So the PTI announced its “Energy Policy Vision”
and I for one was keenly looking forward to it. It was perhaps the first opportunity to see some policy rather than just slogans from PTI, something more meaty…constructive if you will.
The language used is highly emotive, which suggests that the document presented isn’t a bland policy paper, and is something to rally support behind. They are occasional pot shots at the sitting government, which isn’t surprising given the PTI’s fierce opposition of the PPP.
So what off the Energy policy itself?
The identification of problems and limitations in the status quo are detailed, but none of them are new or in any way a departure from what other parties, organizations such as the ADB or the WB have previously identified.
The seriousness of any intervention in Pakistan can be judged by the inclusion of the word, “war footing”.
The PTI lists out “Big Bang” Governance Reforms for the first 100 days in power. What is remarkable about the recommendations is how unremarkable they are. Many of the points listed are already being implemented. What I did find interesting was the aim to setup a “Single, empowered energy regulator”, which is perhaps the need of the hour, however, given that governments have previously ignored the decisions of NEPRA regarding tariff adjustments, does a populist party like PTI have the political will to implement an independent regulators decisions? That of course we will have to wait and see.
Its under the heading “Solving circular debt” that the recommendations begin to sound impossibly optimistic.
“Decrease overall transmission and distribution losses from 20% to 10%” – Very optimistic though laudable aim, but no detail is given on how this will be achieved.
“Increase collections from 88% to 95%” – Again, vested interests from the military, state institutions, landlords and industrialists all regularly default on their dues. Will the PTI, with many members and sympathisers from these areas take on these interests?
Apart from that, and perhaps more importantly how does this Energy Policy hope to increase collections from FATA where apparently no one pays their bills? Last I recall dues were in the region of Rs. 30 billion plus. How are collections going to be increased in such cases? The omission of any mention is quite an oversight for me.
“Convert 4.500 MW+ of expensive furnace oil plants to much cheaper imported coal to reduce cost of generation”. The problem here is obvious. Why would privately owned GENCO’s agree to this after footing the bill to set up furnace oil plants? Who is going to pay for the conversion of these plants and who is going to pay for that? Where will that money come from? While coal may reduce the cost of generation, we cannot ignore the environmental costs of using coal as source of fuel, unless the PTI aims to introduce “clean coal power generators” which for a country like Pakistan, could be prohibitively expensive. The Energy Plan aims to ensure “environmental sustainability”, but truly doing so will alter the cost-benefit of switching from furnace oil to coal, which in the long run may not add up to the savings that they hope for.
“Achieve total annual savings of Rs 475 Billion” – From where and how this figure has been estimated should have been detailed. And who is this saving for? The government? The energy producers? The consumers?
In its aim to correct the wrong fuel mix, unsurprisingly Thar Coal has been put forward as a saviour along with hydro electricity. But I am not sure what “Stalled pipeline projects” are relevant to hydro power and the Central Asian based import of electricity is rather odd, given the emphasis and potential of developing local hydro potential. Further, the uncertainty of affairs in Afghanistan and the inability to guarantee infrastructure passing through her, would likely make it a non starter.
When the Energy Plan starts to talk about Financing, things become rather vague and open ended, with none of the points heralding anything new. Quite complicated processes have been reduced to bullet points, with alot of the factors dependent on foreign factors beyond the control off a Pakistani government, regardless of its efficiency or good intentions. First, “Resolve circular debt and deepen domestic banking market” tells us nothing of how exactly the circular debt will be resolved, and how deepening the banking market will help the energy sector, beyond adding to the profits of the already profitable banking sector. Setting up an Infrastructure Development and Finance Institution sounds well and good, but regardless of how well its functions, there is no guarantee that Sovereign Wealth Funds or Foreign investors will be interested to invest. Especially when the relative costs of investments in other countries/regions are falling. Overseas Pakistanis are always touted as a source of investment to solve Pakistan’s problems, but there is no detail given on how Overseas Pakistanis investors will aid to solve the energy crisis. Also, setting up such an institution seems in conflict with the previously stated goal of limiting government influence in the energy sector.
