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May 9, 2018

Crisis of confidence


May 9, 2018

When it assumed power in May 2013, the PML-N-led government had to face three major challenges on domestic front: economy, extremism and electricity. Calling it the three ‘Es’, the government promised it will deliver on these issues at the earliest. And it did.

The government was able to show some positive signs in reviving the shattered economy. At the same time, it successfully curbed the menace of terrorism by launching military operations in the volatile tribal belt. However, electricity still remains an unresolved issue. The government states that there are a number of reasons for its failure to achieve the desired results.

Whatever the reasons may be, it remains a harsh reality that over 140 million people in today’s Pakistan either have no access to the grid or suffer long hours of power outages. Pakistan – Asia’s second largest economy, with its current production of about 15,886 MWs against the demand of 19,500MWs – is running short of about between 3,500 and 4,000 MWs. This demand rises to 6,000 MW during summer, resulting in frequent power outages for between eight to 18 hours a day.

Pakistan’s energy crisis has troubling implications for its fragile economy and volatile security situation. The chronic energy shortage that eats away between one and two percent of GDP every year obviously hampers growth by forcing many factories to close down. Pakistan’s textile sector, which accounts for over 50 percent of the country’s exports, has taken the hardest hit.

A report by Research and Advocacy for the Advancement of Allied Reforms (Raftar), titled ‘Energy Conservation: Avoid wastages, Prevent Shortages’, states that investment in the power sector has fallen to 0.7 percent of the GDP over the last 10 years from 1.5 percent during the late 1980s and the early 1990s. This has affected around 500,000 households whose very livelihood is associated with the sector.

Frequent loadshedding prevents people from working, cooking, and receiving proper medical care. It ultimately forces them to take to the streets. In summer, people can be seen protesting on the streets almost every day against unscheduled and unannounced loadshedding in different parts of the country. Frequent power outages not only affect economic activities in the country but also shatter the confidence of investors. As a result, some Western companies have already suspended their operations in Pakistan owing to electricity deficits and the security situation.

With increased urbanisation and droves of Pakistanis entering cities and becoming dependent on grids, experts believe that supply pressures will deepen exponentially in the future. According to some estimates, about 60 percent of the people are using UPS as backups. An estimated Rs30 billion is the approximate expenditure by Pakistani households on the UPS and batteries charges alone.

With the same pace, Pakistan’s per capita consumption of electricity, estimated at 451 kWh, is increasing at the rate of eight percent a year. The International Energy Agency has claimed that total energy demand of the country will be 49GW in 2025.

According to a report published by Ogra, around 300,000 new gas consumers are added every year and the shortage will reach four billion cubic feet per day over the next two years. Those who have observed the situation over time have warned that Pakistan’s interminable energy crisis may have catastrophic consequences in the times ahead.

To many, Pakistan’s energy problems are rooted more in shortages of governance than supply. The energy sector suffers from transmission and distribution (T&D) losses that have exceeded 30 percent. Losses are caused by bad equipment, poor maintenance, and energy theft. The debt – often described as the circular debt, which has increased to several billions dollars – is a consequence of cash flow problems.

Over the last five years, the country has incurred system losses worth Rs145 billion per annum in the grid due to inefficient transmission and distribution. Experts believe that if the country does not move with alacrity to address its energy woes, the challenges that the crisis presents today will seem tame as compared with what could be in store for us in the coming years.

This alarming situation calls for a well-defined and well-thought-out strategy to ease the crisis in a meaningful way. It calls for a strategy that emphasises the judicious use of existing resources. This means aggressively reducing transmission and distribution losses by putting in place an effective monitoring system and better enforcement laws against energy theft. There is also a need to develop robust maintenance regimes to ensure that the energy infrastructure does not fall into disrepair. Establishing incentives for consumers to use less energy is also essential. Achieving these objectives would drastically enhance energy security. To that end, the privatisation of poorly-managed publicly-owned distribution companies is a possible solution to the current energy crisis.

Another alternative is to readily use coal. With over $50 billion of Chinese investments under CPEC, some $35 billion of this amount will be spent on constructing new power plants. Taking advantage of the 175 billion tones of coal reserves discovered at Thar, many of them will use coal as a source of power. Currently, imported furnace oil produces 35 percent of the total supply; gas – both imported and local – provides another 29 percent; hydroelectricity generates another 29 percent; and nuclear energy is the source of the remaining six percent.

At present, the share of coal is miniscule. In his recent article, prominent economist Shahid Javed Burki, writes that the use of coal as the source of power production will change the energy balance in the country. It is believed that largest coal deposits in Thar can produce 20,000 MW of electricity for the next 40 years.

Another alternative is to shift to renewable forms of energy, such as wind and solar power. Enough wind potential exists in the country’s Sindh coastline. China is a world leader in wind- and solar-installed renewable energy. Pakistan can benefit from China’s rich experiences.

Similarly, domestic applications of solar power should be publicised and encouraged. People need to be educated about auto-conservation and the efficient use of energy through energy-efficient fans and energy-saving lighting that can reduce loadshedding.

Biogas is another option. Pakistan has enough potential to produce a significant amount of biogas per day and can benefit from the cheapest form of energy production. However, many experts prefer stand-alone power projects. These power projects can function in an area where people have no access to the grid. This enables communities to set up small-scale solar panels and plants in their communities and sell electricity locally.

The writer is a freelance journalist.

Email: [email protected]

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