Discos’ infrastructure: Significant investment needed: ADB

ISLAMABAD: Asian Development Bank (ADB) has said that significant investment is required in critical infrastructure across all Discos, especially upgrading, modernising, and expanding secondary transmission lines and substations, and replacement of transformers.

The Mission comprising of Seung Duck Kim, Senior Energy Specialist (Mission Leader), Ehtesham Khattak, Senior Project Officer (Infrastructure) and Habib Hassan, Associate Project Analyst undertook a consultation Mission on 16 - 25 October 2023 in Islamabad and Lahore to consult with the government on ADB’S support for the power distribution sector investment program.

ADB maintains that considering the limited loan amount initially earmarked for the project ($200 million), it would be prudent to first prioritise projects. Concerns were raised on the foreign currency components procured outside Pakistan and foreign currency loan needed for these components.

Strengthening Revenue Protection Measures:

As part of initial scoping work, the Mission conducted a rapid need assessment of Discos, with an aim to reduce technical and commercial losses and to improve collection.

According to the Bank, building on ADB’s Country Program Mission (CPM) from June 2023, which aimed to discuss sector development priorities and agree on ADB’S proposed assistance pipelines for 2024-2026, the Mission initiated follow-up consultations.

These consultations involved the federal government, provincial governments, Discos and other stakeholders, focusing on the forthcoming energy sector investment program. Particular attention was devoted to the development of the distribution sector, distributed renewable energy solutions, and enhancing energy access in underserved regions.

The Indicative Country Pipeline for Monitoring (ICPM), 2024-2026, includes three energy sector projects: (i) Power Distribution Strengthening Project (2024 firm), (ii) Second Access to Clean Energy Investment Program (2025 standby, 2026 firm), and (iii) Second Transmission Strengthening Project (2025 standby, 2026 firm).

The Mission held extensive discussions with senior officials from the Ministry of Energy (Power Divisions), Ministry of Economic Affairs (EAD), the Ministry of National Food Security & Research, the Energy Departments of Government of Balochistan, Government of Khyber Pakhtunkhwa, Government of Punjab, Government of Sindh, Gujranwala Electric Power Company (GEPCO), Hyderabad Electric Supply Company (HESCO), Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), Peshawar Electric Supply Company (PESCO), Quetta Electric Supply Company (QESCO), Sukkur Electric Power Company (SEPCO), Faisalabad Electric Supply Company (FESCO), Power Planning and Monitoring Company (PPMC), and National Energy Efficiency & Conservation Authority (NEECA).

Wrap up meetings were held separately with Ministry of Energy and with Ministry of Economic Affairs to confirm the government’s commitment on the agreed actions: (i) significant investment needs in critical infrastructure across all Discos, especially upgrading, modernising, and expanding secondary transmission lines and substations, and replacement of transformers.

Concerns were raised on the foreign currency components procured outside Pakistan and foreign currency loan especially needed for these components; (ii) Strengthening Revenue Protection Measures.

Discos have individual advanced metering infrastructure (AMI) rollout plans; some Discos recommend aerial bundled cables (ABC cables) installation and digital solutions such as the revenue and equipment protection system especially in high-loss areas;(iii) Human Resource and Corporate Management - staff shortage is reported in some Discos due to various factors; this suggests the review of the overall corporate management system including HR system; (iv) Climate Resilience and Sustainability - focus on climate resilience in distribution systems and readiness for frequent natural disasters and changing environmental patterns; (v) Emerging Challenges in Grid Stability - rapid growth in net-metering consumers is encouraging in terms of transitioning to clean energy.

However, Discos are required to strategise for grid stability management and financial management; (vi) ongoing challenges and different solutions - Non-payment issues of tube-well consumers heavily impact QESCO and many still lack access to grid-connected electricity services. New strategies will be required to complement ongoing efforts of the government and Discos.

ADB maintained that considering the limited loan amount initially earmarked for the project ($200 million), it would be prudent to first prioritise the Discos.

A scoring analysis based on the performance indicators of the Discos, as reported in the NEPRA State of Industry Report 2022, and taking into account the Disco projects funded by World Bank, ADB proposes the order of engagement as: (i) SEPCO, (ii) OESCO, (iii) MEPCO, and (iv) PESCO/ LESCO.

Further dialogue will continue with other Discos for potential support, including technical assistance. The MOE has agreed to the proposed approach and prioritization of the Discos for further engagement.

Copyright Business Recorder, 2023