Pakistan's Electricity Crisis

[Riaz Haq]

Pakistan’s economy has recently been growing at 7-8% per year, doubling its GDP over the last 7 years. The industrial growth rate has been closer to 12.5% per year during this period, contributing 38% of the total economic output of Pakistan. Per capita energy consumption of the country is estimated at 14 million Btu, which is about the same as India's but only a fraction of other industrializing economies in the region such as Thailand and Malaysia, according to the US Dept of Energy 2006 report. With 40% of the households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. On the other hand, hydro and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both.

Pakistan’s rising energy demand, according to the U.S. Department of State’s Paul Simons, creates opportunities for regional cooperation. To this end, the U.S. Trade and Development Agency convened a meeting a couple of years ago in Istanbul that produced an agreement on examining options for exporting Central Asian electricity to Pakistan. It should be noted here that US does not favorably look upon any Iran-Pakistan cooperation in the energy sector. At an Asia Program event organized by Wilson Center in 2006, Vladislav Vucetic of the World Bank provided a troubling assessment of the state of Pakistan’s electricity sector—demand is approaching maximum production capacity, while institutional capacity for policy development and implementation remains low. Worse, failing to resolve these problems may cause investment delays and hamper Pakistan’s economic growth. Sanjeev Minocha of the IFC, a major source of private sector financing, noted the paucity of domestic private sector initiatives in Pakistan. The IFC has sought to raise investor confidence through its funding of private Pakistani energy companies, including the new firm Dewan Petroleum. Ultimately, stated Minocha, it is crucial that investment projects take into account the interests of local communities.

In early 2008, Pakistan's industrial consumers are facing an electric power deficit of up to 3,600 megawatts (MW)due to low water levels at hydroelectric dams and damage to two main power lines attacked during the three days of violence following Bhutto's assassination. More than anything, this represents the failure of long term energy planning to go with the economic growth forecasts.

Among the temporary issues exacerbating the larger power crisis, the two main power transmission lines were blown up in January 2008 in Sind, creating a shortfall of 1,000 MW. The business community complain that lopsided and unplanned shutdowns have resulted in closures in almost all industries. Subsequent production losses will be reflected in further pressure on exports and lead to increased imports.

Water levels have fallen by 32% compared with last year, according to the Pakistan Electric Power Company (PEPCO). Pakistan's current installed capacity is around 19,845 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. PEPCO also blames independent power producers (IPPs) for the electricity crisis, as they have been able to give PEPCO only 3,800 MW on average out of 5,800 MW of confirmed capacity. Most of the IPPs are running fuel stocks below the required minimum of 21 days.

While there are many economic successes of the Musharraf-Aziz administration in terms of reviving the Pakistani economy and putting it on a growth path again, the energy sector represents its biggest failure. This failure has the potential to threaten Pakistan's economic future, unless immediate steps are taken to bring this crisis under control over the next few years.

[Riaz Haq]

Here's a Gulf News story on Pakistan's plan to import power from neighbors: Dubai: Talks with India and Iran on power exports are under way and likely to be settled soon, Pakistan's Minister for Water and Power Syed Naveed Qamar, told Gulf News.

Iran currently provides 72 megawatts to Pakistan which is likely to be increased to 1,100MW.

"It is our desire that the modalities, tariff and terms and conditions may be finalised at the earliest so that the project can be started soon."

He said the transmission line between Pakistan and India is around 100 kilometres compared with the Kyrgyz Republic and Tajikistan transmission lines which are around 1,000km.

"As we look into the future, the power demand is going to be robust coupled with the growth in the economy. The electricity trade with India is beneficial for both countries and it will open new avenues of economic ties," Qamar said.

Pakistan may import up to 500MW which may be supplied with the construction of small transmission lines from both sides.

Wind projects

He said that the major share of power production is through oil which is expensive, and therefore the government is considering running the power plants on coal. Special attention would be given to the power sector and in this regard more funds would be allocated for the power sector during the coming development budget.

The government has plans to produce 1,000MW of cheaper power from wind projects next year, Qamar said.

