Energy Crisis in Pakistan: Brief Essay

(This essay owes its skeleton and information, almost 90%, to this essay by Mr. T. S. Awan. Please share information, critique and more articles on it.)

Energy Crisis in Pakistan

“What does ‘LOL’ stand for in Pakistan?

‘Lots-of-Loadshedding’.”

“Why isn’t anyone intervening in Africa (as in Middle East)? It’s the layer of oil on Middle East … otherwise it’d have been no different than Africa.”

- Former NATO chief, Gen. Wesley Clark, 2007

[Introduction]

General (rtd.) Wesley Clark, one time Supreme Allied Commander of NATO, admits that US and Europe's intervention in Middle East – initiative of multiple regime changes in around seven countries through direct and indirect wars – is primarily to gain control over oil resources by Western powers. Control over energy has become a cause of wars among nations, only indicating how critically important this resource; although power of collaboration is being underestimated. One cannot imagine a tomorrow devoid of energy in modern world. Energy is its cornerstone. It is critical to be self-sufficient in its generation to preserve independence of a nation. Developed world differentiates itself from the rest because it has been able to harmonize its supply and demand, managing both at the same time. Self-sufficiency and control over energy gives the North its edge over the South.

    Pakistan is energy-deficient. How can one imagine an active and prosperous human being short on blood? Life is hard without sufficient blood running up and down the veins, pumped by the heart round the clock. Pakistan has failed to contain its energy crisis; failing to increase supply proportionately and conserving demand. In 1980s, it met 86% of its demand; come 2000s, situation is getting worse. Explosion in the supply of natural gas gave the nation a breather, sharing burden of electricity and oil, only to make future insecure as gas reserves deplete at fast rate. Fire-fighting on the part of government becomes national strategy, instead of proactive, long-term planning. This has contributed to circular debt problem because of short-sightedness political government.

    Let alone increase the supply of energy, situation has worsened due to poor management, operational inefficiencies, power theft, and line losses. This largely sums up the problems country faces in its battle to restore sanity in energy sector, which is now nudging the economy towards disaster, warns latest report of Asian Development Bank.

 [Energy sector in Pakistan]

Energy sector of Pakistan is considered to be under-developed, thanks to poor management and planning, with untapped potential for humungous growth. The root problem is energy generation which never took place proportionately with the rising demand and positive economic growth, with rapid boost taking place in Musharaf’s era. Nobody could tell him about the shortfall in the supply that would engender an energy crisis for coming government(s). The songs of ‘all is well’ were sung by the planners, and now we are in a quagmire where no short-term solution can work. Apart from this energy generation failure, government did little to contain the demand which seems to have exploded out of proportion in past two decades; operational inefficiencies and line losses are costing government billions; power theft; and on the top of that, the cheapest source of electricity, namely, hydropower, suffers from seasonal oscillations between 2,414 and 6,761 megawatts, depending on river flow. To offset the gap between supply and demand, populace suffers from load management or load-shedding. This crisis has pervasive and far-reaching consequences on economy, society and overall functioning of the country.

[Energy sector & consumption]

Pakistan’s energy sector consists of following consumers: household, industry, services, transport, government, etc.  The largest consumer is industry, accounting for around 58% of total consumption; it is followed by transport sector at 22% usage; and 15% is consumed by household, and rest with other sectors. This shows that the power crisis is affecting the industrial setup most, and cause for pain for ordinary citizens. The consumption is met by the mix of petroleum oil, gas, electricity, coal and liquefied petroleum gas (LPG) sources. Gas contributes most with share of 43.7%, followed by oil at 29% and so on.

[Energy supply]

In 2010, energy supply per capita decreased by 3.09%. The country is in need of 15,000 to 20,000 megawatts (MW) per day. Its current supply is, however, around 11,500 MW per day. Hence, it faces a shortfall of around 3,500 to 8,500 MW. This is the root of cause of all troubles for the struggling economy and industry.

[Sources of energy]

[Non-renewable: fossil fuels: unsustainable / the main sources]

Non-renewable resource is the main energy source of Pakistan, which basically is fossil fuel, formed by the remains or decomposition of animals and plants deposited in earth’s crust and with a long process are converted into oil and gas. There is no replenishment for these sources. There are four main types of fossil fuels: oil, natural gas, coal and liquefied petroleum gas (LPG).