The final point states, “Charge losses/subsidies to budget instead of issuing TFCs and mortgaging future generations” sounds well meaning but will end in the same result. First off, subsidies themselves are a very inefficient form targeting the poor. Similarly, its not the poor that cause the losses to begin with. To saddle the taxpayer with the bill in itself should not be an aim. Even so, is placing it on the budget any better than issuing TFCs? Well its a case of jam today, or jam tomorrow, either way, as long as the federal budget runs a deficient the government will half to borrow money. Whether its under the heading “losses and subsidies” or “financing public debt” is about the only difference.
In its efforts to achieve these aims, the PTI aims to challenge the “business as usual” approach of the energy sector. It aims to delegate decision making to processionals, and create an enabling environment to attract the best manpower etc. But given, the quite interventionist policies detailed in the policy proscriptions above, appear to conflict with the aim of allowing greater decision making in the hands of professionals.
I was also surprised that the PTI energy policy did not mention anything about nuclear power, which according to our 2030 vision, is to make quite a sizable contribution. Is that a recognition that our options are limited?
More of the same?
As I mentioned in the start, the remarkable thing about PTI’s energy policy is how unremarkable it is. The prescription doesn’t really challenge or differ from any of the other options being floated around. What PTI is essentially claiming is that they are in a better position, than any other stakeholder or political party to actually implement these policies.
Silence on the demand side
What is missing from this energy policy, is perhaps what is missing from all the political parties energy manifestos. They all offer the same goals, cheap electricity available in plentiful amounts.
However, no one seems to pay any attention to the demand side of energy consumption.
What I would like all the political parties to consider as part of their various strategies are measures to actually reduce the consumption of electricity or more accurately, slow the increase in its demand.
We need to focus on changing building codes, so newly constructed homes, offices and factories reduce energy losses, improve insulation and incorporate renewable energy to generate their own power. Government offices, schools, hospitals and large domestics consumers need to be encouraged to adopt efficient energy use, retrofit proper insulation, solar heaters etc. Simple changes in behaviour can add up to alot. For example, just by painting our roofs white, we can reduce our energy consumption, by some estimates by 20%!
Alot of criticism has been placed on our use of imported oil. But on the consumption side, we still have 40 year old trucks populating our roads. Domestically produced cars, pick-ups and vans are still offering engines that are wasteful and inefficient. Our heavily protected auto mobile manufacturers need to face foreign competition, but given their close association with political leaders from across the political spectrum, that is unlikely to happen.
Consumer items, our air-conditioners, televisions, fridges, fans etc, need legislated minimum standards, not only to improve safety but to drive up quality and efficiency. The cheap Chinese imported consumer goods that have flooded the Pakistani market are extremely wasteful and inefficient.
Our tubewells guzzle energy and extremely inefficient. The USAID is supporting a project to improve their efficiency, improvements along similar lines could help us save alot of energy.
Daylight saving should be implemented. Over the past year, alot of people commented that, “Day light saving is such a hassle and what the big deal? We “only” save around 300MWs!” With such an attitude no wonder we waste so much energy that we don’t have to begin with.
There are is no shortage of methods available to help mitigate the rise of energy consumption. However, the absence of any mention to it, was quite surprising from PTIs Energy Policy. However, to be fair, its an aspect that is overlooked by all political parties.
Perhaps what would be truly revolutionary from a political parties policy recommendations would be the appreciation that electricity isnt going to get cheaper in the long run, that as individual consumers, no one should expect prices to fall and at the end of the day, people should expect to pay for what they consume.
Regardless of the natural resources that Pakistan is endowed with, our goal should not be to just continually add generation capacity to the national grid. We should learn from the experiences of China, our best friend and brotherly counterpart in the community of nations, which much like our eventual aim, generates most of it electricity from coal and has paid a very steep price for it. The environmental and health costs of meeting the energy needs of China have been dire, especially in urban areas. In Pakistan, promising to use our abundant coal reserves to unleash a blitzkrieg of coal powered electricity generation will lead us down the same route.
In short, the PTI Energy Policy statement offers nothing exciting or revolutionary. It reads like a campaign document, and omits elaboration and detail, while including noble, if not overly optimistic aims.
The good thing however is, that almost everybody seems to be making the same suggestions and offering similar solutions. At least we have some across the board consensus here, which hopefully will translate into the political will to actually implement the said proposals.