9:28AM

    I BET…………This energy crises can be Evaporate like helium gas
    Can be reduced up to 25 % in 6 months
    Can be reduced up to 50% in 1 Year
    And can be eliminated fully in 2 Year.

    Just follow simplest Administration but the key is…. With Both….General Public and Govt of Pakistan.
    “Where there is a will there is a way”

    Recommend

  • Sid
    Jun 10, 2013 - 9:36AM

    Is anyone talking about the demand that is on increase year by year. Where would it stand in the next 10 years or after ?

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  • Arshad
    Jun 10, 2013 - 10:22AM

    @Mj:
    whatever the number is…………. it is more than enough to feed Pakistan Energy…… for decades at least.

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  • Polpot
    Jun 10, 2013 - 10:37AM

    Power Crisis in Pakistan is a technical, economic, political and managerial crisis.
    ++++++++++++++++++++++++++++++++++++++++++++++++++++
    overwhelming chances are that Nawaz Sharif and even his successor will be knocked out by this crisis.

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  • Faisal
    Jun 10, 2013 - 10:38AM

    @Nauman: Totally agree with Nauman. Seems the writer has a superfical knowledge of teh ground realities in Pakistan, especially in terms of usage of low quality Thar Coal.

    Need to set our priorities in terms of gas for CNG of for power plants; increase prices to stop further ballooning of circular debt; reduce power theft / pilferage; Focus on clean energy for meeting future Pakistan’s energy needs!

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  • truthbetold
    Jun 10, 2013 - 12:21PM

    @Faisal:

    Lower BTU (low quality) coal and lignite has been successfully used in many countries including Germany and India. There were three main reasons why Pakistan had not invested in coal or other alternative energy sources. First, there was a belief that the Balochistan gas fields were inexhaustible.

    Second, Pakistani establishment had the notion that Pakistan would for ever get free or heavily subsidized oil from Saudi Arabia.

    Third, the Establishment was intent on getting nuke technology and supplies to further bolster its nuke arsenal. The Establishment geniuses felt that if Pakistan became self-sufficient in energy by using coal, wind power, solar energy etc. sources, they would lose the argument that the developed nations should supply it with nuke technology to “solve” the energy problem. In this sense, the energy crisis may be a self-engineered “strategic” grand design. Sort of “if you don’t give us nuke power, we will shoot ourselves on our heads” strategy.

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  • Khan
    Jun 10, 2013 - 2:57PM

    My first suggestion will be The well of the political leadership for solving the crises not for political or regional gain but As humans and Pakistani 2. Smart meter 3-Decoupling of domestic and commercial consumers 4- Honest ,independent technical , efficient and handsomely paid management 5-punishment for corrupt consumers and officials 6-green energy hydro energy IP gas pipeline,Shale gas ,solar energy and coal should be consider last but for the present crises Coal is first option along with working on other options

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  • Adnan Khan
    Jun 10, 2013 - 3:45PM

    @Nadir:
    Dear Nadir. No yawn. Not that simple. Guess who is not paying their electricity bills.

    Electricity payments and the delivery of electricity is tied-in in Karachi and guess what. It works. The rest of the country has no idea who pays, who gets a subsidy and what is the true cost of either.

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  • Adnan Khan
    Jun 10, 2013 - 3:48PM

    @truthbetold:

    In the Vision 2020 document of the Planning Commission, the official position is that the Sindh Coal is cost ineffective. Colleagues in NEPRA felt that PC was thinking from 1950s technology. I am no expert but surely we can have some clarity between such divergence

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  • OB
    Jun 10, 2013 - 4:40PM

    And if Pakistan is clever enough, they will go renewables and biomass. And still dig coal and extract shale but sell it in international energy markets. Because of renewables, Pakistan will be able to save substantial emission credits that it can again sell in international commodities markets. Finally, it may even get away with it for free. Under the Koyoto protocol, developed nations can help developing nations build emission-free infrastructure in agreement to trade the emission credits that those projects save. Is any one listening?

