News Column

PM's financed power projects: A nation's fears and hopes in light and darkness

August 28, 2014

PM's financed power projects from several millions to billions of dollars is in the throes of a nation's fears and hopes in light and darkness as a 180 million nation of old and young, women and children, suffer up to 18 hours of electricity bread downs commonly called as load shedding. PM saw a signing ceremony of financing agreements of US $ 588.4 million and US $ 76.4 million with the World Bank relating to the development of Dasu Hydropower Project and Sindh Agricultural Growth Project recently, which reflect the importance that the PML-N government assigned to increase the power generation, avoid line losses, decrease the power shortage, expand the electricity supply lines and bring the high energy tariff to reasonable levels.

Dasu Hydropower Project has the potential of producing 4320 MW electricity which will be developed in two phases. Under Phase-I 2160 MW electricity will be produced which will be extended to 4320 MW in future under Phase-II.

It is heartening that Sindh Agricultural Growth project would improve the agriculture and livestock sector productivity of Sindh province. The project will use a value chain approach to provide direct investment support to the farmers and small and medium producer groups for (i) development of more effective and efficient farming systems; (ii) introduction of technology packages for increased productivity and value addition; and (iii) improved market access.

Summer season, luckily, may leave a heated nation soon after parts of the country sizzled at high temperatures: The power situation, as expected, had worsened. Electricity shortfall crossed 6,000 MW and is estimated at around 7,000MW with urban areas facing 12 and rural areas up to 18 hours of load shedding.

Officially, the shortfall was only 2,300 MW - generation about 11,000 MW and demand just over 13,000 MW - or only 20 per cent. If the claim is accepted, load shedding should not be more than four hours. But the situation on ground is that there is an average loadshedding of 15 hours, or 60pc, in 24 hours. “If the shortfall is what official figures state, the government needs to fire all chief executives of the distribution companies,” says a former chairman of the National Transmission and Dispatch Company (NTDC). All these CEOs are working against the government by resorting to 15 hours of load shedding despite having electricity. The demand figures released by the NTDC were the same as of 2010. It's said that power bills and debts are not paid either by the private sector or the public sector. Its reason is that consumers complain excessive billing containing money not paid but electricity used illegally by power thieves through kunda system.

As for Karachi, K-Electric as well as power stealing consumers need to answer a lot of questions. Where has load growth gone for the past four years? This is pity where the government is not even ready to concede even the misery of the common man, who must be given fair deal, with meters installed and logical pricing. Right now, K-Electric is a government within a government, perhaps not answerable to anyone. It can use its power to national benefit and encourage legal use and bring down power rates. People are suffering but power companies, led by the power and water ministry, are busy hiding the situation behind manufactured figures.

Electricity demand had went up, ranging between 17,000 MW to 20,000 MW in most parts of this hot country, said an official of the Pakistan Electric Power Company (PEPCO), with electricity generation estimated to be close to 11,000 MW which must be increased, if those multi billion rupees projects mean anything in practical terms. Government is responsible to ensure that embezzlement does not go into personal coffers. That's one reason among many for those anti government Islamabad rallies. Increased must be hydel contribution to the national grid which stood at about 4,000 MW, independent power producers (IPPs) at 6,100 MW and thermal at about 1,400 MW.

Another reason is that if transmission and dispatch losses are taken out of these 17,000 MW, national contribution to K-Electric (formerly Karachi Electric Supply Company) and 1,500 MW of the feeders that are exempted from load shedding, the common man is left with only 9,000MW against the demand of 17,000MW. This explained the extent and scope of load shedding.

With that kind of big World Bank money, the government failed to devise and implement any sound policy to enhance the generation capacity, and it must first ascertain efficiency in power management more competently. The energy crisis has already grown out of control. Government's claims of reducing load shedding during Ramazan, too, turned out false too. In the first significant wave of demonstrations in last summer, people took to the roads protesting against load shedding. Violent protesters came out in major cities of Punjab, including Lahore, where enraged demonstrators attacked a LESCO office. For the government, this is not a good sign of things to come.

Pakistan’s energy crisis has now persisted for a long time. While new and effective plans are hardly devised, the existing projects are also plagued with conventional inefficiencies. Failure of successive governments to adequately address this issue has now made it one of the most pressing concerns nationwide. Not only has the load shedding affected households, but prolonged power outages have also become a menace for the industrial sector, hampering the social and economic growth at large. To reach any reasonable estimates of how long we will have to face this problem, it is essential to look into its various facets and the progress, or the lack thereof, made towards solving it.

Since decades long methods of power generation could not meet national energy requirements, a shift made towards alternative sources of electricity production must be further encouraged. These include very inexpensive methods to generate power like simply from thin air, called wind energy through turbines, in areas where wind blows faster, especially in coastal areas. Free electricity can be made and stored from sun light called solar energy and its highly expensive storage equipment and technology must be researched into so that its price can be affordable for general public.

