Challenges and Way Forward in Pakistan’s Power Sector

Khalid SaeedHead

Energy Research CentreCOMSATS Institute of Information

Technology,Lahore Campus

2

IntroductionExisting Structure of Energy Sector

Major ChallengesDemand and Supply Gap: 6000-7000MW

(1/3rd of total demand)

3

4

Sources: Overseas Investors Chamber of Commerce & Investments (OICCI) Pakistan, Energy Sub Committee, NEPRA’s State of Industry Report 2013

Major ChallengesHigh cost fuel mix for power generation

5

Major ChallengesHigh cost fuel mix for power generation – Low hydel share; decrease in gas allocation for power sector

6

Major Challenges

Fall in share of investments in Energy Sector: While in mid 90’s, 26% of total and 51% of public sector investments, the share of energy (including power) dropped to 4% and 26% by 2009-10.

Trust Deficit – a reason for inability to undertake large hydel projects over last 25 years (except Ghazi- Barotha)

7

Major Challenges

High T & D losses and poor recoveries by DISCOs

8

System Losses and Revenue RecoveriesDISCO Distribution Losses Recovery (2011-12) (2011-12) PESCO 35% 68%HESCO 28% 69%SEPCO 49% 53%QESCO 21% 36%

IESCO, JEPCO,FESCO, LESCO (average) 9.5%-13.5% 95%-98%

Source: NEPRA: State of Industry Report: 2012

The table below indicates the level of losses and percentage of dues being recovered by various DISCOS.

9

DISTRIBUTION LOSSES IN DIFFERENT COUNTRIES

Country %age of output Transmission &Distribution LossesAustralia 7%USA 6%Canada 8%Germany 4%France 6%UK 7%S. Korea 4%Malaysia 4%Iran 17%China 5%Egypt 11%India 24%Pakistan 20%

Source: World Development Indicators Report: 2012

10

Major Challenges Unsustainable tariff regime

11

Major Challenges2% loss to GDP – Impact on employment/

exports/budget deficits and circular debt

12

Major Challenges

Degeneration/ Derating of Public Sector Gencos

Uniform national tariff – No incentive for efficiency/ better recovery/ cutting theft and losses

Circular Debt/ Inability to fully operate all available generation capacity due to shortage of funds to get fuel.

13

Road Ahead: Way Forward

1. Diversity – More reliance on renewable energy (hydel/solar/wind)

2. More gas allocation – Add coal based power generation

3. Improve efficiency of public sector Gencos – Also introduce efficiency for industrial machinery, transport and household appliances

4. Manage demand through conservation measures

14

Road Ahead: Way Forward (Cont.)

5.Rationalize tariff regime

6. More investments – Public and Private sector to upgrade Power sector T & D infrastructure

7. Timely payments to avoid circular debts

8. Develop political consensus on energy security issues

15

Road Ahead: Way Forward (Cont.)

9. Improve governance to cut theft/corruption and inefficiency

10. Improve governance at policy level inter-ministerial coordination – single Energy Ministry

16

Salient Features of National Power Policy 2014

To achieve the long-term vision of the power sector and overcome its challenges, following goals have been set:

i. Build a power generation capacity that can meet Pakistan’s energy needs in a sustainable manner.

ii. Create a culture of energy conservation and responsibility

17

Salient Features of National Power Policy 2014

iii. Ensure the generation of inexpensive and affordable electricity for domestic, commercial, and industrial use by using indigenous resources such as coal (Thar coal) and hydel.

iv. Minimize pilferage and adulteration in fuel supply

v. Promote world class efficiency in power generation

vi. Create a cutting edge transmission network

18

Salient Features of National Power Policy 2014

vii. Minimize inefficiencies in the distribution system

viii. Minimize financial losses across the system

ix. Align the ministries involved in the energy sector and improve the governance of all related federal and provincial departments as well as regulators

19