The new Special Assistant to Prime Minister (SAPM) on Power, Tabish Gauhar, has recently made public his roadmap for resolving the major issues of the country’s power sector. It’s a welcome step asit reflects his keen and objectivedesire towards handling these serious issues. His insight and grasp on these issues and his ideas to resolve them also come as a breath of fresh air as the nation has been getting tired of hearing the oft-repeated and run-of-the-mill solutions focusing mainly on reducing losses and improving revenue recovery in the DISCOs. While one can dispute his suggested remedies here and there, as we do in the ensuing discussion, all in all, his approach to reform the power sector looks sound, bold, and “out of the box”. Though it comes somewhat belatedly as the government is half way through its present tenure, but as we all know, it’s never too late.
Let’s be clear at the outset. A roadmap isn’t a plan. A plan, particularly a strategic one, generally takes stock of the existing situation, defines where we intend to go, devises strategies to reach there, and lays out a roadmap with clearly defined guideposts and milestones along the way to avoid diversions and keep on track. Such a vision may have been on SAPM’s mind, and would have been nice if he had translated it into a concrete and documented plan for everyone to be clear about what the government intends to accomplish and also keep track of the progress. Hoping that a set of disjointed initiativeswill fall in place like the pieces of a jigsaw puzzle may just be idealistic. A clear, concrete, and cohesive plan, developed with a painstaking effort and considering all the potential intended and unintended consequences,was necessary, but perhaps wasnot considered so.
While the suggested remedies by the SAPM are reasonable as well as promising, they seem to be targeting mostly the outward symptoms of the crisis and miss out on some important causes which have been at the root of the present power sector crisis. These include myopic leadership, institutional dysfunction, and managerial incompetence. His roadmap also seems to focus on inefficiency in the DISCOs only and ignores that in some other equally critical components of the power supply and delivery chain like that in generation and system operation, also overlooking the lack of responsiveness and agility in the management and workforce of the existing entities and their outdated administrative practices and procedures.
Modernizing and strengthening the grid via smart telecom and power control technologies, at only a fraction of the overall cost, can make a big portion of the future investment unnecessary
The new power strategy team is counting heavily on the gains to be delivered by the new wholesale competitive market which NEPRA has recently approved for implementation over an18-month period. It should bear in mind that the expected gains will strongly depend on removing the various hurdles in the way of the desired transition and also on putting in place enabling institutional framework, capacity, tools, and procedures. A theoretically-promising model or scheme may turn out to be a nightmare if the enabling conditions and framework in which their viability was studied are not provided, couldn’t be provided, or are not provided timely. Therefore, the government will have to be watchful to ensure that all pre-requisites are also are put in place along with the market.
Eliminating the existing direct and cross-subsidies to some consumers and using a separate scheme to support the most deserving consumers is a good step but could have been further improved. Government’s policies should focus on stimulating business and economic development in the country, as this will automatically lead to increased employment and improved incomes and thus affordability of consumers obviating the need to maintain social welfare schemes which have their own perils.
Offering 25 to 50% tariff reduction to industrial consumers for their incremental consumption may not lead to any significant increase in revenues as process changes and decisions to increase existing production or add new production capacity require considerable lead times and confidence on the continued availability of reliable and affordable electricity supplies. Same goes for the ambitions to win back the industrial consumption that has switched to captive generation within the industries. A more comprehensive and across-the-board tariff relief would have been introduced instead.
There isn’t a one-to-one correspondence between the GDP and electricity demand growths. Many countries have been able to delink the two and in fact reduce their electricity intensities through energy conservation and efficiency improvement efforts. We shouldn’t therefore promote thoughtless increase in electricity consumption hoping that it would automatically lead into economic growth. Eliminating the existing time-of-use tariffs (peak and off-peak) is also a regressive step as it would not deliver any positive results and may even encourage electricity consumption during the peak hours (the most expensive period to serve). Instead, the government should encourage cost-reflective tariffs that improve economic efficienciesand promote equitable distribution of these costs.
The government’s latest strategic plan (NTDC’s “IGCEP2047”) envisages 50 GW of new generation capacity to cater to peak demand of 44 GW and 6.5 GW that will retire by 2030, estimatedto cost roughly USD 70 billion. This is fearsome for three reasons. First, the cost of serving one MW of demand at or near its source can avoid 1.5 to 2 MWs of capacity costs upstream. Huge potential exists for avoiding a major component of future costs by siting small, distributed, and renewable technologies closer to sources of demand. Second, a solid, robust, and resilient grid contributes significantly to minimize generation needs and enable its efficient, reliable, and economic operation. Modernizing and strengthening the grid via smart telecom and power control technologies, at only a fraction of the overall cost, can make a big portion of the future investment unnecessary. Third, the 70% “reserve margin” envisaged in the plan, largely to cover the intermittency and variability of the government’s renewable deployment target, is way too high. Renewable generation is a noble aim, but developing it exclusively via the central grid may not be the best policy. Many other, more viable, options do exist and must be harnessed.
The government is counting too much on the premises that privatization or a public-private partnership will deliver considerable efficiency and savings. Privatization does lead to some discipline particularly when supported by market reforms, but is also fraught with new risks. Power supply is a public service and serves many additional development and social goals which we cannot expect from the mostly rent-seeking private business owners. Business with social responsibility is a high- sounding goal, but may not be realistic. We must keep in mind that the fundamental motivation behind any private business is to maximize profits, and not social welfare. Hoping them to give priority to social and environmental responsibility is like expecting from a bull to not charge at you because you’re a vegetarian. So, let’s be pragmatic in our expectations.
It is heartening to hear that the prime minister is determined to fix Pakistan’s power sector on a long-term and sustainable footing. He must however insist his team on developing a clear, concrete, and cohesiveplan and then put his weight behind its successful implementation, since without actionable strategies and clearly defined timelines for achieving established targets plans remain what they really are, mere dreams.“Time is of the essence,”as aptly noted by the SAPM.
The writer is a freelance consultant, specializing in sustainable energy and power system planning and development. He can be reached via email at: [email protected]