There is no crisis graver than that of energy in today's Pakistan, and little wonder then that most of the government's time is occupied in planning, addressing and resolving the chronic issues. It was not long ago when Pakistan's economy was suffering an loss of 2 percent of GDP growth due to the energy crisis. It called for some actions, and thankfully, this government has shown some action towards addressing the issues. Although, the gravity of crisis is far deeper, it is heartening to see some actions been taken.
The problems are well-documented, well-researched and widely known and so are the solutions. It is always the implementation end that has been disappointing, largely due to a visible lack of political will. Recall that the incumbent government, when it took office, had vowed to end electricity load shedding in the country by 2018. And with the pace with which things are going, it seems highly likely that the goal will be achieved. But that is only one side of the story, as the issues are deeper than merely load shedding.
The energy landscape has changed significantly ever since the China Pakistan Economic Corridor (CPEC) came to light. There is much sharper focus on adding more megawatts to the system, via various fuel sources. The reform agenda is out and some steps have already been taken toward improving the overall picture especially in the power sector. Recall that partial settlement of circular debt cost the government nearly a massive $5 billion, which invited criticism from many a corners. That episode still remains controversial - but it surely did help Pakistan leap from the dire straits back in 2013.
The circular debt has refused to die, but it surely has been managed well. The power tariff rationalisation taken up in 2013 has gradually started yielding fruits. Efforts were also put in improving collection and reducing losses - both of which have witnessed partial success. It is a long road, but the path taken appears to be the right one.
Adding more electricity to the grid is the cornerstone of this government's energy policies. It is not that Pakistan's existing installed electricity capacity at over 22,000 MW is insufficient. It is the inefficiencies in the system that has dragged on for quite some time. Now that the government aims at adding a mammoth 10,400 MW before the general elections next year, one should genuinely hope that load shedding will soon be a thing of the past.
Bulk of the new additions to the power grid will stem from CPEC projects, which are been done on fast track basis, through the early harvest plan. While, the progress so far has been slower than ideal, experts opine that Pakistan would do well to add around 7000 MW additional by 2018, instead of the earlier planned 10,400 MW.
Electricity demand has been growing steadily and with industrial and commercial activities picking up pace, especially in the wake of CPEC, power demand may increase at a higher rate in the years to come. All this while, what must not be forgotten, is the need to build the right kind of base load and power mix.
It is no secret that Pakistan's electricity generation continues to depend heavily on thermal generation, bulk of which is based on furnace oil. The current government has been lucky in this regard that it never felt the pinch as oil prices remained on the lower side for most of the tenure, but anyone who knows the sector would tell you that thermal based power generation is not the smartest and most efficient furl source.
There has been some progress on gas based plants - both locally produced natural gas and imported liquefied natural gas. Power generated through gas is considerably cheaper than that generated on furnace oil, and would go a long way in streamlining the average power tariff in the longer run.
Luckily, there has also been good progress on the coal front - especially on the mining side. After decades of negligence, Thar coal fields are finally been fined through public private model and the first megawatts from locally produced coal are expected to come online by the end of 2017. The magnitude of Thar coal's potential is huge, and if planned smartly, could be the answer to many of Pakistan's electricity woes.
Renewable and nuclear power have also attracted more interest and work is underway on a number of projects. All this while, what must not be forgotten is the cost of producing all these additional thousands of megawatts. From what it appears, the weighted average electricity tariff for the national grid will be higher than what it is today. And that is something which is not sustainable in the long run and also goes against the government's commitment of reducing the tariffs.
What should be kept in mind that oil prices will never remain as low as they have been. And with expensive power generation, there will be added pressure on the recovery and T&D losses. Yes, there have been improvements on these accounts, but any uptick in tariffs can wipe away whatever little gains have been achieved.
Another important leg of the chain, the transmission system, remains fragile and highly undependable. There is some work going on two major transmission lines under the CPEC - but the progress is far from satisfactory. If the transmission system is not put right before more electricity starts getting in the system, it could cripple the whole system, once again.
Another important agenda of power sector reforms remain unfulfilled, and that is the privatisation of power distribution companies. The privatization of discos was supposed to have been completed in phases by now, but it never got started. Now, with the government in election mode, there is little hope on this front.
Another unfinished agenda is that of empowering the regulatory body and creating more harmonisation amongst various related institutions. The recent episode between the ministry of water and power and Nepra reiterates the value of having a central energy ministry. But that might be asking for too much, as the focus all remains on eliminating load shedding, be it at a higher cost.
In a nutshell, what can be safely say that this government has shown some seriousness towards addressing the power crisis. But the road is a long one, and there remain lots of areas demanding immediate attention, such as generation mix, T&D losses, privatisation, transmission, and regulator's empowerment.