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  • Shah (Berlin)
    Jun 10, 2013 - 4:55PM

    @truthbetold:

    I would not agree with you on many levels. As a Research Engineer in Energy sector in germany would like to point out fews points:

    BTU can be processed but the question is the price. Pakistan invested always keeping in mind SUI gas. Therefore we never invested in coal field. Processing coal will be expensive comparatively but offcourse mismanagement can be seen here.

    Regarding your Nuclear issue. I would like to add that Pakistan is a nuclear power. We have already made a bomb so why would the Establishment try to find an excuse…Your point makes no sense. Nuclear safety is one issue. But the world knows that Nuclear power is important in todays world. France produces 60% of its power through Nuclear and UK is also increasing its Nuclear power output. Germany is an exception keeping in mind the current situation where Nuclear power plants are being shut down. Thats why Germany is ready to pay any price for the coal. Also another point Germany imports gas from Russia so they dont want to be completely dependent there.
    So the picture of conspriracy theory which you have drawn makes no sense. Pakistan right now requires a Nuclear power plant or a dam.
    Kalabagh is a good project but becaue of Political issues it wont be made.
    Please keep in mind alternative energy resources like wind and solar will be very expensive for Pakistan…….will dont discuss this matter just accept it as a rule of thumb.

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  • Kashif
    Jun 10, 2013 - 6:18PM

    @ anwar,

    You are wrong brother, Pakistan does not have proper energy experts. From hydropower to coal and wind the key experts are outside pakistan only available for advisory. They don’t want to visit Pakistan for security reasons.

    Pakistan is not even castle of Islam that Allah will send electricity as gift to us.

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  • Kashif
    Jun 10, 2013 - 6:20PM

    @OB,

    I am listening. Please read the following link of tribune and open your eyes. Fast sleep you are brother in the information age of worthy Pakistani people.

    http://tribune.com.pk/story/552046/pakistan-misses-opportunity-to-earn-carbon-credits/

    Recommend

  • truthbetold
    Jun 11, 2013 - 7:54AM

    ET Moderators, @shah (Berlin) directly addressed me and had refuted my points in his post above. Please allow me to post my reply to him.

    @Shah (Berlin):

    I agree that the first choice should be hydroelectric projects, big and small. As for wind and solar energy, while capital cost is high, once invested, the operating cost are very low – the wind and solar energy are free “fuels”. Also, as green energy sources, they are very benign on the environment. Pakistan has abundant sunshine and strong wind currents. Costs of solar cells and wind turbines have been dropping rapidly over the past few years and are expected to get even more competitive in the next decade.

    Nuclear power carries very high capital costs and the disposal of spent fuel is a big environmental issue.

    As for my “conspiracy” theory, it is not without any basis. You say Pakistan doesn’t need any more nukes since it already possesses enough. How do you then explain why Pakistan is spending $3B+ on nuclear bombs? Pakistan wants new reactors to make a lot more plutonium to build a much larger arsenal that is not very heavy like the uranium based ones. It is no secret that Pakistani foreign office has been making a huge pitch, especially after India got the nuclear “deal”, to western nations that Pak needs to be given nuclear plants and technology because of the energy shortage, while making no attempt to install new capacity using conventional energy technologies. Pakistani establishment could have used the $3B+ spent on bombs to build several thermal-coal plants, wind farms, hydroelectric projects or solar farms.

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  • Saqib Munir
    Jun 25, 2013 - 6:14PM

    Firstly we should stop crying on split milk.move forward and plan on the resources what we have.For example if we have legnite coal (and not anthracite).then why we are wasting time on useless discussions that we have low grade coal.Keep in mind that we have one of the largest reserves of coal and many countries are using legnite coal like Newzeland and IndiaDesigns of.Coal gas plants from legnite are available.So stop wasting time go for coal gasification and renewable energy like hydral,solar,wind etc.

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  • Noureen
    Jul 3, 2013 - 10:29PM

    In fact you are the one who stopped IPPs Electricity projects which were supposed to be the short/medium term projects by the then Government. Last but not the least, the “Thar Coal” Project which could have been the ‘Gold Mine’ for Pakistan was halted by PMLN Government. Stop your Hypocritical nuisance.

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