Prospects of National Electricity Plan

Positive aspect of NEP is inclusion of security of supply and indigenisation


SYED AKHTAR ALI August 02, 2021

ISLAMABAD:

The National Electricity Plan (NEP) is being developed by the Power Division as a consequence or supplement to the National Electricity Policy 2021, which has recently been approved by the Council of Common Interests (CCI).

Yet another plan, some people are wondering, when for the last almost three years, there have been controversies and gaps in another plan (Indicative Generation Capacity Expansion Plan – IGCEP), which have yet to be settled. Already, there are a number of committed projects, which would take care of most of the next 10 years. Legal issues and disputes may emerge if the committed projects are not included in the NEP.

These are, however, practical issues which, it is argued, can be handled. NEP may even be validating the results of IGCEP, if not differing from it or improving upon it. It is argued that the IGCEP, developed by the National Transmission and Despatch Company (NTDC), is too narrowly based involving only two independent variables – gross domestic product (GDP) growth and electricity price – while the NEP is more broadbased involving six objectives – sustainability; energy equity and financial viability; security of supply; governance and stakeholders’ input; research, development and indigenisation; market and risks – and 16 indicators.

A positive aspect of both the policy and the proposed NEP is the inclusion of security of supply and indigenisation. Indigenisation is to be viewed in terms of both fuel and equipment. We have mentioned earlier that Pakistan is lagging behind many developing countries in terms of local content, which increases the dependence, cost and drain of foreign exchange. Similarly, the dependence on imported fuel such as liquefied natural gas (LNG) and imported coal is a negative aspect of the prevailing fuel supply mix, which ought to change – easier said than done.

All energy sources have some negative aspects, dictating the need for a divergent supply mix, which balances out the positives and negatives. Renewable energy sources, such as solar and wind, have become highly competitive and affordable, yet these are variable. Solar is available during day time and wind and hydro are available in summers only. This year, hydro availability has posed a special problem recently. All countries, eg Brazil, which have a high hydro content, have suffered frequently due to water flow issues. In Pakistan, agricultural water conflict also poses a constraint in this respect. Thus, fossil fuels are required to balance the variability of renewable energy.

De-carbonisation

NEP would attempt to handle climate change and carbonisation of energy mix, which are additional issues that will affect Pakistan more than others, although our contribution to climate change is infinitesimal. There is direct and indirect pressure on the government to shape the energy mix in a manner so as to decarbonise it as much as possible. The problem is that there is nothing as a free lunch. Objectives often move in opposite directions.

There are investment and fuel supply issues as well. Indigenisation of fuels would certainly involve the development and utilisation of Thar coal, which is not liked by the international stakeholders. Indigenisation reduces the cost and foreign exchange drain. LNG is becoming expensive by the day, although it may complete its price cycle and may become competitive again. Local gas is cheaper but its resource base is going down and new sources are uncertain. Yet the gas (LNG and conventional) offers the most energy efficient route (60% plus for combined-cycle power plants higher than any other fossil fuel). NEP will attempt to handle demand management issues, although it is not always easy to match demand and supply and is done at a cost penalty.

The irony is that LNG was introduced to eliminate expensive furnace oil (RFO). We are still dependent on it and to top it all, the IGCEP projects that in a few years all the combined-cycle power plants will become redundant, although this is more due to gas and LNG price variations. There are political issues which hamper the adoption of a realistic and representative mixed cost, called WACOG, on which no consensus has been reached yet. Demand management affects cost and tariff. Adequate demand management reduces peak demand and helps utilise the installed capacity to the highest possible level and thus reduce the fixed cost.

Provincial issues

In almost all energy discussions, provinces appear to be unsatisfied and demand more share, benefits and participation. On the other hand, provinces are free riders in many ways. The clearest example is the ever-rising circular debt. Cost side of the equation is borne by the federal government and most of the leakages are of provincial origin. One would like to ask, why not provincialise the whole energy system as is the practice in most federations?

It is a complicated issue and involves many risks most important of which are capacity and capability gaps and optimisation issues. Ultimately, it may have to be done at some point in time but falls beyond the scope of our discussion here in this space. In the intervening period, something can be done to satisfy provinces to a good extent. The problem is that all planning and modelling has been done at the integrated level. For example, in all the models developed earlier, subsectoral demands have been addressed but not the provincial one, the latter in an indirect obtuse manner only. NEP modelers may do well to introduce provincial equations as explicit variables.

The NEP objective mix includes universal access/ rural electrification, which can be a vehicle to achieve this as well. Renewable energy sources such as wind and solar in the form of distributed generation could help achieve some aspects of provincial issues in remote areas, especially Balochistan. Unfortunately, we are still tied to the central grid system and planning in terms of centralised generation and associated transmission.

NEP should bring distributed generation into the fore and if it does so, it can earn its place despite the IGCEP being an established planning approach. Distributed generation, although not necessarily fully, will help solve universal access and provincial issues as well. NEP objectives include financial viability in terms of cost and affordability, the latter two being reciprocal of each other.

The classical least cost planning is intended to achieve this, although an upper limit to cost can include both aspects of cost and affordability. Fuel cost and supply constraints have been a significant issue behind load-shedding and lack of capacity utilisation. The Integrated Energy Plan (IEP) has been discussed in the past and has continued to be on agenda.

Planning Commission has tried it a number of times but could not succeed for a variety of reasons. Inter-ministerial rivalry has been partly responsible for this. But the combined Power and Petroleum Divisions may be able to deliver it this time. It is not known whether NEP people plan to include the IEP or fuel supply module with the required level of detail and granularity.

Concluding, intensive stakeholder consultation is being undertaken, however, the proof of pudding is in its eating. We look forward how the exercise of NEP comes out and whether it is able to replace IGCEP or serves as a base for detailed planning and improvement of the existing framework.

THE WRITER IS FORMER MEMBER ENERGY OF THE PLANNING COMMISSION AND AUTHOR OF SEVERAL BOOKS ON ENERGY SECTOR

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