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Alternate Energy

Published Date: May 1, 2013

Energy crisis caused by faulty business model: minister Sustainable Development Policy Institute (SDPI)

The
current energy crisis “is the result of a faulty business model, widening
demand-supply gap, and increasing losses within transmission and distribution
system, Caretaker Minister for Water and Power Dr Mussadaq Malik said on
Tuesday. He was speaking at a consultative meeting on ‘Pakistan’s Energy Crisis
and its Possible Solutions’ organised by Sustainable Development Policy
Institute (SDPI) here on Tuesday.

The
Minister said that if required funds and gas was not provided in next few days,
the duration of power outage will increase. Currently, urban centres are facing
power cuts lasting 12 to 14 hours while rural areas suffer 16-18 hours of
outages. Deliberating on reasons for energy crisis, he said that currently,
Pakistan was generating around 14,000 megawatts of electricity at peak with 40
percent of energy produced with expensive fuels – Diesel and Furnace oil. He
said producing costly electricity and distributing it at subsidised prices is a
faulty business model which could not work anywhere in the world. He also
lamented lack of accountability regime and management crisis which is
contributing in power crisis in Pakistan.

He
said government is planning to increase generation of electricity by shifting
the bulk of generation responsibility from inefficient Gencos to the more
efficient IPPs. He explained that Rs 13 billion per month are spent on
providing 6000 metric ton of oil to Gencos who generate only 650MW per month.
He said idle capacity of IPPs can be utilised by injecting Rs 10 billion which
would produce 1150 MW electricity. This, he said, would result in saving of 36
billion rupees annually along with additional generation of 500 MW electricity
per day.

On
issues in fuel supply to Gencos, he said adulteration and pilferage of fuel
were major issues which results in huge losses to government. He said the
Ministry was working to devise a mechanism proposed by SDPI titled ‘fair
average quality price formula’ under which the price of fuel would be reduced
if it is found to be of less quality. This, he said, would reduce corruption
and result into efficient power generation.

The
minister also said that only 2.5 percent of transmission losses are allowed by
regulators in Pakistan but this year these losses are estimated at 3.6 percent
and this differential when calculated is more than the power needs of the two
smaller provinces in the country. He said the ministry is now trying to reduce
the transmission losses by signing performance contracts with transmission
companies and installing transmission measurement software’s.

Talking
of solutions to reduce distribution losses, he mentioned installing smart
meters at high-consumption users. In the long-term, he suggested to either
privatise urban Discos or handing them over to the provinces. He also talked of
launching a website that would not only list the efficiency and performance of
all Gencos but allocations of money would be listed to ensure transparency.

Former
Chairman Wapda, Shams-ul-Mulk said that lack of appropriate planning has lead
to today’s energy crisis in Pakistan. He pointed lack of seriousness and
political will at part of government political leadership who despite clear
warnings from Wapda and international bodies, didn’t bother to give serious
thoughts to plan future energy needs of the country. “Wapda and International
bodies warned government to build a major water reservoir and power generation
facility by 1992, but nothing was done and 1992 was the year when load shedding
started in the country,” he added.

Executive
Director of SDPI Dr Abid Suleri said that Pakistan needs to look for alternate
and innovative ways to end energy crisis, emphasising on better policy
decisions from Nepra and demanding stringent measures to reduce pilferages in
fuel supply and transmission and distribution losses. Dr Suleri proposed to
divert gas supply from inefficient plants to more efficient plants so that
wastage of gas is reduced and more mega watts of electricity can be produced.