Part I: Understanding Pakistan’s Energy Crisis
By Mujtaba Khan
Chief Executive Officer, Reon Energy Limited
Goal no.7 of UN Sustainable Development Goals(SDG7) is access to affordable, reliable, sustainable and modern energy for all. Access to energy is integral to human development in the 21st century. Of the 1.1 billion people on the planet without access to electricity, a clear majority lives in South Asia. Our own country’s power infrastructure continues to be plagued by a myriad of problems that are discussed and debated time and again.
1) Roughly 60 million people remain beyond the reach of the power grid that means they are relying on more primitive methods such as burning hazardous fuels for cooking and other needs.
Ensuring energy access to this segment will cost roughly 255b PKR (at the country average of 471 kWh per capita consumption*) annually or 2B USD just in terms of generation costs. There will be an added burden to extend the distribution and transmission network to these areas at disproportionately higher costs compared to rest of the country as this segment includes some of the most sparsely populated and difficult to reach terrains.
2) The power system remains structurally nonviable because of high transmission and distribution(T&D) costs and commercial losses are borne by the distribution companies; this is evident in the record levels of circular debt in the system.
3) Heavy reliance on imported fossil fuels creates a huge balance of payments issue for the country and this is the biggest contributor to our trade and fiscal deficits.
4) The grid-connected parts of the country continue to be plagued by power shortages (9GW at its peak in June 2018) that continues to handicap both consumers and industry.
5) Our electricity tariffs are the highest in the region since good customers are bearing the overall costs of all the inefficiencies across generation, transmission, and distribution. Moreover, the recent trend of rising commodity prices such as RFO and coal can cause a further tariff escalation for everyone.
6) Our electricity tariffs don’t reflect the overall cost of externalities from power generation e.g. healthcare and environmental costs of burning fossil fuels. Recent reports from neighboring countries put just the healthcare costs from coal generation between 4.5c – 7.5c per kWh. A study on the health impact of coal-based power generation in the US has found that coal contributes to 4–5 of leading causes of mortality in the US including heart disease, cancer, stroke, and chronic respiratory diseases.
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In summary, we need more power, at better rates, and at fairer pricing to make it available for everyone in the country. Ensuring this by 2030(SDG7) is crucial to creating a more equitable society as per the new government’s manifesto. In Part II of this blog, I will cover a set of policy choices and solutions that are currently available to us to solve these problems.
* Source: 2014 WB IBRD. Actual per capita consumption is much higher considering a large chunk of overall supply is through self-generation and the 471 kWh number only covers 70% of the population.
^ 70.9% losses 26.71 MTOE of fuel used and 7.78MTOE of electricity received by consumers in 2016/17. Compare that to 62% efficiency of combined cycle plants and standard T&D losses of ~6% in the developed world