Energy politics and policy ambivalence have landed the country in a situation in which the future looks increasingly bleak, despite the rose-tinted projections of the national policy planners.
The Achilles’ heel of our energy planning is that the energy mix is not suited to our monetary capacity and resources. Two factors are of crucial relevance: (i) the selection of a suitable energy mix, in sync with national resource endowment; and (ii) the desultory regulation of the crucial energy sector. The egregious neglect to tap into the cheapest energy sources has landed us in the quandary of an energy mix that is neither economically unsustainable nor productive enough to slake the energy thirst of an economy with vast unmet capacity. It does not take much wisdom to surmise that a net importer of oil – with over 60 percent reliance on thermal energy – cannot survive indefinitely.
It is time for us to galvanise our policy planners and regulators into taking bold decisions that are purely in the interests of the country. Altering our energy mix and improving our regulatory institutions has become an imperative necessity because of our unsustainably high circular debt. A country that refuses to develop its cheapest available natural resource, hydel power, while continuing to amass thermal power plants is on a suicidal path.
According to the National Electric Power Regulatory Authority (Nepra) and the Hydrocarbon Development Institute of Pakistan (HDIP), the current energy mix is 67 percent thermal, 29 percent hydel, 3 percent nuclear and 0.43 percent renewable energy sources. As per the data of the National Transmission and Distribution Corporation and the Planning Commission, the net national power generation capacity and the peak demand of around 28,000 megawatts will converge by the end of 2017, with a heavy reliance on imported gas. The projected hydel and thermal energy percentages of 35 percent and 58 percent by 2025 also appear tilted in favour of costly thermal energy.
Our reliance on thermal sources, despite possessing one of the most bountiful hydel resources is mindboggling. The political squabbles amongst the provinces, instigated by uninformed political prejudices and active lobbying against the vital dams, act as a deterrent to our quest for the most economical and efficient energy flow.
The cheap domestic sources of coal and water are being rejected in favour of expensive thermal options. Electricity generation through domestic coal would cost 3 US cents/kilowatt-hour (kWh), whereas a low-efficiency liquefied natural gas plant costs $11/kWh.
Considering the current limitations of renewable energy – pending a major technological breakthrough in solar and wind power – our main reliance should be on coal and hydel energy. The construction of big dams like Kalabagh needs to be secured through a national debate, which is based on hard scientific reasoning rather than conjecture. The environmental debate about our coal potential needs to be moderated with the same parameters as that of our hydel potential. Instead of chasing the chimeras of technologically constrained alternative energy, our reliance should be on our abundant coal and hydel potential. Once they have sorted out the crucial problem of the energy mix, our national policy planners must focus on institutional reforms in the energy sector.
It is clear that Pakistan suffers not only from a resource deficit and the wrong energy mix, but also through lax regulatory policies that fail to ensure the optimal development and transmission of energy. Independent regulatory institutions like the Oil and Gas Regulatory Authority (Ogra) and Nepra are supposed to engender efficiency and fairness in the energy sector; yet, they have failed to achieve these objectives because of undue government interference. Instead of guarding the interests of private investors and the public, the regulatory apparatus tends to pass the cost of the government’s administrative incompetence on to the consumers.
An apt example is the government’s pressure on Nepra to pass the transmission and distribution losses along to the consumers. Instead of concentrating on the interests of the investors, Ogra and Nepra are constantly pressurised to kowtow to the government. Resultantly, this regulation discourages competitive investment, leaving the field open to government monopoly and private greed.
Some of the other issues hampering the energy sector’s productiveness are the undeveloped banking sector, excessive re-lending rates in the public sector, high insurance premiums and interest rates. The discord between Nepra and Ogra must also be addressed urgently; a possible solution could be the merger of the two institutions. Reforming the pricing mechanism and removing delays in the investment cycle should be the goals for a truly independent and legally supported regulatory apparatus at the national level.
For a country already affected by climate change and water scarcity, the development of an energy policy suited to its economic capacity and indigenous resources is a national security issue that merits urgent attention.
The writer is a PhD scholar at Nust.