Hydroelectricity is the second major source of power generation in Pakistan, contributing 34 per cent to the total production. In addition to being environmental friendly, hydroelectricity is also a source of energy with decreased price.

However, lack of planning and implementation in building new projects has decreased the share of hydroelectricity in the total generation mix over the years and this situation demands improvement not in verbal but active terms.

Once considered a potential game-changer in Pakistan’s power sector, Kala Bagh Dam has now become a political taboo. Severe opposition from some political circles of Sindh and Khyber Pakhtunkhwa has controversialised the issue. While many experts believe that building KB dam can result in many economic and social advantages, no national leader has dared to build consensus on it and the project now lies virtually dead. Presently, the major working hydropower projects are Ghazi-Brotha Power project, Tarbela and Mangla dam.

However, the storage capacity of Tarbela and Mangla dam has reduced over the years due to siltation and their workable life, without any kind of renovation, cannot be estimated to be too long. Diamer-Bhasha dam is another project that has been in the pipeline for quite some time now, surrounded by its own share of maladies. The multi-billion dollar project is struggling to arrange finances for itself as the World Bank and Asian Development Bank are reluctant to fund it.

While the primary focus in solving energy crisis should remain on investing in hydroelectricity projects, many previous governments had other things on their priority list. Rather than undertaking projects with long-term benefits, a major chunk of taxpayers’ money was hastily spent on finding immediate solutions. Hydroelectricity projects take years to complete and start production; hence governments opt for easy ways out by investing on sources of thermal power. Power generation through thermal means immensely increases the cost of production. This also explains the exponential increase in the electricity tariffs in recent years.

Thermal sector is now responsible for contributing about 65 per cent of total energy production in Pakistan. The increased reliance on thermal power plants has meant an introduction of a cumbersome demand and supply chain in the system consisting of Independent Power Producers (IPPs), Central Power Purchasing Agency (CPPA), distribution companies and public/private customers. Circular debt is created when any one of these stakeholders in the chain defaults on its payment and thus disrupts the whole chain. Usually, circular debt results when the customers do not fully pay their electricity bills to distribution companies, which then fail to make payments to CPPA. CPPA in turn fails to pay power producers (mainly IPPs). When IPPs default on their payments to the oil companies; the circular debt translates into a reduction in electricity generation.

Soon after coming to power, the PML-N government made a payment of Rs480 billion to curb the circular debt, without undertaking any kind of energy audit of the power producing companies. However, since no viable policy was framed to ensure any long-term solution, the circular debt has now soared again, resulting in the current wave of load shedding. The government was shying away from paying the amount to prevent the budget deficit from increasing. It is surprising that it took the government years to learn about transmission losses of tens of kinds that had almost always existed since decades.

On the other hand, while government’s bailout packages can temporarily resolve the prevailing crisis to a considerable extent, it cannot be considered a long-term remedy. Two of the main reasons that allow the circular debt to occur are the transmission losses and electricity theft. Estimates suggest that around 12 per cent of the power is lost due to poor transmission infrastructure. Similarly, with billions of rupees of outstanding dues, non-recovery of electricity bills is also a major issue. To ensure any form of permanent solution, the government will have to completely revamp the transmission and recovery mechanism.

One leader hoped that the power shortage would decrease in a few days “with the help of God”. That meant rains. And water for dams and to produce electricity. Khawaja Asif’s remarks symbolise government’s complacence and negligence in effectively tackling the power crisis so far.

In an election rally last year, Shahbaz Sharif, now CM of Punjab province once again had famously promised to end load shedding in six months. However it was only after it assumed the government that PML-N realised that it did not possess the magic wand it had led the voters to believe it did. Now the PML-N is not promising anything after coming to power and believed that it will take long years before power shortage crisis can be solved forever. There was no significant increase in the power generation over past one year while an increase in demand further worsened the situation as population and needs of people increase over the years. Up gradation of the transmission system is being currently planned by the government, which is quite appreciable.

While the electricity tariff has significantly increased over the past year, the power sector has shown no signs of improvement.

The government now needs to act beyond gimmicks to immediately take effective measures towards increasing power generation. While power shortage has become an endemic undermining the socio-economic growth of the country, it can also become a major political drawback for PML-N. How successfully will the government be able to solve the crisis is a question only time will answer. However, if the nation is taught to take part in solving power generation issues, and actively work in local and small power generation and energy saving projects, and not become careless by assigning solution of all their problems once they voted for their leaders in government, then this power crisis can be resolved in within a shorter time, and other nations have worked hard and proved that a nation can also solve problems, besides its trusted government.

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Source: Daily Messenger (Pakistan)

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