    First, petroleum contributes 29% to the total supply of energy, as of 2009-10. The majority of crude oil is imported from Gulf States. It is also used in the production of electricity, generating 64 percent (34 from hydropower). Highest consumers of this source are power, transport and industry sectors followed by agriculture and households. Currently, 24 million crude oil is being extracted annually, which will be exhausted in 12-13 years at current rate if new wells are not discovered and utilized, as total estimated reserves are around 303 million barrels.

    Second, natural gas became the fast growing energy source in various sectors of the economy. In 2010, average production exceeded slightly 4,000 million cubic feet per day. In industry is used to make consumer products; its derivative, compressed natural gas (CNG), is used in transport sector; and households use it for various purposes, including cooking, heating, and using it to run generators. Pakistan is currently largest CNG consumer in the world, thanks to price differential between CNG and petrol that is driving its consumption crazily. We might suffer from the fate of New Zealand, who had converted almost everything to CNG only to reverse it back to other forms of energy as they ran out of their gas reservoirs, unless we can miraculously complete pipeline project with Iran.

    Third, coal reservoirs are deemed to be the last hope of energy-deficient Pakistan, although controversially. With over 180 billion tonnes of coal reserves identified at Thar coal field, it is a prospect worth pursuing. The coal currently being extracted is of not good quality, used primarily in brick kiln and cement industries.

Another major energy source consists of renewable resources. These resources are naturally replenished and can be utilized again and again to produce energy, coming from sources such as water, sunlight, wind, tide and geothermal heat. It is sustainable and clean.   

    Hydropower is produced using electricity generators to extract energy from moving water. Pakistan is a goldmine of hydel power, which is under-utilized contributing only 34% to total electricity generation. The potential generation ranges between 41,000 to 45,000 MW, whereas only 6555 MW is being tapped. Currently, there are five hydropower stations, fully functional, namely, Tarbela Dam, Ghazi Brotha, Chashma, Warsak and Mangla Dam, with combined production of 6555 MW. There are five potential hydropower stations waiting to come to life including, Diamer-Bhasha, Munda, Kalabagh, Bunji and Dasu Dam with combined capacity of around 17,000 MW, which can meet the shortfall of supply by more than 90%.

    There are alternative sources of energy, apart from the two categories – namely, renewable and non-renewable resource – which are promising and future of sustainable energy production. However, these are contested and yet not as feasible and economical as current sources of energy. The potential of all these alternative sources are huge, beyond our wildest imagination. Future is here.

    Wind potential of Pakistan is 10,000 MW to 50,000 MW. It works on the principle on using wind’s power to drive the blades of wind turbines, ending up in generating power. A Turkish company is going to install a 50 MW turbine in Jhampir. More plants are to be installed in Jhampir, Bin Qasim Karachi, Keti Bandar, etc.

    Similarly, solar power also has huge potential of generating 100,000 MW, although it seems like a distant dream, but with revolutionary innovation, its tipping point may not be that far. The key to this treasure is developing solar cells that convert sunlight into electricity. In Gilgit-Baltistan, government is building 20,000 solar water heaters. Mobile companies have been asked to shift fuel of their transmission towers from petroleum oil to solar cells.

Ranging from utter incompetency to foreign pressures and lack of political will, the Pandora box of Pakistan’s current energy crisis traces its roots to multifaceted and distinct causes.

Firstly, over the decades, the demand for energy has grown due to following main reasons: increasing population; electrification of rural areas, in 1990s more than 60,000 areas had connections, whereas in 2000s it has passed the mark of one lakh; industrial and agricultural growth; and increasing transportation needs.

    Secondly, with increasing demand that outpaced the supply, there has been a lack of integrated and proactive planning for growth of energy generation. Although the country did not lack natural resources and sites for the exploitation of non-renewable and renewable energy, it failed to tap its potential. Few plants have been installed by the government to meet future needs. It did invite Independent Power Producers (IPPs) to share its burden; the IPPs have become an object of controversy, and clearly have not been able to meet the shortfall. Against the demand of 20,000 MW, we’re producing only 11,500 MW.

