THE power consumers of Wapda and KESC are enduring with remarkable patience the worst power shortage since 1980s.

Perhaps, they are conscious that they belong to the lucky 50 per cent population having access to the national power grid. The government has consoled the consumers that power shortage and load-shedding are side effects of the growing national prosperity. That is not the whole truth. The rising power shortage and the looming bankruptcy of the power sector are mainly the result of poor planning, failure to upgrade an old and inefficient power grid, tolerating unsustainable operating losses and an ineffective power policy.

In the past 10 years, there were clear indications of the impending power crisis. The government was fully aware of the looming power shortage at the time of framing the 1998 and 2002 power policies. But there was no will to investigate and adopt a reasonable, cost-effective and lasting remedy.

The power grid includes lot of inefficient and unreliable power generating, transmission and distribution facilities. As a result, the grid normally operates at less than 80 per cent of its installed or de-rated capacity. The capability of the power grid is also affected by an imprudent planning by the KESC and Wapda. For example, the KESC heavily relies on supply of the natural gas for generating 78 per cent of its electricity. At the same time, Wapda depends on hydropower and natural gas for generating 80 per cent of its electricity. The simultaneous shortage of these resources in the winter drastically reduces the power generating capability of the grid. For this reason, in December 2007 the actual output of the power grid fell to 60 per cent of its installed capacity.

Another example of the imprudent planning is the dependence of Wapda on the hydropower developed as a secondary benefit of the irrigation projects. The dependence on the irrigation demand makes the electricity less reliable than the electricity supplied by an independent hydropower project. In fact, most of the country’s hydropower is dependent on three factors, first the irrigation demand, second the water level in reservoirs and third the water flowing in rivers.

On the other hand, the output of the run of river hydropower projects depends on the water flowing in the river only. If Wapda had developed some of the promising run of river hydropower projects, the reliability of the hydropower would have been far better than it is the case at present. However, despite many studies in the last 40 years, no major run of river project was implemented out of the most promising potential.

Wapda and the KESC also annually lose huge amount of their revenue due to extra fuel and loss of electricity, besides the loss of capacity of the grid. The average efficiency of their thermal power plants is so low that their operation requires very high expenditure on fuels. On top of it, about 26 per cent of the generated electricity or 30 billion kilowatt- hour per year is lost in transmission and distribution systems or it is simply stolen. The annual loss of electricity amounts to at least Rs120 billion. Total annual losses suffered by the power sector, including the loss of capacity, the loss due to inefficiency and the loss or pilferage of electricity, are simply unsustainable. If remedial measures are not taken soon, these losses and other short comings of Wapda and the KESC will result in the bankruptcy of the entire energy sector. That eventuality can severely disrupt the economic growth.

Finally the policy called ‘Policy for Power Generation Projects Year 2002’ neither prevented the power shortage nor attracted private investment in power generation from the indigenous coal and hydropower. It is futile to expect the policy to attract the required investment for its anticipated 34,885 MW additional demand by 2,027 or an average addition of 1400 MW per year. So far, no hydropower and coal-based project initiated under the policy has achieved the financial closure. Only the low risk gas and fuel oil- based thermal power projects achieved the financial closure.

However, the total output of these projects is too small to make any difference to the rising power shortage. Furthermore, there is an acute shortage of gas which normally shuts down most of the gas-based plants in the winter. For example, even the recently rented power plants were shut down due to gas shortage in December 2007. On the one hand, the fuel oil is an imported and now very costly commodity that is affecting the affordability of electricity and the country’s current account and trade deficits.

The power grid requires an annual infusion of several billion dollars for a foreseeable future on repairs, retrofitting, upgrading, replacements and additions. But it is also clear that the government is not in a position to arrange and manage such a huge investment. Moreover coal and hydropower are the main dependable sources of electricity. But these resources cannot be fully harnessed without private financing and that would be possible only if the power policy offers incentives. The government needs to frame a new policy that offers incentives commensurate with risks and tangible as well as intangible benefits of each technology of power generation.

Although water as an input for hydropower is virtually free and coal is the cheapest fossil fuel, the green field coal and hydropower projects require 100 to 200 per cent more investment per MW than the gas and fuel oil-based power projects. But the price of fuel oil and natural gas is very high and volatile. By the end of 2007, the prices of fossil fuels in the international market in dollar per million British thermal units were 17, seven and three respectively for fuel oil, natural gas and coal. The coal and hydropower-based projects also face a large number of risks, but they provide the following tangible and intangible benefits:

Providing cheap and inflation proof electricity. Reducing the dependence on foreign oil and gas imports and the attendant economic and national security problems Enhancing power system reliability and flexibility. Spending up to 80 per cent of the construction costs on local inputs and jobs The hydropower provides the following additional benefits:

Reduction in the use of non-renewable resources. Reduction in the adverse environmental impacts of thermal power generation, including a relative improvement in air quality and resulting human health.

More than 40,000 MW untapped hydropower can meet Pakistan’s future demand of electricity but for the stability and the reliability of the power grid the hydropower needs back-up of an inexhaustible Thar coal. The coal is still the most widely used fuel for power generation. This is evident from the share of 39, 19, 16, 15, 10 and one per cent respectively of coal, hydro, nuclear, natural gas, oil and other sources in the total output of electricity in the world. The USA has abundant coal and uses it to generate over 49 per cent of the total electricity. Canada has abundant hydropower and generates 61 per cent of its electricity from hydropower. Pakistan should also make optimum use of its coal and hydropower for achieving the energy security, for overcoming power shortage, for stabilising the price of electricity and for reducing the current account and trade deficits.