"Russia, Uzbekistan and Turkmenistan have also offered Pakistan to export their surplus power to Pakistan," A.U. Rahman, acting executive director of Central Asia, South Asia (CASA-1000) project, told Gulf News.

He said Russia is also keen to join the project.

Pakistan has an installed capacity of around 20,000MW, but the production capacity is around 16,000MW. Right now "the shortage of power is around 4,500MW," Rahman said.

He said the current load shedding will be "reduced gradually" with the new projects expected to come online soon.

In certain parts of the country current load shedding continues for more than 12 hours.

http://gulfnews.com/business/economy/pakistan-negotiates-for-indian...

[Riaz Haq]

Here's an excerpt from The Economist magazine on Pakistan's energy crisis: SUMMER in the plains of Pakistan is excruciating enough without the added joy of 20 hours of power cuts a day. Earlier this month protesters in several towns in Punjab, Pakistan’s wealthiest province, smashed windscreens, blocked motorways, shut down markets and set fire to the offices of parliamentarians and an electric utility. They clashed with police who brought out handcuffs and tear gas and fired live rounds in the air.

It was a reaction to electricity shortages that had plunged parts of the province into darkness and scorching heat. At one point the gap between supply and demand hit 7,500 megawatts (MW), or nearly 40% of national demand.

Under the current government, the power sector has neared the top of a list of security, political and foreign-policy problems that includes some heavyweight contenders. Last week’s confluence of events once again underlined how easily Pakistan’s power sector can slip into collapse. The system’s many weaknesses find it all too easy to conspire. Cool weather in the north meant a reduced flow of hydroelectricity. Demand shot up as summer temperatures further south soared into the forties and air-conditioners strained to keep pace.

Meanwhile, several private power producers had to halt or slash production because the state-run power purchasing company hadn’t paid them. They had not been able, because the biggest consumers (especially provincial and federal governments) had not paid their own electricity bills. The bills that were paid are not enough to cover the cost of generation.

This so-called “circular debt”, currently about $880m, is an ongoing problem. The government usually bites the bullet, as it did this time, by paying off a portion when power producers are about to sue for default, enabling them to start generating again—for the moment. What remain unaddressed are the structural issues that cause the debt to pile up again: poor recovery of dues (receivables stand at $4 billion), electricity theft, transmission losses, reliance on imported oil and politically sensitive subsidies for certain groups. Perpetuating all of this is a lack of efficiency and co-ordination across a maze of state-owned agencies including a power purchaser, distribution and generation companies, a regulator and various ministries. The gap between the effective cost of generation and payments received is estimated at $12 billion over the past four years.

http://www.economist.com/blogs/banyan/2012/05/pakistan%E2%80%99s-en...

[Riaz Haq]

Here's a Business Recorder report on Tarbela dam's 4th tunnel power generation project:

The government would award the contract of 'Tarbela Fourth Extension Hydropower Project', costing $928.9 million, including $840 million World Bank loan in March next year to initiate Civil and Engineering and Management (E&M) work. According to documents obtained by Business Recorder, mobilisation of contract was expected by the end April 2013. Pre-qualification of applicants for Civil and E&M works is under way.

The project would be completed by June 2018. The government would spend $88.9 million for this project. Tarbela has an installed power generation capacity of 3,478 megawatts on tunnels 1, 2 and 3 while tunnel 4 was originally intended for irrigation water releases only, but subsequent studies proposed its conversion to irrigation-cum-generation tunnel.

The latest proposed installed capacity of Tarbela is 1,410MW. Ultimately, Tarbela's capacity would be upgraded to 4,888MW after the development of tunnel 4. The projected energy form the project is 3840 GWh/year while annual capacity factor is 31 %.

According to the Project's cost estimate, powerhouse and tunnel work is to cost $307.45 million, turbines, generators and auxiliaries; $434.24 million and implementation of SAP and EMP dam monitoring $28.63 million. Similarly, project management, technical assistance and training cost is $20.45 million while base cost with physical/price construction is $817.9 million.

