Energy Management and Policy Lecture 3 dated 28th Npvemeber 2021.pptx

Energy Management and Policy
Hamdard University Karachi
Graduate School of Engineering Sciences and Information Technology (GSESIT)

Pakistan Power Sector Reform Plan
KEY TO A SUSTAINABLE, AFFORDABLE, AND
RELIABLE POWER SECTOR

Initially two vertically integrated utilities i.e. WAPDA and KESC, were responsible for generation,
transmission and distribution in their areas
 UPTO 70s: Performance of KESC and WAPDA was very good
 IN 80s: Some deterioration observed. Demand-Supply shortfall started
 IN 90s: Budget constraints lead the government to seek involvement of
private sector in power generation projects
 1992: Govt. prepared strategic plan to reform Pakistan power sector
 1993: Energy Task Force created, Power Policy 1994 formulated
 1994 : Creation of PPIB & preparation of National Power Plan by WAPDA
 1997: Autonomous regulatory body NEPRA created, through an Act.
 2001: WAPDA Vision 2025 prepared
 2002: NEPRA issued a future plan for Pakistan Power Sector
 2005 : Medium Term Development Framework (MTDF) prepared
PAKISTAN POWER SECTOR - TIMELINE JOURNEY

 At present the following entities are responsible for delivery of power to the end consumers:
 One Transmission and Dispatch Company (NTDCL)
 Ten Distribution Companies (DISCOs)
 Four Public Sector Generation Companies (GENCOs)
 Thirty One (31) IPPs
 The Electricity Generation is blend of Hydel and Thermal Units.
 Total installed capacity is around 35,000 MW with 39% and 61% Share of Public and Private Sector
respectively.
 Currently Country is surplus in generation.
 Whereas the power demand has been growing by 6-7% per annum resulting into load shedding
due to constraints in transmission system.
 Expansion in Transmission Network is required to evacuate power from upcoming projects.
 Due to Financial Constraints in the Public Sector, the GOP is focusing on private sector to invest in
PPS to bridge the electricity demand supply gap.
OVERVIEW OF PAKISTAN’S POWER SECTOR

5
PAKISTAN POWER SECTOR – KEY PLAYERS
Private
Sector
IPPs
(Hydel, Oil,
Gas, Coal)
CPPs KESC
Provinces
Khyber
Pukhtoon
Khwa
Punjab Sindh Balochistan
AJK
Gilgit
Baltistan
IPPs/ SIPPs
(Small Hydel, Wind,
Solar, Bio Diesel, Bio
Mass, Cogeneration)
Ministry of
Water
& Power
Pakistan
Atomic
Energy
Commission
NEPRA
WAPDA AEDB PEPCO PPIB
Mega Dams
Water
Projects
GENCOs DISCOs NTDC
CHASNUPP KANUPP
GOVERNMENT OF PAKISTAN

Energy Authorities and Institutions
• Government of Pakistan
• Ministry of Water and Power
• Alternative Energy Development Board
• Industrial Energy Sector
• Electricity sector in Pakistan
• Electricity in Pakistan
• Energy and Power Regulatory Authorities
• Water and Power Development Authority
• National Electric Power Regulatory Authority
• Energy Corporations
• Electricity and energy corporations in Pakistan
• Karachi Electric Supply Company

Energy Situation in Pakistan
• Pakistan’s primary energy supply heavily depends upon the imported
crude oil & petroleum products because of low production capacity
of crude oil and natural gas.
• Energy outages hampered economic growth of Pakistan for last few
years.

Energy policy of Pakistan
• The energy policy of Pakistan is formulated and determined by the
federal, provisional, and local institutional entities in Pakistan, which
address the issues of energy production, distribution, and
consumption of energy, such as gas mileage and petroleum
standards.
• Energy policy requires the proper legislation, international treaties,
subsidies and incentives to investment, guidelines for energy
conservation, taxation and other public policy techniques.

• Several mandates and proposals have been called over the years to overlook the energy
conservation, such as Neon signs were banned and the official weekend was extended
from one to two days in an attempt to conserve electricity (Gillani, 2010)
• Reducing the electricity load used by industrial units by 25% during peak hours (Aziz,
2007) but no comprehensive long-term energy strategies were implemented.
• Since 1999, many legislative provisions were adopted for energy conservation including
the seeking energy from various renewable energy sources.
• There is also an intense criticism about the unequal distribution of energy, the
irresponsible usage of energy sources, and the country's new plan which is aimed to raise
country's dependence on imported oil for power generation to 50% by 2030.
• After much public criticism, the long-term energy security policy was announced in 2013
through the introduction of equal cutting edge energy transmission network, minimizing
financial losses across the energy system and aligning the ministries involved in the
energy sector as well as improving the governance of energy sources.
Continued:

• Studies and policy implementation recommended by AEDB, Water
ministry (as policy enforcer), the NEPRA regulates the energy sources
network as well as determining the financial prices of the usage of
energy.
• Government-specific energy-efficiency incentive programs also play a
significant role in the overall energy policy of Pakistan. As of 2013
Prime Minister Nawaz Sharif has announced a determined and
aggressive energy policy to meet the energy challenges and energy
management.
Continued:

Background
• 1960s: Large civilian energy input and infrastructure was built by the
Pakistan military, with the financial funds provided by various
countries and international monetary sources.
• 1960s: Much of the energy was produced by the hydroelectric dams
and thermal power stations.
• 1970s: Pakistan's energy consumption expanded to nuclear power
sources with the establishment and commissioning of first nuclear
power station in Karachi.
• 1980s: Dependence on nuclear sources further grew and the military
continued engineering and building the nuclear power infrastructure.

