The summer of 2018 is not much different from that of 2013 with a bit of change in demography. Lahore fared better in load shedding whereas Karachi suffered much from load shedding.
The prolonged outages are widespread in different areas of Sindh, Khyber Pakhtunkhwa, Balochistan and southern Punjab. In these areas, power outages are from 12 hours to 16 hours on daily basis.
The PML-N government inherited a peak power shortfall of 6000MW which is nearly at the same level as of June 2018. During this period of five years, over 6000MW of electricity has been added to the national grid. The government claims to have added 11,000MW to the installed power.
The successive governments' strategy to add more power stations to resolve load shedding in the absence of understanding and addressing the full landscape of power supply and demand dynamics has proved to be erratic and a mistake.
The ground reality is that there is still widespread load shedding which overshadowed the additional installed power achievements in an effective manner.
The missing link is transmission as additional installed power could not be fully evacuated and made available to consumers. Not only does a solution to this issue require massive investment, it also underscores the need for timely implementation of projects. The bitter fact therefore remains that the nation will continue to suffer from load shedding in years to come.
A statement of the Ministry of Power and Energy has said that power demand in the month of June 2018 stands at 24000MW while the power generation is 24800MW. NTDC has reportedly admitted that the power distribution network system cannot sustain more than 18000MW load.
The solution to address power transmission network limitation is complex and expensive. But even more complex is the financial limitation which is a combination of receivables, financial irregularities, poor governance - all of which cumulate to become a circular debt.
The focus of both PPP and PML-N governments was to add more installed power to the national grid. PPP and PML-N governments opted for rental IPPs and thermal plants based on LNG and coal, but PML-N is credited with initiating a number of mega hydropower projects under CPEC.
Auditor General of Pakistan refused to ratify the pre-audit payment of Rs 80 billion provided to the IPPs on account of circular debt owing to payments of Rs 400 billion under the head of circular debt and financial irregularities.
The other prime issue is the increasing cost of power generation and its unaffordability to industry and all segments of consumers.
The choice of so-called cost-saver new fuels (LNG and coal) has not provided relief to consumers in terms of tariff reductions while extensive investments have been made to facilitate the induction of new fuel mix into our energy network.
Pakistan has imported a record 10 million tonnes of liquefied natural gas (LNG) in the last three years. The proponents of LNG imports therefore argue that the decision has led to an approximately $3 billion saving in fuel imports.
The import of LNG, which is supposed to be a cheaper source of energy than furnace and diesel oil reportedly enabled the country to reduce total gas deficit of over 2.5bn cubic feet by 25 percent. Around 80 percent of this has been under long and medium term supply agreements, and the remainder from spot markets.
The start of commercial operations of three new LNG-fired power plants - Haveli Bahadur Shah, Bhikki and Balloki - with a total capacity of 3,600MW in Punjab will further increase the demand for LNG in future.
The issue of upgrading the power evacuation network is a major challenge demanding investments and time.
Pakistan has acquired $425-million loan from the World Bank on commercial terms with a payback period of 21 years, including a grace period of six years.
The loan is planned to be spent on modernising the national transmission network by rehabilitating selected 500-kilovolt and 220kv sub-stations and transmission lines.
The existing transmission system has the capacity to carry about 15,000-17,000MW of electricity safely, which is substantially below the peak load of over 20,000MW, according to the World Bank.
The objective of the project is to increase capacity and reliability of selected segments of the national transmission system and modernise key business processes of the National Transmission and Despatch Company (NTDC).
Aging and inadequate transmission and distribution systems exacerbated the problem. The World Bank said Pakistan's recent efforts had been focused on increasing power generation capacity, but aging and increasingly unreliable transmission and distribution systems also imposed severe constraints.
There have been several instances of major system collapses, which appear to be increasing in frequency and severity.
The regulator reports that most distribution systems do not meet the investment targets for repair and maintenance.
The project will support investments in high-priority transmission infrastructure, information and communication technology (ICT) and technical assistance for improved management and operations.
Total cost of the project is $536.33 million. The World Bank will provide $425 million whereas the remaining $111.33 million will be arranged by the NTDC.
The project targets include a three-fourth reduction in forced outages and 50% reduction in the frequency of forced outages. About 131-kilometre-long transmission lines are planned to be rehabilitated and 36 new sub-stations will be constructed.
In addition to short-term financial and network challenges as illustrated above there are severe structural issue with the power sector of Pakistan.
The energy planners are now seriously contemplating moving towards a competitive trading bilateral contract market (CTBCM) and doing away with inflexible long term PPAs structured as take-or-pay contracts. It is meant to encourage competition in new capacity procurement opportunities and is one of the objectives conceived by the Central Power Purchase Agency's (CPPA) CTBCM plan presented to Nepra for stakeholder input.
The progress so far made in this regard, which is the sharing last month of the CTBCM with Nepra, will be followed by stakeholders and public consultations and approval by the regulator followed by necessary amendments to the legal framework, which will mean modifying the Nepra Act to incorporate the approved market development policy.
The Ministry of Water and Power (MoWP)shall need to modify and replace the relevant power policies such as generation and transmission policies to comply with the market development policy.
This needs to be followed with modifications in the power sector regulatory framework and assignment of pre-existing power purchase agreements done by CPPA among the Discos. Only after these steps, will the CPPA be able to be separated into a Market Operator and Special Wholesale Supplier Business Unit.
It will take several years for Pakistan to move to competitive electricity market. But, It is a good beginning. India and Turkey are already utilizing a market-based electricity model.
Although Pakistan was much ahead of both the countries in introducing private sector in power market, it somehow lost focus to move towards competitive electricity market. This is the future which promises reliability and affordability of electricity to consumers.
There is a need for the energy planners of Pakistan to recognize, prepare and implement a holistic power strategy failing which the nation will continue to suffer from loading shedding in years to come.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)