The Executive Committee of National Economic Council (ECNEC) has approved the Project on August 16 this year for Rs 83.6 billion, including foreign exchange component of Rs 65.8 billion. A million families would benefit from the additional power. Load shedding would be substantially reduced. Documents also showed that about Rs 39 billion per annum revenue was expected after the completion of the Project. During construction period, between 2,000 and 2,500 jobs would be created.

http://www.brecorder.com/top-stories/0/1252452/

[Riaz Haq]

Here's a report on USAID supporting automated meter reading and IT infrastructure for power distribution network in Pakistan:

LIBERTY LAKE, Wash. - Feb. 20, 2013 - Itron, Inc. (NASDAQ: ITRI) announced today that its Automated Meter Reading (AMR) solution has been selected for a United States Agency for International Development (USAID) project in Pakistan.

The objective of the project is to provide services for the USAID Power Distribution Program, a five-year, USAID-financed project designed to facilitate improvements in electric power distribution utilities (DISCOs) across Pakistan. The project works with government-owned power distribution companies and Pakistan's Ministry of Water and Power to improve governance and management systems, increase efficiency of revenue collection, reform the regulatory framework and improve customer service.

Itron, in collaboration with local manufacturer MicroTech Industries, will supply GPRS commercial and industrial meters, RF residential meters, IT infrastructure and data collection software. The AMR solution will help Pakistan power distribution companies improve energy efficiency, manage supply and demand, and reduce losses on the network.

"We look forward to working with Itron as part of this important project which will assist DISCO to increase revenue, reduce theft, increase accuracy and provide improved service to their customers," said Dick Dumford, senior advisor and technical team leader for the Power Distribution Program. "Itron's AMR solution will help DISCO achieve their goal of expanding the supply of electricity and advancing the operational and financial health of the entire power sector in Pakistan."

"Itron is proud to work with International Resources Group to help upgrade the electricity metering system in Pakistan," said Aqeel Jafar Khan, regional marketing director of Itron Energy, Middle East. "Itron's metering expertise and depth of industry knowledge will help power distribution companies in Pakistan manage supply and conserve resources in a region where both are critical."

http://www.4-traders.com/ITRON-INC-9753/news/Itron-Inc-Itron-Soluti...

[Riaz Haq]

Here's a News Tribe story on a computer center at Multan Electric Supply:

Multan: Helping to strengthen Pakistan’s energy sector in ways that increase the supply of electricity to consumers is a top assistance priority for the United States government. That’s why today the United States Agency for International Development (USAID) inaugurated a brand-new planning and engineering computer center at the Multan Electric Supply Company. This center is equipped with the latest generation of sophisticated computers and software that engineers at the Multan Electric Supply Company will use to help ensure a more reliable supply of power to consumers.

At the event, USAID Mission Director Jock Conly remarked, “Distribution companies don’t have a system to assess energy losses. That makes it difficult to come up with a solution to the energy crisis. The USAID Power Distribution Program is helping the Multan Electric Supply Company by establishing a planning and engineering computer center using the same type of software the United States uses to manage its energy to perform much-needed assessments and implement plans for loss reduction.”

The Multan Electric Supply Company power distribution system supports approximately 120 million Pakistanis. Distribution Companies (DISCOs) like Multan Electric Supply Company play a key role in ensuring a smooth and uninterrupted delivery of power to residential, commercial, agricultural and industrial customers. Establishment of the new USAID-funded computer center will allow the Multan Electric Supply Company to segregate technical losses so they can plan and implement plans for loss reduction. These plans will enable the energy sector to save megawatts and increase revenues, which are both key to solving the issue of circular debt. USAID has established similar computer centers in 7 other DISCOs throughout the country. Through the Power Distribution Project, USAID is also introducing new technologies like smart meters to improve meter reading and thus improving the accuracy of billing to Pakistanis.

