Tuesday, April 22, 2014

First Editorial April 23, 2014

Tackling the energy crisis It is a matter of great satisfaction that Prime Minister (PM) Nawaz Sharif inaugurated two combined cycle gas-fired turbines at Guddu Thermal Power Plant in Sindh of 243 MW each. A third turbine will be completed in May, boosting the capacity of the plant from the present 1,655 MW to 2,402 MW (an increase of 747 MW). The PM in his speech on the occasion promised that the era of darkness was about to end, the rule of light would soon be ushered in, and Pakistan would be transformed into a bright, shining country. Nawaz Sharif revealed that dozens of power plants were being set up with China’s help, which had committed billions of dollars in investment in the sector. The PM’s vow to complete all projects soon was underlined by his praise of the Chinese company that had completed the Guddu project seven months before schedule, saving almost the equivalent of the entire cost of the project, i.e. Rs 58.6 billion. Nawaz Sharif regretted the slow pace of progress on power projects in the past and emphasised that his government was working to make up for lost time. He said 21,000 MW would be added in the next eight years. Load shedding over the last 10 years, the PM said, had not only made life difficult for citizens, it had seriously undermined the country’s progress. The government was trying to enhance the efficiency of existing power plants, expedite work on ongoing projects (the Neelum-Jehlum long delayed project is an example), and set up new plants under public-private partnership. The Gaddani Power Park would add 6,600 MW and 1,320 MW would be added at Jamshoro. These are coal-fired plants being set up with the help of local and foreign investors and the Asian Development Bank respectively. Similar plants would be set up at Lakhra, Port Qasim and in Thar. Tarbela Extension-IV of 1,410 MW and Extension-V of 1,320 MW and the Diamer-Bhasha Dam of 4,500 MW are in the pipeline, although there are still funding difficulties in the last named. Private sector projects are being planned in Soki Kinari, Karot and Kohala. The PM pointed to his government’s retirement of Rs 500 billion circular debt early in its tenure, although this achievement has been dimmed by circular debt rising once again to Rs 300 billion. The government’s emphasis on thermal, gas and coal based power generation is a necessity to overcome the crippling energy deficit, but its planning must emphasise the cheaper forms of power generation as a priority if the electricity mix is to be nudged over time to become affordable. In 1994, when the second government of Benazir Bhutto initiated the Independent Power Projects (IPPs) based on thermal generation, the combined cycle gas-fired technology was already available with a cost one-third of fuel oil-based generation. That mistake gave us the present increasingly unaffordable energy mix over time. To the argument that the present looming gas deficit would have made that option unfeasible by now, it can be contended that imported gas supplies may still have proved cheaper. However, that is water under the bridge by now. While the government pursues thermal generation on a war footing, it is good that it is also pursuing hydel, coal, solar and renewable forms of energy. Only a nuanced policy that avails all options can meet demand, expand available energy to those deprived so far and make the mix affordable. In addition, the government needs to invest in the national grid to minimise line losses (amongst the highest in the world), cut off supply to defaulters (especially government ministries and departments that are the main culprits of this problem), and ensure the collection of dues to overcome the persistent problem of circular debt. One manifestation of this issue is the default that threatens Pakistan State Oil (PSO) unless it receives Rs 149 billion by next month, a default that would halt oil supplies and exacerbate the energy deficit during the long hot summer months when demand is at its peak. The energy crisis is serious, the solutions will take time, but as long as the government is moving in the right direction, there is hope for the economy and the people of a brighter future.

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