    Thirdly, the cost of production of electricity is so high that it can termed as the main reason of current load-shedding. The main cause of high cost is faulty fuel mix. Furnace oil is being used as the main fuel to produce thermal electricity. It is government’s responsibility to provide power generating companies with furnace oil. The cost producing with latter is Rs16 per kwh, which costs the end-consumer Rs22-25/kwh. Government is unable to pay fuel cost to generating companies, forcing plants to be either shut down or run on low capacity. Generating companies in turn are unable to pay to oil companies resulting in a high circular debt of around Rs400 billion. Without clearing this burden of debt, load-shedding situation cannot improve an iota.

 [Consequences / effects on various parts of the economy]

Energy crisis is pervasive in all major sectors of economy and affect quality and standard of life of population at large.

    Economic sector is being hit hard because energy is pivotal for the smooth functioning of its various parts. Economic losses are incurred due to low productivity and cessation of activity in agriculture, industrial and transport sector. Modern economy of a country is integrated, and if one element is displaced or gets weakened it troubles other elements. Lower gross domestic profit (GDP) and high inflation can be attributed to this on-going crisis.

    Agriculture sector is also affected, largely because productivity heavily depends on the functioning of tube wells in many areas. Not only that, production of support agricultural inputs like pesticides and fertilizers is also hampered. Therefore, higher energy generation will boost agricultural productivity.

    Industrial sector represents as one of the most grievous victims of the crisis. It is bloody picture of units being shut down or run at low capacity, layoffs taking place, and overall loss of competitiveness of the country, all of which is also hurting the economy and comparative advantage. Another consequence for this sector is flight of capital; not only foreign but local investors are investing, for instance, in Bangladesh, moving textile units there. If this crisis is not solved immediately, the industrial growth may be reversed completely, allowing foreigners to decimate local industry and innovation forever.

    Unemployment is a natural consequence of the preceding consequences of energy crisis. Shutting down of units and layoffs create unemployment. Interesting inflation is also going up along with layoffs. Moreover, new employment opportunities are not being created due to decreasing investment in new ventures, partially due to weak economy, corruption and terrible law and order situation.

    Social and psychological problems are also emanating from this crisis. Load shedding has led poor junta to take their frustration to road, unleashing it on public and private property, creating some of the most horrendous scenes of incivility. Since domestic supply of energy is erratic and as rare as gold, it stresses people out decreasing their productivity as workers and citizens.

Above all, energy crisis is creating the worse outcome for many: poverty. Instead of decreasing poverty figures after six decades, the country is on the path of adding misery to more and more people. However, economic growth is the messiah, as demonstrated by the experiment of Harvard Advisory Group in Pakistan in 1960s.

    In short, energy crisis is a plague that is poisoning many a sectors’ productivity and growth, increasing circular debt on government, and creating unrest in the populace. The problem is two-fold: supply shortage and demand explosion. It is not just the government that is to be blamed, but the people as well. Nonetheless, its options have not been exhausted. Instead, there is wide range of policy options available, although time taking, which can end this crisis for many generations, if not for eternity.

[Recommendations]

Solutions to energy crisis are not going to be ordinary, because the crisis is not. Recommendations and especially its implementation can be very painful for the people and for the government. These are hard times; hard decisions need to be made, or else this generation will end up compromising its own, and of future, generation. The reforms vary, firstly, due to the time factor involved in the completion of projects; secondly, according to the nature of energy resource; and, finally, depends on supply and demand sides of the problem.

    Reducing unnecessary consumption – or, reducing demand – can benefit populace and industry a lot. While American nation learnt the art of preservation thanks to twin oil shocks, we refused to do so despite widespread knowledge and omens of eternal low supply of energy. Government needs more robust educational campaign that covers as many ears and eyes as possible. Household consumers waste lot of electrons with their electrical devices, including TV, computers and lightings. In transportation, many reforms can be made: increasing usage of public transport, strengthening of railways, etc. in industry, energy efficient machinery and tools must replace tools of antiquity. Billions can be saved by reducing line losses. This will shrink government’s pockets but the future payoffs are worth it. Moreover, reliance on rental power projects should be decreased to drive down prices, which will boost production, although increase consumption which can be harmonization with education in conservation.

