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State of the Energy Sector
Pakistan’s policy-makers have done a reasonably good job of articulating (repeatedly through several five-year planning cycles) policy objectives for the energy sector. The broad objective is to develop the sector to support an expanding economy. Developing indigenous resources, importing energy at competitive prices to meet deficits, expanding delivery infrastructure and improving energy efficiency and reliability, would enhance energy supplies. Security of energy supply would be increased by greater reliance on national resources thus reducing import dependence, and by diversification of energy supplies to manage risks and external shocks. Long-term viability of the sector would be supported by a shift in the role of government from owner to that of policy-maker and regulator, encouraging the private sector to own and run the energy companies through appropriate incentives, including attracting foreign and local private capital and deploying competitive processes. Also, the objectives contain consumer-oriented, eco-friendly and pro-poor elements, promoting service-provision, environmental protection and affordable energy for the underprivileged.
Despite these laudable objectives the sector is in a dire state. The problem is not a lack of clarity on what needs to be done but how it is to be done.
Before considering solutions, it is essential to briefly review the state of the sector, the gravity of issues, and why the situation has become so serious. The official Pakistan Energy Yearbook 2009 lays out the supply and consumption picture. Total primary energy supply in Pakistan is 63 MTOE (Million Tons of Oil Equivalence) of which natural gas accounts for 48 per cent, oil 32 per cent, hydroelectricity 11 per cent and coal around 7 percent. Nuclear, LPG and imported electricity make up the remaining 2 per cent. Pakistan imports a third of its energy requirements mainly in the form of oil and coal, despite huge proven reserves of coal and a significant exploration potential of oil. Over 80 per cent of Pakistan’s oil requirements are imported at a prohibitive cost of $12 billion a year, and over 60 per cent of its coal supplies come from overseas.’
Pakistan’s indigenous coal reserves are huge, estimated at 186 billion tons, of which the Thar deposit of 175 billion tons is the fifth largest in the world. Proven reserves stand at
1980 million tons and at the present production level the reserves-to-production ratio is well over 400. This signals the need to enhance production significantly. However, most of this coal is of low quality (high sulphur and ash content) and is located in remote areas. Its exploitation therefore requires expensive excavation, treatment and transport infrastructure, in areas where security is a concern.
Renewable energy sources are also significant. Hydroelectric potential in Pakistan is an impressive 41,700 MW of which only 6,600 MW or 16 per cent has been harnessed till today. For mini-Pydro (units up to 5 MW capacity), the potential is about 1500 MW of which only 60 MW (4 per cent) has been tapped. Pakistan’s almost entirely untapped wind energy potential, according to the USAID Renewable Energy Lab, is estimated at 41000 MW of power generation based on areas of favorable wind regimes.’
Solar energy is abundant and remains unharnessed except for a few isolated projects. If only 0.25 per cent of the land area of the province of Balochistan were covered by solar panels of 20 per cent efficiency, this would be enough to provide electricity to the entire country.’ However, the feasibility of generating large quantities of wind and solar power (while improving with continuing research) is highly questionable. Estimates for non-commercial sources, mainly wood fuels, are less reliable. These resources are considerable and constitute 45 per cent of the energy supply mix for the country. However, there is ample evidence that in several parts of the country, unregulated harvesting of this poorly managed resource is severely impairing its sustainability.
Three characteristics of Pakistan’s energy sector take on special significance. First, the indigenous resource potential is substantial, notwithstanding some critical exploitation issues. Two, the energy deficit is prohibitively large and expanding. Three, nearly half the population, mainly the rural poor, is not connected to the commercial grids and relies on non-commercial energy. This combination often tempts policy-makers to promote the harnessing of all forms of energy available. This is a common trap, particularly in a severely cash-strapped environment such as Pakistan. In this approach, for example, undue priority is given to renewable forms such as solar and wind, since they are considered free and able to reach poor, remote localities. Such forms of energy are indeed ‘free’ since they are constantly renewable, but they are not necessarily cheap. Moreover, they do little to close large deficits. Even compared with nuclear power generation, itself an expensive option, wind power is around 60 per cent more expensive and solar about 30 per cent. Nevertheless, to support poverty alleviation objectives under severe budgetary constraints, all options should be on the table but a mechanism needs to be in place to strike an affordable balance. The degree of departure from the optimum can make the difference between success and failure of energy policy.
How did we get here? How this dire state of affairs came about is analyzed in a noteworthy work, which traces the history of the down-ward spiral and milestones along the way. The path is characterized by ‘stop-go’ reforms, policy reversals, bureaucratic delays and missed opportunities and, over the last decade or so, a growing security crisis. Through all this, there were some sound and well-intentioned policy initiatives and concerted efforts towards implementation. However, these efforts could not yield the desired results in a policy environment, which lacked the necessary fundamentals.
Pakistan is facing a number of constraints in the path of social economic and political development. One of them is the ever- increasing inflationary pressure on the general public. This inflationary pressure created a social instability and misconception among the messes towards the Government. General public considers the government responsible for this inflation. Government gave the blunt gift of inflation, unemployment, terrorism and energy crisis to the public. The government offended the masses. Some economists argue that such type of increase in prices was never seen before the regime of Musharaf. The prices of essential domestic commodities have touched the psychological boundaries. The fixed income employees and creditors are affected by this inflation.
