KARACHI: Experts have called for market reforms and deregularisation in the power sector to allow Pakistan to kick start its economic engine.
In a session titled ‘Pakistan Energy Symposium-Ushering the Future of Energy’ held at a hotel on Friday, renowned corporate and government experts including Engro Energy Limited CEO Ahsan Zafar Syed, National Electric Power Regulatory Authority (NEPRA) Chairperson Tauseef H. Farooqi, OICCI Pakistan President Ghias Khan, Pakistan Business Council (PBC) Chairperson Muhammad Aurangzeb, Pakistan Stock Exchange (PSX) Chairperson Dr Shamshad Akhtar, Board of Investment (BOI) Chairperson Azfar Ahsan, and Special Assistant to the Prime Minister on CPEC Affairs Khalid Mansoor discussed Pakistan energy sector and its issues.
Engro Energy Limited CEO, in his opening remarks, said that there is a critical need to re-evaluate the policies and decisions that have impacted the power sector.
“We are aware that by reducing foreign-exchange drain, circular debt, power cost, improving demand, we can make our power sector competitive, and that will kick start the economy,” he said.
"Instead of being supply-centric, we should also focus on consumer needs. This won’t just resolve consumer issues but also the supply-chain problem,” he said.
He said that the solution to the power sector woes lies in market reforms.
“That is transitioning from a single-buyer market to a multi-buyer system, and all of this enabling environment should give customers the confidence to leapfrog in this multi-buyer market,” said Syed.
“Dialogue should continue till we achieve a customer-centric energy market."
Marred with inefficiencies and mismanagement, Pakistan's power sector has become a headache for policymakers with transmission losses, and circular debt becoming massive challenges. Farooqi, the NEPRA chief, said deregulating the sector is the solution.
Farooqi said prior to his arrival the power sector was being managed without any planning, which brought in the topic of Indicative Generation Capacity Expansion Plan (ICGEP).
“IGCEP gives you an idea as to where we want to take our power sector in the coming years, and expand our industry based on ICGEP,” he said.
"Secondly, we introduced CTBCM, which stands for Competitive Trading Bilateral Contract Market. CTBCM is the NEPRA-approved model for the wholesale electricity market of Pakistan."
Farooqi said that for the industry to thrive, "we need to minimise the cost of doing business".
“So, CTBCM is like creating a motorway, as we are trying to replicate the successful telecom model by giving choice to the consumers.”
Farooqi said that previously, it was a multi-seller, single buyer model, where the government of Pakistan was primarily buying all the electricity.
“However, by launching the CTBCM, we are switching from multi-buyer, single-seller to multi-buyer, multi-seller market, whereby liberating the market,” said Farooqi.
He informed that NEPRA plans to launch CTBCM on May 1.
“New rules and regulations are being written for CTBCM."
He informed that NEPRA is also bringing in K-Electric in the mainstream, as they will become part of the central dispatch system.
“K-Electric is a private sector company but it has joined the new system of NEPRA,” he said.
Expressing his views, Ghias Khan, the OICCI president, emphasised the need of deregulating the market in order to achieve competitiveness.
He said that the global energy market has suffered two major setbacks in the last two years, i.e. coronavirus-led economic disruptions, and the ongoing Russia-Ukraine conflict.
Elaborating the impact of the said events on Pakistan, Ghias said that the country’s economy remains highly import-driven. “If we take aside the import of energy components, Pakistan would not have a current account deficit,” he said, adding that Pakistan cannot sustain current oil prices.
“We need a deregulated and a competitive market, to bring about the efficiencies and serve the customer better."
The OICCI president was of the view that as the country seeks to enhance its renewable capacities, necessary investments need to be made in the grid.
Meanwhile, PBC Chairperson Muhammad Aurangzeb also called for focusing on green energy, saying that the country has a long way to go to realise its goal of achieving 60% alternative power generation by 2030.
“Our current share of green energy is around 30%, of which 25% is made up of hydro and only 5% of the installed capacity pertains to solar, wind and bagasse,” said Aurangzeb, adding that their is huge potential for both wind and solar in Pakistan.
Aurangzeb said that the cost of capital for establishing wind power plant and solar power plant has declined by 50% and 60%, respectively. “This also includes the cost of finance, which has also significantly declined.
He said that in order to meet the target set by the government, the private sector and financial institutions need to come around and step up.
Giving a historical perspective on Pakistan's power sector, PSX Chairperson Dr Shamshad Akhtar said that with the passage of time the country, which at one time utilised indigenous sources to meet 90% of its energy needs, has not invested in sustainable energy or demand management.
She said that getting the right legal and regulatory framework is essential for the power sector.
Akhtar, who is also the chairperson of Sui Southern Gas Company (SSGC), informed that Pakistan produces 3.6 billion cubic feet (bcf) of gas from its domestic sources, and LNG is catering to about 1.2bcf of gas.
“The gas shortage is hurting both the consumer and industry,” she said.
Akhtar said that the power sector needs a single energy regulator, as there is a need for an integrated view.
She said that similar to the power sector, the gas sector also suffers from an Unaccounted For Gas (UFG) problem, which is equal to 1.2bcf.
“We need to secure full recovery of whatever we are selling, as we are standing at a crossroad where we have a circular debt in both power and gas sector,” she said.
Akhtar said that systematic inefficiencies are reflected by 12-18% of UFG.
“To put into perspective, the UFG losses are equivalent to the cost of LNG import estimated at roughly $2 billion per annum,” she said.
She highlighted that amid international volatility, Pakistan needs to ensure that its LNG cargoes are not diverted to other markets, adding that the pricing needs to be passed on, otherwise the circular debt will magnify.
Addressing the symposium, Khalid Mansoor, SAPM on CPEC Affairs, said that a few years ago Pakistan experienced one of its worst energy crisis.
"However, after CPEC finalisation, the first objective was early-harvest projects to alleviate the power crisis, under which 17,000 MW of power generation was envisaged."
He said that in the first phase of CPEC, 5,300 MW had been installed, and under the second phase 3500 MW of alternative energy is under consideration.
He said that the long-term energy security of the country is based upon indigenous fuels, and that is the scalability of Thar.
“If Thar scalability takes place, the cost of coal per ton will reduce and that will in turn also reduce the cost of power, which is needed to make our export product competitive,” said Mansoor.
Talking about his visit to China, Mansoor said Pakistan paid focus to those sectors that have become economically unviable for China, and which could be offered to Pakistan as a preferred destination.
"These sectors include textile, footwear, automotive, furniture, pharmaceutical, information technology and agriculture.
“We are at a tipping point, and if we continue to focus on development, Pakistan will soon be a market with import substitutes, export-orientation, and huge investment," Mansoor said in his concluding remarks.
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