Books can be written on the inefficiencies, incompetence, and irregularities in Pakistan’s energy sector. The PMLN regime tried to address sectoral deficiencies by launching plethora of base-load plants to match the peak load without giving any consideration to heightened capacity charge, transmission, or distribution constraints. Now that the power plants have been commissioned, power generation capabilities are higher than peak demand – but affordability has become questionable. Evacuating it to consumers is an even bigger headache.
As per a report in this newspaper, out of allocated 23,940 MW to DISCOs, 4,500 MW remained underutilized until last Friday. This is absurd. The country is paying through its nose on capacity charges to new plants to ensure no load shedding; yet the problem has persisted during peak demand season. The mismanagement and lack of coordination is evident. Overall power sector governance is weak – deregulation, and privatization of DISCOs is the way to go.
The peak demand in Jun-Jul is about four times of the base demand (minimum demand in Nov-Feb). Multiple baseload plants (thermal IPPs) have been installed to address the problem. The approach is wrong, as baseload plants are supposed to cover the minimum demand and rest is usually fulfilled by renewables. Pakistan went for the expensive option, and the past cannot be reversed. Evacuation of power to regions with peak demand is still missing.
The grid infrastructure is fast deteriorating. DISCOs are apparently unable to transmit and distribute what they were used to even until recently. Distribution control systems are no longer reliable. No economic and mathematical analyses have been conducted to assess demand at DISCOs level. On top of everything, distribution bottlenecks persist. Load management in many areas continues due to non-recovery; in other areas grids are altogether breaking down.
The circular debt is growing invariably. With less electricity distributed, the billing ought to be low. The cost is growing because of induction of must-run new plants. Older plants have their own issues such as inefficiencies and accumulated financial charges thereof – their cost is coming at par with new plants. Gratefully, there is no capacity charge on old pants – as the debt repayment part is already complete.
The whole system is working haphazardly. The nation is paying a huge cost. In better planned economies, base load thermal plants are usually designed for industrial use – as demand remains same around the year. Domestic consumer demand fluctuates with weather extremities – and for one to two months of peak demand – countries usually rely on renewables. In Pakistan, exact opposite is taking place. Some industries are relying on captive generation, while baseload plants are installed for consumer demands – to gain vote.
Some say wheeling should be allowed – identify where the need is and allocate supply accordingly – allow the buyer and seller to match fully – including the capacity charge. It’s easier to do wheeling for renewables. But wheeling should not be done without passing the capacity payment – else state will have to pay while private parties will buy electricity off grid.
These solutions are not coming out of the wood. Experts have been talking about them for years. But for some odd reason successive governments have not paid any heed to these recommendations. Energy sector gurus in the government are making the argument circular around circular debt. They propose increasing tariff to resolve the problem – not optimal, as more consumers will sway away from grid. The solution is in straightening the DISCOs – it is a governance problem – there is no shortcut to it.