In addition to these activities, the United States is renovating thermal plants at Jamshoro, Guddu, and Muzaffagarh, which have already added 650 megawatts to the national grid since September 2011. The U.S. government is also co-financing the completion of the Gomal Zam and Satpara dams which will add another 35 megawatts and irrigate more than 200,000 acres. Finally, we are helping to replace thousands of highly inefficient agricultural and municipal water pumps throughout the country to save additional megawatts. These and other major U.S. energy projects will add 900 megawatts to the national grid by the end of this year – enough power to supply electricity to estimated two million households.

http://www.thenewstribe.com/2013/03/06/new-usaid-funded-computer-ce...

[Riaz Haq]

Here's Express Tribune on private sector jumping in to add power generation capacity:

After five years of unbearably long daily power outages, Pakistan’s private sector has had enough: over the next five years, they plan on investing over $14.3 billion in increasing the nation’s power production capacity by nearly 46%, and they are doing so by investing in the cheapest possible sources of electricity.

According to data released by the National Electric Power Regulatory Authority (Nepra) in its 2012 State of the Industry report, private sector firms have already begun work on dozens of projects that would substantially increase the country’s electricity generation capacity. For the purposes of this special report, we include only those projects that are scheduled to be completed by the end of the next administration’s term in 2018.

If the next administration were to do absolutely nothing to prevent or slow down the progress currently being made on projects that are already approved and progressing, Pakistan’s power generation capacity will increase to 34,200 megawatts (MW), compared to the approximately 23,500MW today. Of that increase, more than 80% is coming through private sector initiatives.

Yet it is not just the private sector’s initiative that deserves to be applauded: it is also their foresight. Nearly all of the private sector projects scheduled to come online use the cheapest fuels possible. These firms are scheduled to add about 4,900MW to the nation’s hydroelectric power generating capacity, for example. Another 800MW will be added in terms of gas-fired thermal power plants. And nearly 3,000MW will be added or converted to coal and bagasse (a waste product from sugar manufacturing).

Residents of Karachi should rejoice in particular: the Karachi Electric Supply Company is converting 840MW of oil-fired thermal power stations to coal, which will dramatically increase the country’s only private utility’s ability to generate cheaper electricity. Put simply, this will mean even fewer power outages in Karachi.

The private sector’s focus appears not only towards fuel sources that are cheap, but also easily available. Natural gas, for instance, is possibly the cheapest source electricity, cost an average of Rs4.24 per kilowatt-hour, according to Nepra. But the bulk of the investment is going towards hydroelectricity, which, according to Nepra’s tariff determination, is expected to cost Rs5.43 per unit for the first 12 years of a project’s life, while the debt used to finance the plants is still being paid off, following which the tariff will be reduced to Rs2.47 per unit.

The preference for hydroelectricity has to do with the fact that Pakistan’s natural gas reserves are rapidly being depleted and importing gas is far more difficult than importing coal. Power plants that run on imported coal can produce electricity for an average of Rs10 per unit, according to industry experts, much cheaper than the Rs16 per unit that oil-fired thermal plants cost.

Compared to the $14.3 billion being invested by the private sector, the government is planning to invest just over $2.5 billion over the next five years to upgrade its power infrastructure, which will add about 2,100MW of electricity generating capacity over the next five years, the overwhelming bulk of which will be in thermal power plants that can run on both oil and gas.

The picture, of course, is not completely rosy. Power projects are notorious for not meeting their deadlines so it is possible that the next administration will not see all of these projects come to fruition during its term. But given the private sector’s commitment to solving Pakistan’s energy problems, the least the government can do is not create hurdles in their way. It will only help their own re-election chances.

http://tribune.com.pk/story/532404/energy-power-generation-capacity...

[Riaz Haq]

Here's a PakTribune report on lack of budget allocation for power generation in Pakistan:

Not a single penny has been allocated in federal budgets for power generation for the last 19 years despite unprecedented electricity loadshedding in the country.

This was stated by former managing director of Pepco, Engineer Tahir Basharat Cheema, while addressing a seminar on “Pakistan power sector: past, present and the future” held here at Pakistan Engineering Congress on Wednesday.

