In my last piece on electronic vehicles titled “What is the E in EV?” I had discussed the supply side of the energy sector in Pakistan. In economics, we always talk about both, the supply and demand side. So, what is the demand side like for the energy sector?
In my recent discussion with Dr Fiaz Ahmad Chaudhry, who is the Director of the LUMS Energy Institute, I was amazed to learn about a few facts.
There exists a huge disparity between peak demand and base load. What does that mean?
Using data of six years it has been shown that peak demand is 30,000MW. This is the demand that exists during summer time and is mostly due to the cooling equipment used by a small fraction of the population.
These include, for example, air conditioners. The majority of the population in Pakistan cannot even afford these air conditioners.
In the April 2023 World Bank Poverty and Equity brief, it is stated that poverty is expected to reach 37.2%. As many as 24.8% people have no access to limited-standard sanitation.
Although it is mentioned that only 9.3% have no access to electricity, it is no hidden fact that the ones with access to electricity face prolonged load-shedding in summer.
Just in March there was a 10-hour protest in Peshawar against load-shedding which was at times for 23 hours per day. I do not want to get into the discussion of the process whereby selective areas have load-shedding mainly due to large number of illegal users (kunda system).
Only 71% of the electricity sold for use across the country is recovered through bills. Thus, supply is truncated due to the financial woes of the public distribution companies operating throughout Pakistan.
The energy sector is prone to challenges. The problem of circular debt is a major issue. Successive governments have strived hard to bring circular debt down but the issue remains largely frenzied.
In 2013, circular debt was around Rs450 billion which had increased to the colossal amount of Rs1,148 billion by 2018. According to data of the Central Power Purchasing Authority (CPPA), circular debt stood at Rs2,467 billion by March 2022.
This implies that circular debt is equivalent to 3.8% of Pakistan’s GDP and represents 5.6% of the government’s debt. If allowed to grow without efficient redressing, this debt is expected to reach Rs4 trillion by 2025.
The revised Circular Debt Management Plan (CDMP) has revealed that a staggering Rs952 billion more will be added to the country’s circular debt this year. The total circular debt of the electricity sector with projected losses only expected to increase in future unless the course is changed. The sector is demanding urgent reforms.
What we need to consider at this point is that due to the superfluous electricity demand of the elite for a few months, we have built units with this excess capacity – maybe massive capacity is a better analogy to understand the problem we have brought upon ourselves.
It is predicted that capacity payments for unutilised electricity will amount to approximately Rs1,500 billion by 2025. Can a country whose fiscal condition is already in shambles afford this unnecessary luxury of cooling?
It’s a luxury that is used only during summers and a luxury used by only a small percentage of the population.
In winters, the computed demand for electricity is only 12,300MW. That means our actual demand (base demand) of electricity is less than half of what is used in summers.
In other words, the demand for around 18,000MW of electricity in summers is mainly driven due to the ‘cooling demand’.
Dr Chaudhry has proposed to the government that infrastructure should be designed in such a way that they do not require additional cooling.
Building approvals should be given to only those who take care that there is proper ventilation available. This will curtail electricity demand spikes in summers.
Further incentivising households to adopt green energy will also decrease future electricity demand.
It is high time that we as a nation work together to adopt behaviours that are conducive to the growth of the country.
Coming to electronic vehicles, this excess capacity can be utilised to power these vehicles. So, the electric vehicles are not just good for our environment but also help reduce oil import bill and utilise the excess energy capacity.
The writer is a PhD scholar at IBA and tweets at @ShabbarShagufta
Published in The Express Tribune, May 1st, 2023.
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