Power generation: No more oil?

Electricity mix and not the generation itself have long been considered a bigger problem facing Pakistan’s power sector. Countless detailed reports and concept notes have been written over the years, most of which have been eating dust in the lost shelves. The government finally seems to have woken up from the slumbers and realized that heavily thermal based electricity generation is never going to solve the problem – it will only aggravate it – no matter how many thousand megawatts are being generated.

Government is reportedly mulling over a complete ban on furnace oil and diesel based electricity generation. Details are far and few, but the idea is laudable. Recall that conversion of furnace oil based power plants to other fuels such as coal and liquefied natural gas has already begun, but (the idea of) a blanket ban on oil based production is surely a welcome move.

Pakistan’s electricity generation mix has been heavily tilted towards thermal and that too on furnace oil. As per the latest available numbers, 36 percent of Pakistan’s electricity generation was based on oil, which is the largest chunk in the pie. Pakistan’s inflated oil import bill is well documented, and switching over to relatively cheaper and in some cases indigenous fuels, will surely be a much needed relief.

Potential savings in case of a complete shift from furnace oil could fall in the range of $6-8 billion per annum – and that could prove to be vital for Pakistan’s balance of payment structure. More importantly, an improved and balanced energy mix would lead to reduced power tariffs, which could solve the pilferage, theft, and circular debt problem to a great extent.

While the idea is noble, it is easier than done of course. It is going to be a really long-term process. It is not clear at this point if government is also considering retiring some of the sick power units. Experts argue that not all power plants will run as efficiently if converted, and may need to be completely shunned.

What also needs to be kept in mind is that the change in power generation mix should not be heavily tilted to one fuel or the other. Base load needs to be shifted to bigger hydel and gas based units. Efforts should be made to maximize generation from indigenous resources and imported fuel should always come later.

Mind you, CPEC power projects at this stage have no mention of a migration of this level from oil based generation to other fuels. Seeing how CPEC projects have evolved over the period, do not be surprised, if the same is added to the list. But if it is not, it is not likely to see the light of the day. Here is hoping, plans such as these are put in place, and not just conceived.