Empowering Pakistan

Electricity Abroad EM visits Pakistan, a nation and an electricity industry facing enormous challenges as it endeavours to evolve into a 21st century economy.

Looking at Pakistan today, a lot depends on whether you're a "glass half empty" or "glass half full" thinker. On the "half empty" side there are a number of inescapable facts. The country is, by any measurement, still largely underdeveloped and impoverished. It has suffered through decades of political unrest, natural disasters like last year's devastating earthquake, and an uneasy relationship with its neighbour, India - a relationship which has occasionally turned violent, particularly over the disputed Kashmir province. Taken together, these issues have discouraged foreign investment. Investors look for stability, and stability continues to be an issue for Pakistan.

On the "half full" side, however, the Pakistani government has been keen to tackle these challenges, and has made considerable progress, helped by improved access to global markets and foreign assistance which has become available since 2001. Also, Pakistan has made major economic reforms over the same period. As a result, the picture is brighter today than it has been for over a decade. Solid and encouraging progress has been made. Progress, however, brings its own problems.

Pakistan's energy consumption has nearly tripled in the last two decades, outpacing economic growth due to urbanisation, industrialisation and rural electrification. And, despite extensive natural gas reserves, the country has only limited oil resources and poor quality coal, making Pakistan heavily dependent on imported oil.

From 1970 to the early 1990s, the supply of electricity was unable to keep pace with demand that was growing by roughly 10 per cent each year. By the early 1990s, peak demand exceeded supply by as much as 25 per cent. This capacity shortage was a matter of infrastructural investment; the government was unable to fund capital expenditure for the electricity industry to a level sufficient to meet demand.

As early as 1986, the Pakistani government began encouraging private sector power projects on a "Build, Own and Operate" basis, but the hoped-for investment was not forthcoming. It became clear that privatisation of key public monopolies and market reforms were essential to attract outside investment.

Renewed efforts began in earnest with the creation of Privatisation Commission in 1991. By 1993 the Commission's mandate was expanded to include the power, oil, gas, transport, telecommunications, and banking industries. The Privatisation Commission was charged with selling government shares and assets in all these areas, and the granting of concessions to operate assets which remained in public ownership.

Progress, however, was initially slow. The energy sector is still, to a large extent, owned and operated by the government, although it has been carrying out organisational reforms for more than 15 years, seeking to improve efficiency as well as increase private sector participation.

The Government refined it policies in 1998 and adopted a more aggressive strategy which began to meet a positive response in the private sector. Competitive bidding was opened up for specific independent power projects for specific sites and the types of plant required by the system. Many were built to use indigenous fuel sources or have since converted their plants to use them. Amongst these, Rousch Power Ltd (Pakistan) is a 500MW (nominal) combined cycle plant located at Sidhnai Barrage near Multan in the Punjab which came into operation in January 2000.

ESB International had a part in the development of the project and also has a long-term contract to operate and maintain the plant. There are now 16 IPPs in Pakistan producing approximately 5500MW coming under the auspices of the Pakistan Private Power and Infrastructure Board (PPIB) and this number is planned to increase.

Today, the majority of electricity generation is under the control of two major generation utilities: the government-owned Water and Power Development Authority (WAPDA) and the privatised Karachi Electric Supply Corporation (KESC). The Pakistan Atomic Energy Commission (PAEC) owns and operates the country's two nuclear power plants, which are connected to WAPDA and KESC networks. Independent power producers, like Rousch Power, are connected to the national grid at various locations.

Just over half of generation capacity (50.8%) is fuelled by natural gas, with the balance made up by hydroelectric (30.0%), oil (15.8%), nuclear (3.3%) and coal (0.2%).

The two nuclear power plants are located near Karachi and the other at Chashma. The Karachi facility was built in 1965 with assistance from Canada. The Chashma Nuclear Power Plant was built with Chinese assistance went online in 2001. Pakistan is placing more emphasis on nuclear power to meet future energy needs and has begun construction of a second facility at Chashma, scheduled to be commissioned in 2011.

Distribution of electricity is carried out by a number of companies which serve large conurbations or regions, such as Faisalabad, Gujranwala, Hub, Hyderabad, Islamabad, Karachi, Kot Addu, Lahore, Multan (where the ESBI Rousch Power company operates), Peshawar and Quetta, as well as the Tribal Electric Supply Company which serves the federally administered tribal areas of Pakistan.

While gas, oil and coal - together with nuclear - will continue to be Pakistan's principal fuels for electricity generation in years to come, there is considerable scope for more environmentally sound options, and the Asian Development Bank is currently promoting development of renewable energy in Pakistan through a multi-million euro finance programme.

Hydroelectric plants - which already supply almost a third of Pakistan's electricity demand - will be first on the agenda. "Small to medium-sized hydropower plants offer the greatest renewable energy potential for Pakistan, while possibilities also exist in promoting greater use of wind, solar, and biomass power," Piya Abeygunawardena, Asian Development Bank's project leader, has said.

The initiative - the Renewable Energy Development Sector Investment Program - can potentially serve about 600,000 new domestic connections, while also improving reliability and quality of supply. The first project will finance a set of small to medium-sized hydroelectric plants in the Northwest Frontier Province and Punjab.

"Investment in such renewable energy options would not only be beneficial to the country's energy security, but would boost social equity, lead to a cleaner environment, and make good economic sense", said Piya Abeygunawardena, someone who clearly sees a glass half full.