Trapped in an unaffordable energy paradigm, Pakistan’s economy has been experiencing crippling power shortages while its government is mired in mounting circular debt generated by this very paradigm. Last week, the demand and supply gap in power generation crossed 8000 MWs – the highest in the country’s history. Acute power outages have wrought havoc on households and industry. The mountain of circular debt keeps rising at the rate of one billion rupees per day! If, in order to eliminate circular debt, the government passes on the full cost of this unaffordable power to the people, there will be rioting on the streets. How did the country land in such a deadly trap?
Both problems are rooted in the flawed energy policies pursued for decades. Even when the rest of the world made drastic changes in their energy paradigms after the oil shocks of 1973 and 1979 and moved away from expensive oil to coal and hydro for power generation, Pakistan’s energy planners continued with suicidal policies as if oil was still selling at two dollars a barrel as in the 1960s, rather than over $100 a barrel.
Sitting on top of one of the largest coal reserves in the world, and still suffering power shortages, blackouts and breakdowns, Pakistan’s power sector has notoriously neglected cheap indigenous sources of energy and remained glued to the temptations of expensive, imported fuel. That has strangulated economic growth and made electricity an unaffordable luxury rather than a necessity of modern life.
Pakistan’s power mix is roughly divided in three equal parts – with oil, natural gas and hydro each contributing about 32 percent. The rest is taken by nuclear (two percent), coal (one percent) and renewables. The problems of power shortages and circular debt lie right there embedded in this irrational and unaffordable energy mix. Much of the world uses cheap coal-based power (30-50 percent cheaper than oil based) for 40 percent or more of its power mix, but Pakistan uses cheap coal power for only one percent of its power mix and that keeps power unaffordable for both the people and the government.
Most countries also make minimal use of expensive oil-fired power generation to keep power supply cheap and affordable. Worldwide, oil for power generation, is used for only six percent of total power production. Many countries use oil for less than five percent – and India uses oil for even less than one percent – of power production. But Pakistan has continued to use expensive oil-based power generation for one-third of its power mix.
A bigger disaster was planned under the so-called ‘new’ 25-year energy plan (2005-30) introduced during Shaukat Aziz’s time. This aimed to raise Pakistan’s dependence on imported oil for power generation to 50 percent by 2030, when even oil rich Gulf countries were reducing their share of oil in their power production!
World over, coal-based power is cheap and the largest source of power generation. The abundance of this cheap power in the power mix of a country pulls down the average price of power and makes electricity cheap and affordable. Pakistan today produces less than 20,000 MWs of power from all sources of energy – private and public. If Pakistan were to produce 100,000 MWs of power from its coal reserves (five times its current production) and kept producing the same for the next 100 years, it would have consumed only one-fourth of its coal reserves! Why then hasn’t the country made use of its abundant coal reserves to provide cheap power?
The one and only time a major coal-fired power project was actually started was in 1996 when four plants of 1300 MWs each were being installed over a six-year period at the low cost of 4.6 cents/KWh. That project fell victim to the usual politics of Pakistan. Since then, not a single MW of coal-based power has been added, while oil-fired power projects three to four times more expensive continued to be added to the power mix making electricity increasingly unaffordable. In fact, the energy planners of Pakistan in the early years of its independence were much better tuned to the realities of this country, for coal-based power contributed 60 percent of the country’s power production in 1948.
Coal-based power is no rocket science; there is no reason why it should take ages to bring several power plants on stream. It is intermediate technology, has been tried and tested for over 200 years and it takes an average of 36 months for a coal-fired power project to come on stream.
With only one percent of coal-based power in its power mix, Pakistan has a long way to go to rectify the damaging consequences of its faulty energy paradigm. But we have been using the wrong end of the stick to address the problem. The problem of power outages and circular debt cannot be solved by endless raises in power tariffs. It cannot be solved by massaging symptoms and not attacking the root cause – the irrational and unaffordable energy paradigm that continues to produce more problems than power for Pakistan.
Pakistan should offer attractive incentives for coal-based power projects, encourage shifting existing oil-based power plants to coal, and freeze new power generation from all sources except coal – until an affordable balance in power mix is achieved. Other countries have done it and so can Pakistan. Until Pakistan’s energy mix has more than 50 percent of coal-based power, the problems of expensive, unaffordable energy and circular debt will remain. But the urgency and seriousness required to tackle this national emergency are nowhere on display, nor have such projects come on stream.
Coal is available in every province with Sindh sitting on an estimated 175 billion tonnes of coal. Due to the 18th Amendment provinces also have greater autonomy in the matter. While every province has organisations dealing with coal-based power, they appear either to suffer from the problem of not knowing how to go about this task in world markets or too many cooks are spoiling the broth.
The writer designed the Board of Investment and First Women Bank. Email: smshah @alum. mit.edu