• 1994: Prime Minister Benazir Bhutto of Pakistan Peoples Party (PPP)
launched the country's first ever and largest energy conservation
program to produce 13,000MW and issues 70 Memorandum of
Understandings (MOUs) and Letters of Intent (LOIs) to Independent
Power Producers (IPPs).
• 1994: Energy policy brought a decisive shift in Pakistan's diverse energy
sources.
• In 1994, out of the total installed capacity of 11000MW, ~60% of energy
was produced from the hydroelectric power sources while nearly ~40%
was produced from the thermal and nuclear sources.
• This mix was reversed from 60:40 to 30:70 in favor of thermal capacity
based on imported fuel (Sartaj Aziz).
• Every year, this ratio went down further to 20:80 in winter months as
hydropower generation was reduced due to lower water flows in the
rivers.
Continued:

• Controversially, the energy policy depended less on renewable energy
sources and dependence on imported oil increased that created a
permanent fault in country's energy conservation system.
• 1995: Only 27 IPPs were able to generate ~6,335MW of electricity.
• 1998: Ratio was stabilized by the policies enforced by Prime Minister
Nawaz Sharif.
• 2001: Military government led by President Pervez Musharraf and Prime
Minister Shaukat Aziz, while contributing to the growth of domestic
demand for electricity through large scale provision of bank loans for the
purchase of air-conditioners and home appliances (share of domestic
energy consumption had jumped to 46% of the total by 2008), did not add
any new capacity to the energy system.
Continued:

Energy policy: 2008–10
• 2005: Prime Minister Shaukat Aziz announced the long-term energy security
program which was aimed to the development of the power infrastructure from
all energy sources.
• This policy relied on privatizing the energy sector by international mega energy
corporations.
• Controversially, this program was aimed to raise dependence on imported oil
from the Arab countries for power generation to be increased by 50.1% by 2013.
• 2006: Prime Minister Aziz held conversation with the officials of the Saudi
Ministry of Petroleum and invited Ali Al-Naimi to invest in country's energy
sector.
• 2007: Prime Minister Aziz allocated ₨. 12.5 billion for power production-related
projects which remained unutilised. In his last policy statement, Prime Minister
Aziz further called for banning the Neon lights, Neon signs, and to close the
market places by 9:00 PM; such policy enforcement was harshly resisted by the
left-wing parties, such as Pakistan Peoples Party, Communist Party and the labor
unions

Energy Policy: 2010–13
• After the general elections held in 2008, the mismanagement and
weak policies led to an intense repetitive cycle of load-shedding in the
country.
• Responding to a massive demonstration against the load-shedding and
the growing power shortages in the country, Prime Minister, Yousaf
Gilani announced the "energy policy" on 22 April 2010.
• The policy was announced after the Prime Minister, Gilani had held a
three-day national energy conference in Islamabad with energy experts
that discussed the causes of the power crisis in Pakistan and possible
steps to relieve it.
• On an immediate effects, the gaseous Neon lights and the signs were
banned and the official weekend was extended from one to two days
in an attempt to conserve electricity.

• Under this policy, several attempts were made by Gilani government
to privatized the energy sector.
• Devised by the Finance Minister Abdul Hafeez Shaikh, the
programme failed to resolve electricity shortage, which private
energy companies failed to maintain and upgrade despite being part
of their contract.
• After much criticism and public demonstration in 2012, the PPP
government decided to nationalized the energy sector and issued
clear directives to regulate the energy corporations to produce the
power generations
Continued:

Energy Management and Policy Lecture 3 dated 28th Npvemeber 2021.pptx

• Musadik Malik has been entrusted to develop Energy Policy for
Pakistan. He was appointed Federal Minister, Water and Power of the
Pakistan Government in 2013.
• 2014: The National Energy Policy 2013-18 aims at achieving the goals
of social development and prosperity for the country, highlighted
earlier as ‘Roshan Pakistan’ in Pakistan Muslim Leage-Nawaz’s (PML-
N) manifesto.
Continued:

National Energy Policy 2013-18
Salient Features
• Power sector subsidy would be phased out till it is put to an end.
(Unstoppable flood of inflationary pressure would create havoc in the
lives of the common people in the country)
• End to load shedding would be made possible till 2017 and surplus
electricity in 2018. (Without proper utilization of all available natural
resources, mix of alternative energy resources and above all creation
of strategic balance in the power generation chain, it would not be
possible).
• Privatization of government owned power plants and little power
distributing companies (Discos), bringing the double digit cost of
power generation to a single digit. (Levels of productivity and
efficiency of the private sector of the country is not so encouraging to
meet the demands).

