Daily Times

The ancient Chinese philosopher Confucius had once observed, “When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps.” As our present efforts to cure the power sector ills are not proving effective, we should heed the Chinese sage’s timeless advice and adjust our strategy. A critical component of our changed approach to power sector reforms should target the “system planning” function which we need to turn on its head, from its present top-down approach and exclusive focus on capacity expansions to a bottom-up approach seeking demand-oriented solutions.

The traditional approach to power system planning, including integrated resource planning (“IRP”), is largely supply oriented, even though in IRP some effort is arguably made to consider the scope and feasibility of demand-management possibilities. This approach is problematic for a number of reasons and continued reliance on it will be akin to inviting bankruptcy for this sector with obvious implications for the national economy and society.

The traditional approach is remnant from an era when electric utilities were considered among the most stable and least risky of the industries for investment since economies of scale existed in the generation and transmission of electricity, competition was non-existence due to natural monopoly character of this industry, consumers had no choice in suppliers, and a decent return on investment was virtually guaranteed by the regulators. All of the above fundamental features of the electric utility industry have changed in the past couple of decades, and the industry is now in the midst of an unprecedented change and transformation which the utility analysts have correctly termed as “disruptive forces” because these are shaking up the way electricity in society is supplied and consumed.

Economies of scale are gone as small power plants have evolved with efficiency and cost characteristics that are at par with, if not superior to, the large plants, enabling competition in supply. The advent of information technologies (ITs) and gains in appliance efficiencies are enabling consumers to manage their demand to cut their bills. And, sharp drops in the costs of renewable energy and storage technologies have provided the previously-captive electricity consumers a choice to opt for stand-alone off-grid systems to reduce, and in some cases even eliminate, their dependence on the utility supply.

In the above backdrop, the traditional approach to system planning which essentially consists of aggregating consumers’ forecast demand within the utility’s control area and meeting it through a least-cost (capital and operating) sequence of generation and transmission and distribution (T&D) capacity additions, has lost its rationale. A continued reliance on this approach essentially is tantamount to locking the country into capital-intensive, long-lived, import-dependent, and environmentally-hostile power sector infrastructure which, once in place, will be difficult to change, let alone rollback completely.

Just to give readers a hint on the quantum of new capacity needs using the traditional approach, the recently submitted “Indicative Capacity Expansion Plan (IGECP) 2018-40″to NEPRA by the National Transmission and Despatch Company (NTDC), envisages adding of roughly 80 GW of new generating capacity in the next two decades raising the total capacity in the country to around 100 GW (for a forecast demand of 80.4 GW by 2040).

Execution of IGCEP will require capital outlays of over US$ 150 billion over the next two decades in generation facilities alone. Add to it the T&D costs (25 to 30 percent of the total) and the figure will easily rise beyond US$ 200 billion. Obviously, it will be a Herculean job to fund and operate such a monolithic system. We must, therefore, explore alternative avenues to lessen this huge capacity burden and also for funding it through less capital-intensive and more sustainable ways.

The traditional approach to power system planning, including integrated resource planning (“IRP”), is largely supply oriented, even though in IRP some effort is arguably made to consider the scope and feasibility of demand-management possibilities

A key role in achieving this objective can be provided by the sector’s planning function which requires complete revamping. The traditional approach to power system planning must be replaced with a new approach that is alive to the rapidly-changing realities in the global energy markets and fully incorporates the new options and choices that have emerged recently throughout the power industry’s value chain. The new developments in the global energy markets, in fact, have opened for us a rare window of opportunity, and we must capitalize on it. In the changed approach, the system planning will need to start at the consumer’s end, by identifying his energy service needs, for example space conditioning, lighting, cooking, food preservation, mobility, etc. After identifying these at the individual customer as well as community levels, planners should consider the scope of electricity in serving these requirements, at source, via a nearby distributed plant, or from the utility’s main grid whichever proves to be the most feasible solution. We should appreciate that each MW that is saved at the consumer’s end, supplied at source (for example, through a roof-top PV installation), or through a nearby distributed power plant will help the nation avoid 1.5 to 2 MW of building generating capacity upstream in the system by way of avoided reserve capacity, loss in dependable capacity, station use, and T&D losses, and thus can significantly alleviate the cost burden envisaged in the IGCEP.

Reaping the huge potential that shifting the planning and development focus at the demand’s end holds, however, will not be easy. It will require a strong political will and commitment by the government and some systemic overhaul in the existing institutional structure in the power sector. Most planning tools, institutional capacity, and financing arrangements have evolved around large and central-station supply-oriented schemes based on conventional fuels and technologies. As such, these long-standing practices will be difficult to unravel and replace with a new thinking that surely will involve more labor by the planners for which they presently are neither trained nor have the requisite tools. Potential investors might also shy away from investing in such small-size schemes owing to their distributed and scattered nature and consequently higher risks.

A major part of the system planning function will also need to move from its current central location-under the NTDC-to Distribution Companies (DISCOs) as these entities are much closer to the end-customers, and thus can better plan for the demand and required supplies within their jurisdictions. In a sense, DISCOs will be planning for mini-grids that will be designed to function as autonomous systems largely but will be tied with the NTDC’s national grid to mutually assist each other to enhance technical and economic operation of the country-wide interconnected system.

However, to accomplish the above objectives, the existing planning capacity within DISCOs will require considerable strengthening and re-equipping to enable them to perform their new and enhanced roles effectively. The planning function at NTDC will still be required but its aim and role will have to change significantly. Instead of acting as the main and sole planner for the power sector, it will need to act as a coordinator and facilitator in linking together the multiple mini-grids under the DISCOs.

The suggested changes in the planning function of the power sector will be admittedly difficult as well as time- and resource-consuming, but their payoffs to the nation would be huge in terms of avoiding unnecessary, capital-intensive, and largely import-dependent generation, transmission, and distribution assets. As such, these must be considered seriously by our decision-makers.

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