KARACHI: Pakistan is stuck between a rock and a hard place when it comes to our energy dilemma.
Procrastination in making hardcore decisions to resolve the burgeoning energy crisis over the last decade has been the real culprit. This delay is taking the entire nation through one of its worst periods with some regions experiencing 18 hours of load-shedding or more. Its impact on the economy, GDP growth and especially industrial production and exports is devastating and long lasting.
Energy impact on an economy and its industries is twofold; reliability of supply, and cost of energy. In our case both these factors are going the wrong way. As we have no oil, we have to import it in order to run our power plants and that is one of the most expensive ways to generate electricity, and all of this is compounded by the circular debt issue.
Today roughly two-thirds of our energy is generated using oil, one-third using Hydro and a minuscule contribution from coal (4%) and nuclear (2%). Generation of energy from indigenous resources is a far cheaper option, but we are constrained as the majority of investment in generation to date has been on petroleum based plants.
Hydro is the cheapest option for generating electricity but requires the construction of a dam which takes over a decade to build and our need is urgent and we cannot wait until 2022 for it to kick in.
The second-cheapest option is to use indigenous fossil fuel, namely coal. Pakistan has been blessed with one of the largest reserves of coal in the Thar region which is estimated to be around 185 billion tonnes. It is said that the Pakistan coal reserves in equivalent-energy-unit terms exceed that of the official oil reservoir of Saudi Arabia, which is huge from any aspect! However, currently very little electricity is generated from coal as compared to 69% by China and 49% by the USA.
The real issue today is not capacity, but the never-ending circular debt which today stands around $880 million. Moving to coal and hydro will help in eliminating this issue as well.
We need to quickly start exploiting this God given resource as it is estimated that if we use coal instead of imported oil our power generation cost per unit could fall by 40%. With our huge coal resources we can totally eliminate oil usage and save precious foreign exchange while reducing electricity charges. In fact our reserves are so large that we can even export coal to further strengthen our forex reserves.
This estimated 40% reduction in energy cost could help make the private sector more vibrant, many energy intensive industries will suddenly become feasible and overall I estimate that this cost efficiency will enhance the private sector contribution to the overall GDP by adding an incremental 1 to 2% of growth to our GDP.
In order to get out of this quagmire we need immediate actions and decisions. We need a high powered professional team to work out a long-term plan, involve all key stakeholders and make the plan public so that everyone can see light at the end of the tunnel. We need to revamp our energy policy all the way to 2050.
THE WRITER WORKS IN THE CORPORATE SECTOR AND IS ACTIVE ON VARIOUS BUSINESS FORUMS AND TRADE BODIES
Published in The Express Tribune, 25th, 2012.
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