Power sector role in turning Pakistan into a begging bowl

Monthly fuel cost adjustment (FCA) is a big hole in the power sector

Arshad H Abbasi April 29, 2024
Engineer Arshad H Abbasi has an extensive experience of working on water and power issues in Pakistan and Afghanistan


Pakistan is thought to possess the sixth-largest nuclear arsenal in the world, with roughly 160 warheads, according to the Bulletin of the Atomic Scientists. This puts Pakistan in a powerful position on the international scene. However, the leaking power sector bucket has not only turned Pakistan into a global begging bowl but also driven forty per cent of its people into poverty. The various stakeholders who control the system carefully craft the holes and collect the leaks for economic gain. The sensible solution is complete transparency in the electricity industry, as opposed to continually adding more power plants to the national grid, which is merely a means of adding more water to the already overflowing bucket.

Monthly fuel cost adjustment (FCA) is a big hole in the power sector. The monthly fuel cost adjustment is based on the cost of the fuels used to generate electricity, such as natural gas, LNG and coal. Because of the frequent fluctuations in these fuel prices, NEPRA, the national power regulator, modifies the “fuel cost” component of the electricity rate each month based on the current market price. Nepra drops a bombshell every month when it approves a price hike, further taxing the already heavily taxed power consumers. Transparency is lacking in the entire power industry, not just in this mechanism for determining electricity prices. How much fuel is used by power plants to generate electricity, only electricity producers know; but the only duty NEPRA performs regularly is to pass its impact to the consumers without fail.

In Pakistan, almost 50% of electricity is generated by fossil fuels — gas, oil or coal. Who will verify the quantity of fuel used when power producers are not allowing the technical audit? It is the poor consumers who are paying the cost of this negligence.

Other than measuring fuel, the biggest dilemma is violating the merit order of the thermal power plants. The purpose of the merit order is to enable the lowest net cost of electricity to be dispatched first, helping minimise overall electricity system costs to consumers. The merit order is a way of ranking available sources of electricity generation based on the ascending order of the price of fuel. Let’s take the loss on this account alone. In FY 2022-23, the violation of economic order and resultant under-utilisation of efficient plants cost Rs20 billion. Another impact of violation of economic order is that efficient power plants are not operated on full load, which results in lower efficiency and higher generation costs in the monthly FPA, thus severely impacting end-consumers. This negligence alone cost Rs47 billion. Another colossal loss was the operation of plants using RFO or HSD, which was Rs164 billion, while ample capacity was available using relatively cheaper fuels in the same financial year.

Consumers would have avoided these financial losses if NPCC’s Supervisory Control and Data Acquisition (Scada) system had been operating at peak efficiency. Scada is a real-time computer-based system which monitors and controls the whole power system, including the automation of economic merit orders, improving the efficiency and reliability of the power system and reducing costs. Scada, with a little value addition, can display the fuel consumption of any power plant in real time.

National Power Control Centre (NPCC), a subsidiary of the National Transmission and Dispatch Company (NTDC), is a load dispatch centre that is an important link between generation and transmission, which coordinates the power requirements of consumers of electricity. Currently, NPCC manages the entire transmission and sub-transmission network of Pakistan, dispatching over 100 power plants and coordinating network operations at over 1000 grid stations. In the year 1992 with the help of Japan, Scada was installed at NPCC. However, despite the partial availability of this system, the absence of several crucial components — technical hardware, interest on the part of officials and software updates — rendered it ineffective. Nuclear Pakistan paid a huge cost for the lack of efficiency on the part of Scada during the 2023 blackout in the country. This was the second-largest blackout in the world history and the second most significant grid failure in Pakistan in two years.

In August 2004, Narendra Modi, chief minister of the Indian state Gujarat then, introduced Scada to the state’s electricity system. Later, the whole system was enforced in India which reduced variable costs worth $26 billion, with the benefits shared with generators and their beneficiaries ultimately reducing the cost of electricity to consumers.

In 2015, NTDC had launched the Scada III project with the assistance of international donors. How many years it will take to complete, nobody knows. The world has, meanwhile, moved to a smart grid.

This system allows for monitoring, analysis and control within the supply chain to help improve efficiency, reduce electricity consumption and cost and maximise the transparency and reliability of the electricity supply chain in real-time. How tragic it was when the FIA and Police had gone to check the electricity metering in Punjab for power theft this month. Again, the Indian tea boy, PM Modi, in November 2014, responded to transmission and distribution losses as well as theft by the National Smart Grid Mission by deputing professionals, and not by placing his favourite bureaucrats to reform the power sector.

With its strong IT infrastructure and 80 million intelligent social media users, Pakistan can easily combine artificial intelligence with ingenious smart grid technology to plug the holes in the power bucket and win back the trust of 250 million people, transforming the country into an economic power.

Published in The Express Tribune, April 29th, 2024.

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