Daily Times

Two news reports have come out recently that apparently seem unrelated, but if looked slightly deeper, should make it evident that these are but two faces of the same coin. Both relate to Pakistan’s participation in cross-border cooperation in energy infrastructure projects with some other countries in the region, especially on building electric power interconnections.

The first report refers to an advice to the government by NEPRA in its recently released “State of Industry Report 2018” against the Central Asia South Asia Interconnection (CASA-1000) project. According to NEPRA, electricity imported through this project will be considerably expensive compared with that produced locally, and also will not be available during the winter seasons when the country needs the most. The Authority, therefore, has advised the government to revisit the relevant agreement and, if still possible, scrap it.

The second report is about signing on 20th September of a 10-point declaration at the end of the Energy Ministers’ Dialogue of the Central Asia Regional Economic Cooperation (CAREC) at Tashkent, Uzbekistan. Among the other wide ranging cooperative initiatives, the declaration also endorses the CAREC Energy Strategy 2030 and, feeling encouraged by the recent progress on regional power exchanges, commits to doubling the current regional power flows by 2023 through enhanced power interconnections among the member countries.

These two news reports come at time when a fundamental transformation is taking place in the global energy markets. Many countries are striving to adjust their strategic positions to align their energy supply and delivery systems with the rapidly developing new technological and market trends in the world. Avoiding long-term commitments and keeping the power system flexible for any disruptive changes will be the most prudent approach for any nation including Pakistan.

Both the energy supply and demand are currently undergoing radical changes. Technical advances have expanded the global oil and gas reserves considerably in the past decade, resulting in a supply glut and lowering of fuel prices. Rapid strides are being made by renewables, particularly solar and wind, leading to their unprecedented growth. Society’s push towards shifting its energy-mix towards cleaner fuels, to counter the looming threat of climate change, has also resulted in lowering the demand for carbon-rich fossil fuels.

Meanwhile, the composition of energy demand has been changing too. A greater use of information technologies (IT) in every walk of life has led to expansion of service-oriented economy, replacing energy-hungry industrial processes. Technological developments are making new energy fixtures and appliances much more efficient than their predecessors. Also, on the demand side, significant inroads are being made by electric vehicles (EVs) in the transport sector and energy storage technologies largely for storing electricity.

Collectively, these new trends are shaking up the whole energy supply, transportation, delivery, and consumption value chain. Large-scale, central-station, and capital-intensive power supply projects interconnected with extra- and ultra-high voltage transmission systems extending over long distances are legacy of a bygone era when economies of scale used to rule the energy, and especially, the power sectors. Small-scale, renewable, and distributed supplies, as near as possible to the source of demand, is the new paradigm that is expected to reign the energy and power sectors, at least for the foreseeable future.

Any commitment into highly capital-intensive projects such as regional interconnection, therefore, could further exacerbate an already under-siege (using NEPRA’s words, “a collapsing”) power sector of the country and could be suicidal for the national economy as it could lead to stranded generation and transmission assets which can become a burden for the country’s economy for many years to come.

Regional electricity interconnections are not anymore just an issue of techno-economic feasibility, though even this can be questioned under the changed market conditions

In the above backdrop, NEPRA’s advice is both timely as well as pertinent. The government should heed this advice seriously and also move very carefully and cautiously in making any new long-term commitment on regional cooperation on energy infrastructure schemes, especially those that involve capital-intensive and high-risk power interconnection projects that will span multiple political jurisdictions.

Cross-border interconnections, no doubt, offer numerous benefits for the participating countries, including sharing of installed capacities, operating reserves, and economic operation of interconnected systems, economy and emergency trade of energy, and enhanced reliability. These also contribute to system security by virtue of diversity of supplies as well as demands.

In recent times, these have acquired an added interest due to their potential for mitigating the intermittency and variability of renewable plants in the connecting system due to spatial and temporal spreading of resource availability and variability risks. But these are not without their costs which must be weighed against any benefits they hold for each participating country.

Regional electricity interconnections are not anymore just an issue of techno-economic feasibility, though even this can be questioned under the changed market conditions. Such interconnections demand rigorous and detailed technical and financial studies and evaluations and sorting out of a wide range of political, regulatory, legal, institutional, social, and environmental issues owing to the fundamental variations that exist among the cooperating nations.

On the technical side of it, these require ironing out of variations in industry and operating standards as well and connection and operating codes, removing any differences and making them uniform across a number of technical parameters. Legal and regulatory frameworks are also required to be studied and made compatible with those of the other participating countries. Even the institutional setups within the participating countries can vary a great deal and must be thoroughly studied and aligned to avoid disputes during implementation phases of the interconnections. All these require collection of data and information from participating countries, their assimilation, and use to carryout evaluation work. Something easier said than done.

Pakistan’s energy and power sectors are currently marred with widespread inefficiencies, deficiencies, malpractices, poor governance, and corruption. The country is already facing numerous issues with the present contracts with IPPs that were signed in the past, and in some cases is even paying a heavy price for these. In their present form, adding additional burden on existing institutions for dealing with even more complex and serious issues that regional interconnection are bound to raise will certainly make an already bad situation even worse. It would be better if we set our own house in order before committing to complex, potentially expensive, and high-risk undertakings like the regional power interconnections.

The government will need to move very carefully and cautiously on such collaborations after evaluating every single aspect of the cooperation to protect the interests of the present as well as future generations of the country, and not just because some multilateral development bank or aid agency is pushing for these and is willing to extend technical and financial assistance for such costly and high-risk projects.

The writer is a freelance consultant, specializing in sustainable energy and power system planning and development