Efficiency vs. capacity

Back in 2013, in the heat of the moment the PML-N leadership in a state of electioneering exuberance stated that load-shedding would end within six months. Three years on and the country is still plagued by intermittent blackouts. There are occasional ‘relief’ periods when the electricity does not go off for two whole days, as was recently the case at the time of the PSL Finals in Lahore. Of course, such relief is almost always followed by six to eight hours of continuous load-shedding or rather ‘maintenance’ work. Realising their pre-election folly the government quickly back-tracked on their apparently over-zealous pre-election rhetoric and re-stated that the power problems would be resolved within three years. On the expiry of the three years the deadline has now been extended to 2018 (5 years). This means that now the seemingly never resolvable electricity problem is expected to be resolved by the time of the next elections. Just as the government has been moving the financial goal posts to accommodate their seemingly never-ending borrowing binges, it seems other parameters can be adjusted, as words and promises become seemingly meaningless.

Tall claims have been made about additional generating capacity having been added to the grid; line losses having been reduced; and, efficiency and effective control measures having been implemented. Yet, the shadow of darkness continues to hover over the entire country. People have devised their own alternative solutions to meet the shortfall; be it through UPS, Solar, Diesel, Petrol or Gas. And, I guess they have just stopped listening to the revised promises and are trying to get on with their lives as best as they can. The Government continues to highlight its achievements in the power sector. There has been progress and no one doubts that, albeit skewed perhaps in favor of Punjab. Alternatives are being explored with solar, wind, and coal-fired plants. There is no easy fix available and time will tell how viable all the new power projects are.

For now the following capacity additions are expected:
  • The 1,180 MW gas fired Bhikki power project is expected to be partly commissioned in March 2017.
  • The 1,200 MW Balloki power plant will be commissioned later in 2017.
  • The 1,320 MW coal fired Sahiwal power project has commenced test runs with expected commissioning around June-July 2017.

The issue of Circular Debt continues to haunt the government, with no permanent resolution in sight. As a result there continues to be disruption in supply from the private power projects. In addition the distribution system continues to be plagued by problems due to required updates not having been implemented; and, line losses remain another problem, which has not been effectively tackled by the Ministry of Power. The expected rise in oil prices could compound the problems as this would place additional fiscal pressures on the economy for running the oil-fired plants.

CPEC, dubbed the game-changer for Pakistan is also expected to contribute to the power sector. It remains an expensive proposition with guaranteed rates of around 18 percent in US Dollar terms, plus risk insurance coverage of around 7 percent, additional sovereign guarantees, and costs of around 1 percent for security arrangements. For now the CPEC power plants appear to be high-cost.

Recently, KfW, a German state-owned development bank, reviewed the Pakistan Ministry of Power’s claim of having achieved a tur*naround in the power sector mainly through efficient generation and effective control. It is a fact that there has been some improvement, and KfW acknowledges that. However, the reason for that improvement remains debatable, as the low oil prices have been a boon for the economy and the power sector.

As per KfW the improvement is a result of the induction of three new power plants that were actually initiated prior to the current government coming to power. The claim of efficient generation and effective control falls flat when one reviews the underperformance of three major public sector plants (Muzaffargarh, Jamshoro, and Guddu, which cumulatively had lower production in the period 2013-2016 versus 2010).

As a result the Ministry’s claim, “with a 25 per cent increase in power generation since 2013, we have touched 16 billion units annual generation in 2016, thanks to efficient fuel consumption regime and effective controls”, appears to be nothing more than pre-election vote-grabbing rhetoric. It needs to be determined whether the 25 per cent increase was actually a result of performance improvement or capacity additions initiated by the previous government.

As per KfW, in 2013 there were 10 government-owned thermal power plants in the country. In 2014 three new plants were added, which effectively amounts to capacity addition and not efficiency enhancement as claimed by the government. In fact there has been a marked decline in the generation capacity of the thermal plants ever since 2010, despite rehabilitation under a USAID programme.

Public sector power generation did increase from 12,860 GWh in 2013 to 16,103 GWh in 2016. The question that needs to be addressed is whether the 25 per cent increase claimed by the Ministry of Power is actually a result of efficient fuel consumption regime or due to capacity enhancement from now plants coming online.

As per KfW the increase in generation came from the two additions to the system of 1,246 GWh, as well as another 1,322 GWh from the Nandipur power station. These projects were initiated in the tenure of the PPP-led government and were commissioned during the PML-N government’s tenure. This amounts to capacity addition and not performance enhancement.

There is a dire need to address the electricity shortage issue across the country. This can only be achieved through capacity addition, existing
plants optimisation, improvement in distribution systems and cutting down of line losses. Alternatives need to be explored and implemented for producing cost-effective and environmentally friendly power. The focus needs to be on bringing about genuine, long-lasting solutions, and not on providing false hope through tall claims. A lot has been done, but a lot more needs to be done to end the menace of darkness.