    Along with managing demand of energy hungry populace and industry, government should waste no time investing or arranging investment in new energy sources. There are two main untapped resources with awesome capacity to meet our energy demands: Thar Coal and dams.

    Thar Coal has estimated 175 billion tonnes of coal, the energy potential of which exceeds oil reserves of Saudi Arabia. Government claims to have begun construction of infrastructure; however little or no significant progress has been made. There are two scientific approaches that are being pitted against each other: gasification of coal, led by Dr. Samarkand Mubarak, and open pit testing and conversion of coal into gas. Former approach is being critiqued for a lack of open pit testing which is a norm in the world, and that it is a novel and risky approach. Currently, an audit of the progress done by Dr. Samarkand is being carried out to decide on further investment in the project. However, there is no doubt in the minds of experts that Thar Coals resources can be materialized; it is only a matter of few years.

    Somewhere else in the essay, we identified five potential dams with combined capacity of 17,000 MW. Using renewable resources (water) by constructing new dams and hydro power plants, much of our energy problems can be solved. However, the projects such as Kalabagh Dam are politicized beyond one’s wildest imagination, but according to many experts, including former chairman of WAPDA from Khyber Pashtunkhawa, we have no other option than to build most of the dams, if not all.

    Instead of importing furnace oil, government should import of natural gas by IPI (Iran Pakistan India) and TAPI (Turkmenistan, Afghanistan, Pakistan and India) pipelines to replace furnace oil and to meet demand of natural gas in industry and households.

    Import of electricity from Tajikistan - through Pak Afghan Tajikistan transmission - and Iran (approximately 1000 MW from each of them) pipelines can also serve as short-term solution.

    Utilizing alternative energy resources should also be part of the energy mix. This includes wind power, biodiesel or biomass, solar and tidal. These sources may not be able to meet energy requirements of large cities, but surely will make small-scale businesses, villages, household and institutions self-sufficient.

    Enhancing civilian nuclear capacity is way to the future. This should be part of long-term planning, because the costs are heavy and development time long.

[Solution to circular debt]

An alternative to furnace oil for production of electricity is coal. It can be imported. However, even if coal is imported now it will take three years to fully operate majority of plants on it. Moreover, only those plants will be feasible to be run on coal, which are near to the coast; transportation of coal to far off area may not be feasible at all.

    Another short term solution to circular debt is replacement partially furnace oil with natural gas. We know that natural gas can be extracted by applying heavy pressure in fields. Availability of gas will take time. Moreover, exploiting gas from Thar Coal can be a great payoff, although it will take three or more years. The sooner the change takes place, the better it is in order to restore industrial and economic growth. Circular debt is expected to come down with recent increases in tariff. Citizens cannot be burdened any more. The multiple initiatives to reduce cost of electricity are the last resort to improve the situation.

[Conclusion]

It has always been the worse of times. There has been no energy bonanza in Pakistan. Economic growth did speed up in last decades, so did population growth rate and demand for energy; only supply of it failed to match the demand. This ‘feat’ has been accomplished with the help of poor planning, fire-fighting as a mental attitude of short-sighted governments, lack of political will, untapped resources, faulty fuel mix for electricity generation, and whole lot of other causes and its effects. Energy is a key requirement many sectors of Pakistan’s economy and society, hence its crisis has severe consequences for all these sectors. The main sources of energy need overhaul, change of heart, and replacement with new resources such as indigenous coal, gas, and more reliance on futuristic alternative, sustainable energy resources which will take at least decade or two before becoming true rivals to fossil fuels.

    The causes of the crisis are multifaceted and accumulated over time. Reconstructing the energy sector means dismantling decades of poor planning and decision-making, which speaks of the complexity of the situation. However, the severity of the crisis can be a blessing in disguise; it can compel authorities take hard decisions. Their biggest enemy is their own short-sightedness.

    Solutions have not been exhausted; in fact the opposite is true. Need of the hour is to launch multiple strategic moves, instead of pinning success in one ‘big push’. There are at least four kinds of energy sources identified in the essay that are vast open spaces for development, including building new dams, exploiting Thar Coal, alternative energy, and importing cheaper energy sources to replace costly one.