Oily matters – II

Electrical Vehicles

Immediate solutions are never possible or feasible. There has to be alternative plan and targets. How about we target a proposal to reduce oil consumption by 25% by 2030? A number of approaches may be feasible: converting oil demand to electricity through adoption of Electrical Vehicles; and electricity generation through solar. While EV proposals and initiatives are originally based on climate requirements; for us, however, it is based on our energy needs and peculiarities.

Major advanced countries have decided to close down petroleum vehicles production by 2030-2035 and to be substituted by EVs. Existing vehicles may, however, remain to be depreciated away or discouraged through taxation laws. EVs have become a reality now in Pakistan as well. In Sindh, EV buses have been imported and should have started operating by now, when the readers are reading these lines. Many local production initiatives for EVs are in the pipeline by private sector, which include motorcycles, rickshaws and even cars and buses.

Motorcycles’ petrol consumption accounts for 40-50% of the total gasoline consumption. There are some 20 million motorcycles on the roads while 1.2-1.5 million motorcycles are added every year. Both conversion of the existing and production of new EV motorcycles should be encouraged. What would be the implication of reducing the EV motorcycles population by 50% or so? This has to be worked out and the associated demand on electricity that would be generated.

Cars’ prices have gone up tremendously. The prices are almost out of purchasing power of the middles classes.

Only, the rich or perhaps upper middle classes can buy Japanese cars. There is a huge potential for cheaper Chinese EV cars under Rs 800,000/- per vehicle. Similarly, auto-rickshaws at Rs 300,000/- or so. There is potential for conversion of existing buses to EVs. It is being already done in rich and advanced countries. The right time for replacement of Diesel engines from buses may be 5-7 years of operation when Diesel engines have to be replaced. New EV buses can also be produced, if an appropriate policy is around.

An almost ‘Industrial Revolution can be caused by promoting local EV manufacturing industry. That would need demand creation. Automotive market is highly price elastic ad can be seen from the growth of motorcycle industry. It remained sluggish when it remained dominated by high priced Japanese motor cycles. It grew exponentially when low priced Chinese origin MCs came in.

An appropriate RV Automotive policy is required. Zero taxation and only GST for reasonable local content projects. Market should not be allowed to be segmented which would harm local content objectives and scale economies.

Ethanol Blending in Gasoline

Ethanol blending is being mandated in many jurisdictions of the world for environmental reasons.10% mixing of Ethanol is the usual target and practice. Additional rationale is indigenization of fuel and price stability. Such a gasoline is called E10.

Oily matters – I

Ethanol is produced in sugarcane distilleries. India has achieved its target of 10% blending and is trying to move to even 20%. Both India and Pakistan have an almost identical sugar industry structure. In Pakistan, Pakistan State Oil (PSO) has tried to introduce it almost a decade earlier but could not succeed for a variety of reasons. Consumer reluctance has perhaps been the prevalent reason. E10 is still on Oil & Gas Regulatory Authority’s (Ogra’s) palette of price determination.

Ethanol is exported by Pakistan to advanced countries and South East Asia where E10 legislations are implemented. Annual export earnings from Ethanol were USD 425 million.

It is argued by sugar industry that import savings by using Ethanol may be counter balanced by the loss of export revenues. Perhaps more exports revenue could be there as part of it may be going to offshore accounts. Sugar industry has been alleged to be indulging in unhealthy practices and market manipulations. Thus there may be net advantage in using Ethanol locally in gasoline blending than exporting it abroad. Price stabilization and environmental improvements are the additional advantages. After all why so many countries are making E10?

Bio-CNG

Biogas has a lot of potential in Pakistan. A large human and cattle population creates a lot of waste whose management is becoming an increasing challenge. While Biogas can add to the gas supply system of the country –both on gas grid and off grid— Bio-CNG can add to the petroleum supply product portfolio. More than 3000 CNG plants have been installed in Pakistan, many of which have been shut down due to lack of availability of gas and expensive LNG. In our region, India plans to install 5000 Bio-CNG pumps in the next five years. India already has installed many Bio-CNG plants.

Hydrogen:

Ultimately, Hydrogen will be replacing oil and gas. It has already started doing so. Smaller vehicles like cars will be EVs, while heavier vehicles like trucks, construction machinery, off-road vehicles, aero-planes and trains will be run on Hydrogen. Hydrogen and EVs are also expected to reduce road-side pollution. We have to suffer from smog regularly in winters. Also, Hydrogen is an essential part of climate change control policies. Most of the thermal energy in industrial applications is expected to come from Hydrogen.

Perhaps a more important or equally important aspect is that Hydrogen can be locally produced through solar and wind energy of which we have a lot of potential. Oil and gas are and will be imported as we have discussed in the foregoing. India plans to produce 5 million tons per year of Hydrogen by 2030. India has also started with mixing Hydrogen (10-15%) in natural gas pipelines. A number of other developing countries like Egypt, Morocco, Namibia and Nigeria have made plans to get into Hydrogen. Saudi Arabia is coming up in this sector in a big way.

It takes, on the average, around ten years to reach somewhere in acquiring these technologies and reach some degree of proficiency. Hydrogen, in terms of technological complexity, is simpler than other related technologies like solar cell production. It involves steel fabrication and piping, etc., of which, we have considerable capabilities. India has ready plans to build Electrolyzers (Electrolyzers are used in the electrolysis of water by which Hydrogen is separated) making capacity of 12000 MW. It is high time that a Hydrogen policy and plan is made by the government. Public sector may have to become active in Hydrogen; initially, by the way of installing pilot plants in various end-use sectors. Private sector will follow eventually once basic know-how and manpower resources are developed to an extent.

Hydrogen policy issues have been complicated by organizational confusion as there is no easy answer to question: where does Hydrogen belong to? National Energy Efficiency & Consideration Authority (Neeca) and National Electric Power Regulatory Authority (Nepra) have been taking some interest in it. Power sector has the least relevance to Hydrogen. It would be unrealistic to suggest use of electricity to make hydrogen and then convert it to electricity again. In energy storage or, perhaps peaking, there may be some relevance. Bigger stake-holders are in the oil, gas, fertilizer and general industrial sectors.

(To be continued)

Copyright Business Recorder, 2022