Stressing the need for higher budgetary allocation to meet rising power costs, he observed that no government has allocated any fund in national budget for electricity generation after 1994.

“The National Highway Authority was given Rs92 billion in current budget while Rs16 billion was allocated only for a single constituency and if this amount was given to power sector that would have gone a long way in eliminate power loadshedding.” Cheema, who is presently heading an Energy Management Committee of the Ministry of Water and Power, stated that government's seriousness to control power crisis can be gauged by the fact that it allocated a minor amount of Rs15 billion for power sector but that was not released either and diverted to some other project.

“In order to tackle the energy shortages, maximum funds should be allocated for construction of dams or water reservoirs, besides tapping of Thar Coal, completion of Iran-Pakistan gas pipeline, energy conservation & energy efficiency, fuel mix and energy rationing.”At least Rs50 billion of the total budget should be allocated for hydel power projects, he stressed.

Reliance on costly thermal power has been jacking up the cost of production and the import bill as well. “The country is in dire need of an urgent shift in its energy-mix in favour of hydel power and local fuels. Use of biogas should be promoted throughout the rural sector both for electricity generation and gas for cooking besides producing bio fertiliser, said the power sector expert.He expressed that 175 billion tons of Thar coal reserves with a price tag of $13 trillion in the international market are enough to provide 100,000MW of electricity for 100 years. Uninterrupted and affordable power supplies can turn Pakistan into an economic powerhouse. While expressing the optimism for construction of Kalabagh Dam, he said that Sindh needs fresh water the most and it is the KBD, which would fulfill its dire need of fresh water..

http://paktribune.com/business/news/Not-a-penny-in-budgets-for-maki...

[Riaz Haq]

Here's a News story on US support and funding for Central Asia-South Asia (CASA) transnational grid:

WASHINGTON: The United States has committed $15 million in financing towards the Central Asia-South Asia electricity transmission project (CASA-1000) that on completion would help bring electricity to Afghanistan and Pakistan.

While announcing the funding the State Department expressed the hope that the US financial support for CASA-1000 would help leverage other donors to support the project and encourage the World Bank to present the project to its Board of Directors for final approval next year.

“We believe CASA-1000 can be a potentially transformative project, helping create a regional energy grid that connects Central and South Asia for the first time,” a statement released by the Office of the Spokesperson said.

When completed, CASA-1000 will allow Tajikistan and Kyrgyzstan to profit from existing, unused summer generation capacity by selling electricity to Afghanistan and Pakistan. Afghanistan would doubly benefit from the project as a consumer (300 MW) and as transit country generating revenue.

“Pakistan would add 1,000MW to its national grid during the summer months when it experiences its peak demand period and have access to a reliable, clean, and cheaper energy supply.”

According to the State Department, CASA-1000 is entirely dependent on existing hydropower generation so it will not affect water-sharing agreements for other Central Asian countries. It also complements ongoing efforts by the Asian Development Bank and others to support a regional energy grid.

“These types of projects can enhance economic interdependence and support peace and stability in the region for years to come. That is why the United States has been supporting the CASA-1000 Secretariat for several years, and is now committing an equity stake in the project.”

“US support for CASA-1000 is representative of our long-term commitment to peace, stability and prosperity for Afghanistan and its neighbours. CASA-1000 is a practical example of a project that supports regional economic connectivity and our New Silk Road vision. The United States looks forward to working with the World Bank, the Islamic Development Bank, and other development partners to support CASA-1000 and other projects which connect Central and South Asia.”

http://www.thenews.com.pk/Todays-News-13-27249-US-pledges-$15-million-to-bring-electricity-to-Pakistan-Afghanistan

[Riaz Haq]

Here's a Shell Pakistan press release of Asia Energy Survey 2013:

Following is the text of press release issued by Shell Pakistan Limited

Quote

Thailand, the Philippines and India top a list of nine Asian countries that say they are very concerned about future energy needs, amid increasing pressure for more energy, water and food to keep up with increased population growth.