• Restructuring of water and power ministry, National Electric Power
Regulatory Authority (NEPRA) (It may pay dividends, provided all the
key appointment will be made on merit and without any political
compromise).
• Oil and Gas Regulatory Authority (OGRA) adjustment of outstanding
dues owned by the government and privately owned bodies through
federal adjusters (Financial discipline would hold the key of success).
• Formation of regional transmission and power trading system would
be made. (Role of provincial governments would be crucial in the
days to come).
Continued:

• It focuses the government’s efforts on reducing the weighted average
cost of producing electricity by shifting to cheaper fuels and cracking
down more forcefully on theft.
• It proposes charging higher rates from industrial and upper-middle
class household consumers, who have heavy electricity use and for
whom the higher tariff, coupled with a guarantee of uninterrupted
supply, would still be cheaper than running back-up generators.
• It proposes privatization of state-owned energy companies to reduce
the influence of corrupt labor unions.
Continued:

Philosophical inputs
• Philosophical inputs are always good for reading but hard to implement
especially where there is a chain of corruption.
• It has some philosophical inputs too. It speaks about the importance of
honesty, transparency, financial discipline and accountability which are parts
of parcels of a bygone story in our parts of the world.
• It has long term goals aiming to build a power generation capacity that can
meet country’s energy requirements in a sustainable manner.
• It also aims to create a new culture of achievement, rights and responsibility
and to form new culture of energy conservation and responsibility, ensure the
generation of inexpensive and affordable electricity for domestic, commercial
and industrial use, minimize pilferage and adulteration in fuel supply and
promote world-class efficiency in power generation.
• Moreover, it envisages creating a cutting edge transmission network,
minimizing financial losses across the system and aligning the ministries
involved in the energy sector and improves governance.

Result-Oriented Policy
• It is envisioned to build energy cities and corridors and sponsor
public-private partnership for coal and run of river projects.
• The government will also redesign and strengthen the national grid
transmission network and build a regional transmission and power
trading system.
• The government would like to limit its role to policy making and
unless necessary, service delivery will be promoted through a fiercely
competitive and transparent private sector.

Elements of Supply & Demand Details
Efficiency
It would be based on merit order,
transparency/automation, and accountability.
Competition
It would be institutionalized through the help of upfront
tariff and competitive bidding, and key client management
Infrastructure
It will be developed and incentives would be provided to
attract greater private sector investments.
Tariff
It will be by a world-class regulatory authority. Up-front
tariffs will be set for low cost fuel and competitive bidding
will be used to decrease the costs further.

• The new national policy of energy 2013-18 tells the roadmap for
attracting domestic and foreign investments in the power sector.
• It explains different means to increase the power generation capacity
in the days to come. It introduces new system of price determination
for the household and commercial utilization.
• It gradually shifts Pakistan’s energy mix towards low cost sources
such as hydel, gas, coal, nuclear and biomass. Local and foreign
investment will aggressively be sought for small and medium size run
of river hydel projects.
• Selected hydel projects under development will be positioned for
privatization. Multilateral agencies will be invited to partner in large
infrastructure hydel projects.

Estimations
• It is predicated that successful execution of new national energy
policy would reduce the supply-demand gap by 2017.
• Moreover, there would be power surplus in 2018. The cost of power
generation will be reduced to a single digit per unit, and the
efficiency improvements in transmission and distribution will
decrease the burden of power for the end consumer.

PILLARS OF THE POWER SECTOR REFORM PLAN
Strengthen Energy Sector Governance & Regulation.
Rationalize Pricing & Energy Subsidies.
Develop Energy Finance Capability.
Energy Efficiency to be the Corner Stone of new Energy
Policy.
Maximize use of Indigenous resources for generation.
Fast Track Investment Projects for Energy Security.
1
2
3
4
5
6

OVER VIEW OF
POWER SECTOR REFORMS
•Reforms are multipronged and developed in close
consultation with multilateral/bilateral development
agencies and other stakeholders.
i. Ensuring autonomy to power sector companies.
ii. Ensuring effective corporate governance through the
professional boards of directors and management.
iii. Induction of modern technology and managerial
practices.
iv. Redressing the adverse fuel mix through a least cost
generation expansion plan.

iv. Correcting the imbalances in fuel costs to realize
maximum economic benefit from our resources.
v. Human resource capacity building in the
Companies, Ministry of Water & Power, NEPRA and
Planning Commission.
vi. Empowering NEPRA through an amendment to
directly notify tariffs to avoid the recurrence of
circular debt through the application of cost
recovery tariffs.
Continued:

iv. Ongoing work to deal with circular debt over 2500
Billion
v. Automated payment systems amongst the
companies to minimize discretion.
vi. Economic dispatch and curtailment of inefficient
generation.
Continued:

Energy Management and Policy Lecture 3 dated 28th Npvemeber 2021.pptx

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