When did we last read reviews in the international reports such as the following, about Pakistan's Power Sector? Never in the history. "Since the start of the programme, power blackouts declined, distribution losses were reduced, payment collection rates increased, energy subsidies were reduced.
"Improved performance of distribution companies and favourable oil prices have helped contain the accumulation of power sector arrears. The end-March 2016 IT(indicative target) on the accumulation of power sector arrears was met with a large margin. "The authorities' enhanced focus on improving the performance of Discos... is welcome."
The following chart shows that the collections increased to an unprecedented high levels (jumping from 88% to 94%) and losses decreased to an all-time low (17.9% down from 19%) during the past one and a half years:
We all know that the international institutions are very careful in accepting a country's claim about its performance. It was only after detailed scrutiny during several quarterly reviewsthat they put on record such an acknowledgement of our performance. It is now accepted internationally that Pakistan's Power sector has come out of its worst financial crisis, from posting a loss to the national budget of Rs 200 billion to now Rs 8 billion per annum. In terms of its impact on the national exchequer, the power sector's performance has brought savings of Rs 400 billion in the past two years. The following charts show that achievement:
On the operations side, the power sector has come a long way from a routine of 12-15 hours of industrial and domestic loadshedding, often unscheduled just a few years back, to now zero loadshedding for industries and a scheduled predictable loadshedding of 3 hours in urban and 4 hours in rural areas, as per the new schedule announced in November 2016.(This relief in schedule of loadshedding, however, will not be available in the areas with higher thefts or low payments)
Due to an uncontrollable circular debt, rising at a pace of Rs 10-18 billion a month (yes, in a month) during 2007-14, no investors and their bankers were ready to put in their funds in Pakistan's power sector till 2014. After strenuous efforts, the menace of Circular Debt has been successfully tackled with better recoveries in distribution companies and better management of generation plants plugging losses from all sides. The reduction in oil prices also helped to an equal extent. The result is that the increase in Circular debt has been capped since October 2014.
Now, there is a beeline of foreign and local investors vying to get a space on our grid. In just one year (2015), more than 12000MWs of new private sector power projects were facilitated as against only 8756MWs of private sector power generation in the entire (20 years') history of IPPs in the country from 1994-2013. The abovementioned facts clearly show that the Power Ministry has been able to successfully put better monitoring systems for oversight of the power sector entities, which has helped reduce the sector's losses. However, in order to keep this system afloat, suchvigilant monitoring and supervision will need to continue, perhaps with greater vigour if new generation is to be smoothly added to the system. In addition, there is also a need to keep the power tariffs realistic and cost-covering. Any artificial lowering of tariffs, will again jeopardise the stability achieved in the power sector, after decades of turbulence.
This tells the story of reduced loadshedding and better financial performance of the power sector, but how would that translate into zero loadshedding as being claimed. We read some worrisome views of few analysts who maintain that the aims for bringing loadshedding (outages) to zero are not supported by the available transmission and distribution capacity. Some other views even question the expected timelines for completion of the new generation projects.
These views cannot be ignored especially when they get the support in the reports issued by the regulator which though based on outdated data, still get attention of the power sector analysts.
Power sector projects, like all such large-scale undertakings, always have possibilities of changes in the timelines. In order to cater for any such eventuality, against an expected generation shortfall between 7000-8000 MWs estimated for 2017-18, the additional capacity planned to be achieved by March 2018 (before summers) is around 10,996 MWs. The question is whether there are any projects expected to get delayed and substantially reduce power availability in March 2018? The frank answer will be that while the possibility of such an eventuality occurring owing to any unforeseen technical problems in any project can never be ruled out, it will be too far-fetched presuming such problems occurring everywhere, putting the entire plan of zero-loadshedding into jeopardy, God forbid.
And there are plans for the years after 2018, as well. There is a healthy pipeline of 30,837MWs of the new generation projects already in execution, expected to complete by the year 2022. This includes the capacity of 10,996MWs expected by March 2018, but doesn't include many projects such as Diamer-Bhasha Dam and others which are also expected to be initiated soon. In these new projects, a large funding came from the CPEC Energy portfolio which solved the problem of Coal (especially Thar Coal) power financing which Pakistan was seeking to replace costlier generation and to improve the energy security.
There is no doubt that the weak and unreliable transmission and distribution system plagued with constraints and bottlenecks has been a major challenge, for successfully inducting new generation. The simulations run in the Ministry of Water & Power showed that there was no chance of transmitting any new generation on the system as it prevailed in 2013. It could not carry more than 15000-16000MWs. For a generation of more than 25000MWs, expected in 2018, there were 38% constraints on the NTDC's 500 KVA and 29% constraints on its 220 KVA transmission network. The situation was equally alarming in the distribution system of DISCOs. The distribution system constraints were in 30% areas of IESCO, 48% in PESCO, 44% in GEPCO, 40% in FESCO, 52% in LESCO, 33% in MEPCO, 80% in SEPCO, 42% in HESCO and 38% in QESCO. While in many of the areas such constraints might not have affected supplies in 2013-14, thanks to loadshedding, but these were there to erupt as soon as higher transmission would have been attempted from the additional capacities.
The work on improving system resilience is going on in all areas of the country, and closely monitored in the Ministry. It has helped reduce these constraints substantially since 2014. This was the reason that all the generated capacity, which went up to 17340 MWs in 2016 summers, was transmitted without major issues.
However, the system augmentation work (for expansion to allow carrying additional capacity) will be completed by the end 2017. It is expected that more than 90% of the system will be constraint free in 2018.
Zero outages (loadshedding) for the industry since November 2014 (except during the month of Ramazan) has also helped enhancing GDP growth in 2015-16. The reduced domestic loadshedding has also alleviated the sufferings of the common man to some extent.
We need to work hard every hour, all the days in the next eighteen months to ensure that the nation can see the end of the menace of power outages and its remaining adverse effects on the economy and the lives of our people, before the summer of 2018.
The increased generation and removal of system constraints will eliminate outages in most of the country. Futuristic investments will still require to be made into all spheres of power sector, from generation to distribution. The Ministry is committed to keep on working beyond 2018 end-loadshedding plan to turn the entire power set-up into a modern, efficient and resilient system in line with the aim to enhance energy security of the country.
(The writer is a Federal Secretary Ministry of Water and Power, Islamabad. The views expressed in this article are not necessarily those of the newspaper)
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