The second factor responsible for current power crises is the unprecedented surge in the price of furnace oil in 2007-08. The price of furnace oil (fuel for power generation) increased of 118 percent in just one year. Such a massive increase in the price of furnace oil also increased the cost of power-generation by WAPDA and the lPPs. The government did not allow a corresponding rise in the price of electricity and decided to provide subsidy through the budget. Because of the financial difficulties the government could not pay the subsidy to WAPDA and the KESC in time, and subsequently they could not pay the bills to the IPPs. The lPPs could not pay in time to the oil refineries which, in turn, slowed the import of furnace oil. As part of the circular debt, WAPDA and KESC owe to the IPPs over Rs60 billion and Rs7 billion, respectively. Since the surge in oil prices in 2007-08 was the root cause of the aggravation of circular debt, the collapse. in oil prices in 2008-09 could have been used to eliminate this menace. Instead, the government earned Rs129 billion through the Petroleum Development Levy (PDL) and treated this as non-tax revenue. This money could have been used to eliminate the circular debt.
Effects of Energy Crisis In Pakistan:
The most important source of our modem civilization is energy. Energy is in everything . lt comes in different forms — heat (thermal), light (radiant), mechanical, electrical, chemical, and nuclear energy. The use of energy has been a key in the development of the human society by helping it to control and adapt to the environment managing the use of energy is inevitable in any functional society. In the industrialized world the development of energy resources has become essential for agriculture, transportation, waste collection, information technology, communications that have become prerequisites of a developed society. The increasing use of energy since the Industrial Revolution has also brought with it a number of serious problems, some of which such as global warming, present potentially grave risks to the world. The macroeconomic implications of a suaoly shock-induced energy crisis are large, because energy is the resource used to exploit all other resources. When energy markets fail, an energy shortage develops. Electricity consumers may experience intentionally engineered rolling blackouts which are released during periods of insufficient supply or unexpected power butanes, regardless of the cause. Industrialized nations are dependent on oil, and efforts to restrict the supply of oil would have an adverse effect on the economies of oil producers. For the consumer, the price of natural gas, gasoline (petrol) and diesel for cars and other vehicles rises. An early response from stakeholders is the call for reports, investigations and to a commissions into the price of fuels. There are also movements towards the development of more sustainable urban infrastructure.
On the international level, rich nations can transfer sustainable energy technologies to developing nations, thus allowing them to “leapfrog” beyond the destructive energy models used by the industrialized regions. In order to reduce global warming, industrialized nations might agree to limit their carbon emissions while offering “cred” to developing nations with a much lower rate of resource consumption. Any attempt by the rich nations to reduce their dependency on fossil fuels will ultimately benefit the poorer countries as well as reduce their own rising energy bills. In a sustainable approach to energy use, reduction of wasteful practices must be linked with redistribution of what is already available.
Nationally, extending the power grid to rural areas will have the effect of slowing flight- to the cities, reducing inefficient use of biomass energy and freeing women to engage in income-generation and productive activities. Development and extension of renewable energy sources in areas of poverty would have the added impact of creating bs at the local level. Solar, wind, and waterpower technology can transform remote parts of countries into valuable assets and provide cheap reliable power to rural dwellers.
Significant steps are being taken in developing international energy policies that will protect the environment. The latest version of the Kyoto Protocol, approved by all of the developed nations except the United States, includes an elaborate formula for reducing greenhouse gases by agreeing to limit carbon emissions to prescribed levels. Many industrial nations have reduced waste and actively promoted the development of renewable energy resources.
The use of hydrogen and other non- polluting fuels would have a dramatic effect on the environment. If hydrogen can be efficiently isolated (either through solar power or other means) aid distributed cheaply it could provide a clean fuel for internal combustion engines and revolutionize transportation as we- power generation. Other attempts a - carbonization of fossil fuels and creation of
synthetic fuels could have similarly positive effects on the environment. Tree planting on land already degraded by cutting would not only increase oxygen production but also provide cheap energy to peasant farmers.
Energy policies that are environmentally friendly will have a direct effect on many world health problems as well. The shift from fossil fuels to renewable energy sources means that individuals directly exposed to greater risk, such as coal miners or those living in vicinity of nuclear power plants, would automatically live healthier lives. At the village level, women engaged in arduous daily wood gathering and families exposed to harmful smoke from cook fires would benefit greatly from alternative,’ clean energy sources. Cheap energy allows for food processing and preservation at the local level and/or efficient transportation to markets. Ground water pollution from the extras of fossil fuels will be reduced significantly with sustainable energy policies.
So, it is concluded that the use of energy should be efficient. Solar and coal energy should be generated. We will have to compromise on luxurious lifestyles in order to meet the necessities. Markets and commercial places can substantially reduce their power consumption by changing their working hours. An early start and early end to capitalize on daylight as much as possible should be recommended rather than having opening hours from afternoon until late at night. Air- conditioning, usually a sign of a luxurious lifestyle, needs to be dropped. Small steps have already been made in promoting appropriate technology in agriculture, especially in irrigation. With the advent of fuel cells and other alternative forms of energy, mechanization on a small scale will be more affordable and friendly to the environment. As photovoltaic cells become more affordable, small farmers will be able to raise and move water to and lands and increase their productivity without harming the environment.
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