Pakistan’s gas allocation policy caters to winning votes rather than what is right for its economy or bringing its population out of poverty.

Table 1 shows the efficiencies possible in power generation, whether for Gencos, Independent Power Plants or Captive Power. Please note, these are not the efficiencies of individual facilities, but rather the maximum potential efficiency for that category. Natural gas can produce power in Simple Cycle (gas turbine or engine only) with efficiencies up to 40%, i.e., 40% of the heat produced by burning the gas is converted into electricity, while 60% is wasted. Many Pakistani Gencos have much lower efficiencies, even as low as 17%.

In combined cycle, a steam turbine is added to produce additional electricity by using the waste heat from the gas turbine or engine, raising efficiencies to up to 63%, while still 37% heat is wasted. Sadly, our highest efficiency combined cycle power plants (Haveli and Balloki) are rarely used because they use expensive RLNG instead of indigenous gas. If they were converted to indigenous gas, they could provide electricity at an extremely cheap rate due to their 63% efficiency.

In Combined Heat and Power (CHP) for industry, efficiencies can cross 80%. In this case, waste heat from the steam turbine, or gas turbine or engine, is used to provide heat to industrial processes. CHP can even be used in community settings in long winter areas, where the waste heat from a power plant is used to heat homes.

Industry (and community based captive power in cold areas) are the only sectors where CHP can be used to reach fuel-utilization efficiencies of 80-90%. Most industries use both heat and power. Some use more heat than power, while others are the opposite. The tariff the industry applies for is based on whether the main use is heat (industrial tariff) or power (captive power tariff). If the industrial customer is experienced, he will produce industrial heat as a by-product of the captive power, or produce power as a by-product from the waste heat of his steam boiler, hence using gas for Combined Heat & Power.

Many industrial customers apply for both tariffs and use double the gas than if they had used CHP or co-generation. Forcing industrial customers to apply for two separate tariffs makes no sense, as it discourages thinking of heat and power as combined industrial needs that can be produced in an efficient and complementary way using the same supply of gas. Industrial tariffs should cover all industrial needs, whether heat or power, with one fixed industrial rate. In this, SNGPL and SSGC, could be very instrumental in raising the awareness of industrial customers when they apply for a new connection, encouraging them to consider Combined Heat & Power.

Captive Power should only be used as a separate tariff for housing communities, commercial, agriculture or government customers.

Although industry is the only sector with the potential of supply-side efficiencies reaching up to 90%, the gas tariffs for industry were raised so high (PKR 1054/MMBTU) that it no longer makes sense for many factories to use gas. Meanwhile, power producers pay PKR 824/MMBTU, while having lower efficiencies. Expensive gas makes the costs of goods high and reduce local and global competitiveness.

Currently, our domestic sector uses single-pass gas geysers with efficiencies less than 30%. Compare that with instant multi-pass gas or electric heaters with efficiencies of 80-100% or with electric heat pumps that are used in Europe, with efficiencies of 300-400%. Heat pumps do not produce heat but extract it from outdoor air and dump it in indoor air or water, the reverse of an AC that extracts heat from inside air and dumps it outside. Hence, they are capable of higher than 100% efficiencies. Although stoves have slightly higher efficiencies (~40%) than a single-pass geyser, geyser use dominates as water heating forms 80% of the gas bill. Paradoxically, domestic rates start as low as PKR 121/MMBTU, with very few households paying the real cost of gas, being subsidized at the cost of industry and with no incentive for energy efficiency.

Hence, the current gas allocation policy (Table 2) is completely contrary to the efficiencies and value the different sectors bring. The highest priority is given to the lowest efficiency sector, and lowest priority (excluding CNG) to the highest efficiency and value-add sector, i.e. industry.

Note that industry provides jobs to domestic customers, whereas gas is just an alternate source of fuel to cook food and heat water. Households can do the same with electricity or LPG.

For domestic customers, natural gas is an average monthly expense of PKR 500-2000 per household. Industry, however, provides them a monthly income of PKR 15,000-300,000 per working adult (several per household). This income pays for rent, food, clothes, school fees and the gas bill.

Yet, when Pakistan faces gas shortages, government stops gas to industry to provide gas to homes. This order robs 13 million households of their income just to give subsidized gas to 9 million homes.

And yet the general population thinks this policy benefits them. And politicians stay under pressure to continue this erroneous policy. Go figure.

Don’t forget, domestic connections are the primary source of theft, leakages and measurement errors, resulting in high Unaccounted for Gas (UFG) (~15%) across Pakistan. Bulk connections provided to Industry or Power Plants have very low UFG.

So, Pakistan has given highest priority in gas allocation to the sector with lowest efficiencies, highest gas losses in distribution, and which could easily use alternate fuels.

Policies like these are responsible for the Vicious Cycle of Poverty, Trade Deficits and Debt that Pakistan is stuck in (Figure 1).

Pakistani citizens and policy makers need to decide. Does Pakistan continue spiraling downwards in this vicious cycle, or do we adopt policies to break this cycle so that Pakistan can change its fortunes?

Policy Needs:

1) Domestic consumers should pay real cost of gas. Economic learnings globally show that direct income stipends to the poor are more impactful than energy or food subsidies.

2) To encourage economic growth and job creation, Industrial and Power sector rates shouldn’t be higher than real cost of gas.

3) Industry and its captive power should have first priority in gas allocation, followed by power plants. However, the priority of individual factories and power plants within this tier should be determined by their efficiencies, to encourage use of combined cycle and CHP Technologies for high fuel efficiencies.

4) One single industrial tariff for both heat and power needs in industry to encourage efficient gas use. Captive Power tariffs should be only for non-industrial users.

5) Domestic and Commercial customers to have lower priority than industry and power sector. Long term they should be encouraged to switch to LPG or electricity for their cooking and heating needs.

6) During low gas availability, load-shedding should be used to provide scheduled service to domestic customers, allowing them to cook food and take hot showers in scheduled slots, while not stopping gas supply to industry.

7) This will impact commercial customers like bakeries, tandoors, restaurants, etc., since they are inside domestic zones. However, they could be encouraged to use LPG cylinders by offering 1 cylinder free during winter months.

8) A massive energy conservation awareness campaign should be launched for the domestic sector to insulate their hot water pipes, to use instant gas heaters and other high efficiency (>80%) geysers, to fix gas leaks, and to use geyser timers to drastically reduce gas consumption by up to 80%.

9) Use of electric stoves, electric heaters and especially electric heat pumps should be encouraged, to reduce and eliminate dependence of the domestic sector on gas, thereby freeing the gas for power and industry so as to create jobs.

(The writer is founder of Save Joules, is an aerospace engineer and energy efficiency consultant)

Table 1
Captive Power Technology
Simple Cycle (Gas Turbine, or steam boiler)                  20-40%
Combined Cycle (GT+ST)                                         <63%
Combined Heat & Power (co-gen)                               80-90%
Table 2
Category of Comsumer                   Priority          Efficiency
Domectic and Commercial                    1                   <30%
Power & Zero-rated Industries              2                 20-63%
Industrial/Fertilizer/Captive Power        3                 20-90%
Cement including its Captive Power         4       Same as industry
CNG                                        5                 10-15%

Copyright Business Recorder, 2021


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