Tackling energy crisis
Among the most serious problems facing the country one is shortage of energy and its high prices. According to experts, the key strategy should be to bring efficiencies in the energy chain to slash import bill, lower the circular-debt buildup and cut PSEs' leakages to curb fiscal deficit, and to lower the overall cost of energy to bring competitiveness in the economy. Equally essential is to reverse the trade balance by cutting imports. An agrarian economy is a net importer; the equation is required to be changed.Pakistan's total energy and food/agriculture imports are estimated at $24 billion in FY18, which is 40 percent of total imports and 130 percent of current account deficit. Imported energy accounts for 45 percent of country's prime energy supply and 40 percent of primary energy is consumed in power generation.
It is no secret that the country has enough indigenous energy potential which needs to be utilized fully. The solo focus on new generation ought to be on Thar coal, renewable energy (hydro, wind, solar and biomass) and on exploration of oil and gas including shale and tight gas.The energy capacity expansion is alarming and it is on take or pay basis. The government has to pay for every megawatt of capacity addition irrespective of demand. According to NEPRA's latest report, the net capacity addition stood at 7,775MW in 2018 and total capacity addition planned till 2024-25 is 35,999MW.The growth is going to slow down in FY19 and FY20 in the quest to cut down twin deficit. According to NEPRA, the demand is assumed to grow by 4.5 percent and the energy will remain surplus every year, peaking at 19,934MW in 2024-25. These numbers are alarming as the capacity payment has to be made and that will invariably increase the energy prices.
It cannot be emphasized too much that the PTI energy team has to be very careful with any power-generation addition and there should be only take and pay policy. The focus should be on energy conservation. There is undocumented captive-power generation across the country running on gas. The captive generation is inefficient but domestic gas prices in Khyber Pakhtunkhwa and Sindh are too low for industries to not opt for grid electricity.The gas prices ought to be revised upwards to incentivize captive consumers to move to the grid. And within the national grid, only most efficient new plants should be running on imported fuel while the inefficient plants should be closed down or retired. The use of solar energy should be promoted to replace captive generation on fossil fuel across the country, while in agriculture land biomass is required to scale up.
Bringing energy efficiency in both generation and consumption can help in reducing the oil import bill to a great extent. On T&D losses, the need is have competent technical teams to check the problems across the grid and invest in cable, transformers and other infrastructure where it is required, and improve governance where theft is high. In order to straighten the energy sector, the need is to merge the two regulators (Ogra and Nepra) into one. When the country has one energy ministry, there is no rationale for two regulators. The Discos are required to be privatized or at least de-regularized to take the brunt of their losses. Since energy is the key to future economic development, no efforts should be spared to put the sector on an even keel.