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Managing energy

Prof James Trevelyan has rightly pointed in his article, ‘Pakistan has a bright energy future’ (May 31), that Pakistan can overcome its energy issues by rethinking its electricity distribution. I would add that in addition to more emphasis on solar energy, the country’s policymakers need to take a more holistic approach that includes improving the efficiency of existing assets, introducing serious demand management measures and sectoral reforms.

The current energy deficit cannot be filled by relying solely on imported energy sources. According to the ADB report Pakistan’s Energy Recovery Plan, the reliance on imported energy supplies is just not sustainable. The report points out that energy imports, which were at US$10 billion till 2009, will grow exponentially and the requirement for fuel supplies will jump to US$38 billion by 2016. However, the forecast for export earnings is only at US$26 billion. Pakistan will thus be unable to meet the energy deficit through imported fuel sources alone.

In order to meet this growing demand, energy generation needs to shift from reliance on imported energy to other sources. Power generation from local coal and hydel resources are two options that must be pursued. However, coal and hydropower plants have a long gestation period and usually take five years to come on line. This does not mean that we should not start work on any coal or hydro projects. They should be taken up as medium- and long-term options and the new government must start work on at least one large-scale indigenous coal and hydro project.

With massive power cuts crippling industrial production, Pakistan must prioritise renewable energy, including wind and solar technology. For short-term generation, the solar option offers the best bet.

Besides shorter gestation period, solar energy has quite a few advantages, including being commercially viable and less susceptible to changes in economic outlook as opposed to power plants based on fuel. The solar option also saves foreign exchange, does not require any additional infrastructure investment as the electricity generated can be plugged straight into 11 Kv distribution lines, and is easily more in step with the demand of electricity (eg the power load is maximum during day time and fortunately for a solar PV plant, this is when the sun is shining).

Another advantage of solar generation is that you can put up solar farms near load demand centres whereas wind and hydro plants have to be located near resource availability.

A smart power policy should include a clear plan on how to improve the efficiency of existing power stations in the public sector (Gencos), achieve loss reduction in distribution companies (Discos), introduce demand management strategy (DSM) measures, and bring about sectoral reforms.

Let me comment briefly on each of these elements:

Gencos: Through the up gradation of existing Gencos, 2500MW of more capacity can be achieved. For example, the current installed capacity of the Jamshoro power plant is 850MW and it is operating at the derated capacity of 700MW at 29.83 percent efficiency. By converting unit 2 and 3 to combined cycle – adding four gas turbines of 200MW each, heat recovery steam generator and utilising the existing turbines the capacity of this power station can be enhanced from 700MW to 1650MW. The best part is that by using the same amount of gas it’s already using, it can generate additional power at 48 percent efficiency.

Discos: Technical losses and rampant corruption are perhaps the single-largest cause of current power crisis. In my opinion, a loss reduction programme should be implemented through private sector participation – the complete privatisation of Discos is also not a viable option at present.

DSM: Pakistan’s industrial sector is very energy intensive – for each dollar of GDP we use 15 percent more energy than India and 25 percent more than the Philippines. Major gains can be realised from energy efficiency measures – savings of 25 percent possible which translate to $3 billion of savings annually.

Sectoral reforms: Institutional consolidation is needed and all bureaucratic red tape and discretionary powers of government functionaries should be taken back. Small policy measures can bring quick dividends. For example net metering and wheeling policies can be introduced. The net metering policy will incentivise home and office owners to install solar panels on rooftops – the electricity that is in excess of their requirements flows back to the grid for which the installers are rewarded in terms of payment.

The wheeling policy will allow private power producers to sell electricity to multiple clients by using the existing grid system. At present private power producers can only sell to government-owned entities. These policy measures do not require any investment by the government; however, such measures will jump start the sector.

Way back in 2006 the government announced a renewable energy policy (RE 2006) to involve the private sector yet not a single solar plant has started work. The major drawback is that there are far too many discretionary elements in policy which create uncertainty for investors to take risk.

To get renewable projects started the government must announce an attractive upfront tariff for wind and sola and do away with all studies that are required to be carried out by project developers under present policy. The only study that should be carried out should be a grid connectivity study.

The government must also table standardised energy purchase agreements (EPA), IA; give clear mandate to the Central Power Purchasing Agency(CPPA) to sign EPAs on behalf of the Discos; set a ceiling of say 2000MW (1500MW wind and 500MW solar) for phase one. There should be no more than a 15-month period for financial close and project developers must give a high amount performance bond for non-performance. A similar package for bagasse and coal plants should also be introduced.

4000 MW of new power can be generated within three years from bagasse, wind and solar at tariff less than existing thermal plants based on RFO. 2500MW can be additionally generated through the rehabilitation of existing Gencos. 3000MW of energy savings can be achieved through demand management measures.

Lack of economic leadership, particularly in the energy sector, during the last decade has been a major cause of what the power sector is going through today. The government needs to appoint an energy czar to lead this sector. The person appointed must have a clear road map which is then endorsed by the cabinet and implemented properly. This is the only way the energy crisis can be successfully dealt with.

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