Pakistan can produce renewable energy. So why do we continue to import pricey fossil fuels?

From chronic load shedding to electricity theft, heavy transmission and distribution losses to massive non-payment of built-up dues, the sector is prone to every problem imaginable despite attempts by various governments over the years to fix the system and provide some relief to the populace.

The issues, however, are severer than the consistent, yet occasional, hours spent at the mercy of the urban heat without the relief of fans or air conditioners.

Pakistan’s electricity woes adversely affect the competitiveness of the country’s industry, lower the standard of living by creating an artificially low demand due to excessive prices and cost the national exchequer billions in the form of subsidies and import bills.

High costs

Most problems arise simply due to an unreasonably high cost of electricity for the average consumer. Fix that, and most issues will dissipate automatically in due course.

According to the most recent State of the Industry report issued by the National Electric Power Regulatory Authority (Nepra), the billing price of electricity throughout Pakistan averages to around Rs13/KWh consumed.

At US¢10.7/KWh, it fares on the lower end of the global electricity prices spectrum, significantly lower than that of developed economies such as the United States (at US¢21/KWh) or Germany (at US¢33/KWh), though above that of regional economies such as India (at US¢8/KWh) and China (at US¢9/KWh).

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But adjust that against income of an average individual in Pakistan, and the real cost balloons.

Assuming a high gross national income per capita of $1,580 and the global average of just over 3,000 KWh consumed per individual each year, approximately 20 per cent of a Pakistani individual’s income would be spent on paying electricity bills.

The same percentage is 1.1pc for the US, 2.3pc for Germany, 13pc for India, and 3.1pc for China.

It’s no wonder that Pakistan ranks amongst the countries with the lowest per capita consumption of electricity.

Those with enough means can enjoy an air conditioner in every room while many wouldn’t dare leave the television on for longer than absolutely necessary.

Self-perpetuating cycle

The high cost of a core necessity in today’s environment prompts those living on an edge to seek cost-efficient alternatives even if they are illegal, such as kundas.

These losses prompt the distribution companies to resort to systemic load shedding while the government is left to pick the tab via subsidies to the power distributors.

Lack of maintenance and upgrade of the national transmission infrastructure leads to further losses and bottlenecks throughout.

The high expenses passed on to the consumer, coupled with unsteady supply, raise cost of doing business in Pakistan and is partially responsible for the country losing export competitiveness.

Some may call for the government to increase its contributions to the power sector to aid the people, but that doesn’t shift or reduce the burden — it merely realigns it from energy bills to tax bills.

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Others may call for privatisation of the energy supply chain, and although private markets may do wonders for an ailing and inefficient sector, it wouldn’t be enough.

While a privately-run power distributor may be able to invest in and maintain an efficient transmission infrastructure, it cannot magically force its customers to pay their dues on time.

K-Electric is a prime example, for its distribution losses run far higher than those of state-owned electricity distribution companies.

And if the regulator eases the burden on the power distributors by allowing for passing of the heavy losses and non-collection to the paying customer via increased energy tariffs, a whole new swathe of people may be priced out of the market, exacerbating the issue in the first place.

What’s the remedy?

The only long-term, sustainable solution to all these chronic problems is to reduce the cost of generation.

Unfortunately, precious little has been done in recent years to that affect.

Large hydropower plants operated by the Water and Power Development Authority are the country’s cheapest source of power and imported fossil fuel-based thermal generation companies some of its most expensive.

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And yet recent major additions in power generation have been regasified liquefied natural gas-powered stations that add to the country’s import bill and produce power that is subject to international commodity price fluctuations and currency devaluation, as well as the decades-late introduction of coal-fired plants.

And though Thar coal may be a small blessing — if one ignores the effect on an already deteriorating environment — some of the coal-fired plants being built run on imported fuel.

Hardly on the right path

Nepra’s forecasts of Pakistan’s energy generation mix by 2025 is a small, but unrealistic, step towards the right direction.

Although the share of renewable wind and solar (which can offer non-fuel based clean energy at attractive rates once the initial payback period runs its course) will still be abysmally low, that of hydropower is expected to increase to 32pc from 26pc in 2017, with no further addition to non-coal based thermal generation beyond 2018.

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But that includes large additions in capacity from uncertain projects such as the Diamer-Bhasha dam, which has so far been restricted to crowdfunding due to judicial activism rather than an attempt at professional planning and project financing.

If they don’t materialise on time and demand continues to march ahead, the government will then be forced to resort to the relatively quick-to-set-up thermal generation.

In short, nothing would change seven years down the line.

Unless our public planners start working towards better ten to 15-year goals that address core issues in a sustainable way, we would be stuck implementing short-term measures that simply delay the problems than fix them.

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