The results emerged from a series of Shell-commissioned Future Energy surveys in which 80 percent of the respondents ranked longer-term future energy needs alongside everyday concerns like public education and cost of living as important. The surveys covered 8,446 people in 31 cities and 9 regional areas.

These concerns have arisen amid growing energy pressures globally. By 2030, the world will need 40% to 50% more energy, water and food in tandem with rising demand and increased populations. Tremendous stress will be placed on these vital resources as energy is used to move and treat water; water is required to produce energy and both energy and water are required in the production of food.

"It is encouraging to know that Asians view future energy needs as high priority, as this region will see one of the fastest growths in population and energy demand," said Jeremy Bentham, Shell's Vice President for Global Business Environment. "More than ever before, the industry, government and public all have a joint responsibility to create a better energy future, and must come together to collaborate and coordinate our efforts to meet these challenges for generations to come."

Most survey respondents expect energy shortages and higher energy prices to have a significant impact on their countries. Issues seen as most pertinent are energy shortages in Thailand (91%) and Pakistan (90%), higher energy prices in India (91%) and Singapore (79%), water shortages in Vietnam (89%) and food shortages in Indonesia (86%).

The surveys indicate that Asia is in favour of a mix of future energy sources, with solar energy and natural gas leading the way in many countries. Solar energy is the most desired future energy source across most countries, which include Singapore (86%), Thailand (83%) and India (77%). Natural gas is cited as the most preferred future energy source in Brunei (87%) and is second most preferred in Singapore (52%), Indonesia (43%) and India (43%).

Survey respondents agree that collaboration between industry, government, and the public, as well as innovation and incentives for cleaner energy, are the most important factors in shaping future energy needs. In Pakistan, over 50% of 2000 respondents, identified effective government policy as the most important factor in building future energy solutions.

http://www.4-traders.com/SHELL-PAKISTAN-LIMITED-6496379/news/Shell-...

[Riaz Haq]

Here's a VOA report on the growing use of microhydro turbines for generating electricity at village level:

Many areas of Pakistan suffer energy shortages because the country's grid does not reach all of its remote corners. In one section of Pakistan's Kashmir region, people have taken the initiative to create their own energy from abundant streams and rivers, using small-scale turbines.

The Neelum Valley, in the Himalayan region of southeastern Pakistan, is sometimes called “Heaven on Earth” for its unspoiled beauty. Local residents want to preserve their forests and their clean environment despite a growing need for electricity said Shafiq Usmani, an official at a local hydroelectric board.

"All the beauty of the Neelum Valley is dependent upon those forests, streams, and neat and clean water, and this can only be sustained if we are giving them the clean energy," said Usmani.

Less than half of the Neelum Valley's 200,000 inhabitants have access to electricity from the national grid. However, the Neelum River itself and its tributaries flow with enough force to produce energy. Some local communities use small turbines, called hydel machines, to generate electricity to light their homes.

"This hydel machine [turbine] was installed with a share from 50 families, which costs us nearly $3,000. We started this small hydro scheme as we needed it. We only get light from it and no other electric appliances. We start this turbine at 3 in the afternoon and switch it off the next day at 8 am," said Rahimullah, one of the turbine operators.

Villagers say the homemade turbines have transformed their daily lives.

“When we had no electricity there was always smoke, as we use wood for heating and cooking, which causes diseases. Since we installed this project, thank God, we have gotten rid of these diseases and gained some other benefits," said Mushtaq Ahmad, a villager.

Even so, there is not enough energy for everyone's needs, and that means that trees still have to be cut down to provide wood for fire. Engineer Sardar Basharat Ahmad said the valley needs more turbines.

"Cutting down trees is a big loss, using wood for heating and cooking causes health problems. If the hydel is promoted and new projects are set up, it will fulfill all the requirements of the people like cooking and heating, and it will save the cutting down of green trees," said Ahmad.

Pakistan is plagued by power cuts, especially in the summer. The blackouts affect ordinary people's lives and hamper the economy. The country is using only about 10 percent of its identified hydropower potential.

http://www.voanews.com/content/pakistan-villagers-find-creative-ene...