EDITORIAL: National Transmission & Dispatch Company (NTDC) has prepared an Indicative Generation Capacity Plan (IGCEP 2047) using a planning software, PLEXOS. The overall generation capacity is planned to increase from 33,000MW in 2020 to 168,200MW in 2047. NTDC has used various scenarios to compute generation needs in 2030 and 2047. It has also laid out options of generation by types such as RLNG, coal (imported and local), nuclear and, renewables. The government should not be doing such long-term planning along with specification for the next 28 years in an industry that is going through a disruptive phase globally. Imagine thinking about planning for PTCL in 1990 for 2020. The industry underwent a revolution and no plan made in 1990 would have been of any use today.
Similarly, the scenario in the energy market is changing at a dizzying speed, which means that a holistic thinking is required; power generation cannot be planned in isolation. There are shifting trends in other energy needs such as transportation. These plans should be updated every year with new technologies and global trends. The policy level decisions should be aimed at deregulating the sector and working on incentives. Energy planning, the number of power plants to be installed, and fuel options should be left to the private sector with the government supporting clean energy production through fiscal and other incentives.
In 2017-18, Pakistan's total energy consumption stood 54 TOE (million tons of oil equivalent) units. Out of which, only 15.8 percent (8.7 million TOE) was consumed for electricity generation. But this mix will and should change. Highest consumption at 19.2 million TOE (35 percent of total) is of oil - mainly in transportation. Can anyone predict how many motor gasoline-based vehicles will switch to Electric Vehicles (EVs) by 2047? It is similar to how no one in 1990 could have predicted the use of internet data and smartphones by 2020. If 20 percent of vehicles move to electricity, Pakistan will be short of electricity in no time. The projected capacity of 52,000MW by 2025 would not be enough to meet the demand.
The second biggest energy consumption is of gas at 16.6 million TOE units (30.4 percent of total). This does not include gas used for power generation grid. This gas is used in domestic sector (6.6m TOE), commercial, transportation, and industrial. The most inefficient use of gas is in domestic sector. The country has largely wasted its natural gas resource through inefficient pricing. The plan should be to convert the domestic gas consumption (for heating and cooking) to electricity.
Coal is on the third place in this regard - at 8.9 million TOE units (16.3 percent of total). This is mainly used in industries such as cement and brick kilns. There is talk of siphoning coal in power plants for environmental degradation reasons; but the use of imported coal is at much larger scale in other industries. These industries must eventually move towards cleaner fuel options.
The government should instead focus on making energy market efficient through deregulation and policy level decisions should be on conversion of most of the energy needs to electricity. Within power generation, the mix should be tilted towards renewables and for base load, reliance should be on cleaner fuel options - such as gas and nuclear. But indigenous coal resources should not be wasted at the same time. The Private Power and Infrastructure Board (PPIB) is underscoring the need for ending the RLNG planned projects under IGCEP and replacing them with hydropower and local coal plants. That is the right approach as the focus should be on efficient use of domestic energy resources. But long-term plan should be to withdraw domestic gas consumption from domestic and industrial sector to power generation.
In the power sector, the whole governance regime must undergo a sea change. The need is to move from 'take or pay' to 'take and pay' agreements. This will shift the risk from government to power producers. To ensure demand, the government should channel gas and oil energy use to electrification through an attractive incentives structure. Furthermore, energy distribution and transmission systems must be deregulated and should have private sector participation in energy retailing. For that to happen, the policy framework should be geared towards making these markets efficient and have private participation. It is desirable that the NTDC or any other government organization should have an indicative plan for the desired power mix for the next 5 to 15 years. Renewables - wind, solar, hydel (run of the river), and biomass, should be the top priority. But energy supply by these segments fluctuates and base-load cannot rely on these fuel sources only. For base load, domestic gas and coal should be the top priority. There are funding issues; but China under the China Pakistan Economic Corridor (CPEC) is committed to this sector. The government should only opt for imported fuel when all domestic available sources are fully committed. The world is exploring safer nuclear power technologies. Within base-load, nuclear is the cleanest fuel option. But under current technology, any accident could be disastrous. After the Fukushima accident, the world is moving away from nuclear. But who knows by 2030, a safer technology could be commercially viable.
With all these unknowns in a disruptive industry, 20-30 years' plans with specifications of power plants should not be made. The focus should be on deregulating the industry and letting the private sector take the lead.
Copyright Business Recorder, 2020