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Waqas Bin Najib Published September 7, 2024
THE prime minister inaugurated Chashma-5, a 1,200 MW nuclear plant, after Ecnec approval in July 2023. The project reportedly cost around $4 billion. However, it appears that we have decided to spend this money on an unnecessary project when the country is on the brink of economic collapse.
In 2021, the Council of Common Interests approved the National Electricity Policy. The policy aims to provide affordable electricity. It requires planners to use modelling for generation expansion planning. They must choose the least-cost technology and fuel.
Chashma-5 was not selected in the generation plans in any modelled scenario. Cheaper options exist to meet the projected demand. Chashma-5 replaces Thar coal in the expansion plan, the other baseload option. A 2021 analysis found that Chashma-5 would raise total annual power costs by $500 million compared to the least-cost plan.
The Pakistan Atomic Energy Commission supports Chashma-5, citing its low cost over the project’s 60-year lifespan. However, the levelised cost is not the right measure. The first 20 years of the tariff, which include the debt repayment period, are more relevant for analysis.
Nuclear power generation is no longer a strategic investment for Pakistan as it once was. It is only a technology choice now — an expensive choice. There is no technical or economic justification for this choice. Today, solar projects can replace some existing power schemes if their tariff is below the variable generation cost. Otherwise, Pakistan does not have a supply problem today; it has a demand problem.
One of the issues at the root of Pakistan’s electricity problems is unsustainable demand.
Pakistan has seen electricity as a supply problem. It has invested in new power projects, ignoring their long-term impact. The generation pipeline, even without Chashma-5, is unaffordable. The cost of power will further increase with the planned generation projects. Engineers plan the power capacity to meet 100 per cent of the peak demand. The quality of demand is not a criterion. Low-quality demand is electricity consumption that does not produce any economic output.
One of the issues at the root of Pakistan’s electricity problems is the unsustainable demand. Industrial consumption of electricity is a good indicator of that. In 2022-23, the industry consumed only 31,000 GWh (27pc) of electricity from 113,000 GWh. The industry consumed 42pc of electricity in India in the same year. Bangladesh sells 50pc of its electricity to industries. China sells 60pc of its electricity to its industrial sector. In Pakistan, the higher cost of electricity is further reducing industry’s demand. Industry consumed 8.5pc less electricity in 2022-23 than in 2021-22.
Today, residential consumers use half of the electricity produced in the country. Most of the electricity generated does not produce economic output or jobs. We use imported machinery and fuel to produce electricity to meet this demand.
Residential electricity use also contributes to raising electricity prices in two ways. The first impact is seasonal non-utilisation of generation capacity. Space cooling (air conditioning) drives the peak demand in homes. This results in seasonal variation in demand. In FY 2022-23, summer peak demand averaged 29,000 MW. In winter, it was only 18,000 MW. The second impact of residential-dominated consumption is on the average system losses. Industrial supply is often at a higher voltage with T&D losses of 3pc to 5pc compared to 8pc to 10pc for residential supply.
The electricity consumption pattern has deteriorated over the last few decades. In 1980, industry consumed around 36pc of the electricity and residences less than 18pc. The demand profile worsened in the previous 40 years, and we added costly power plants to meet this demand. To illustrate this, between 2010 and 2020, annual industrial electricity use increased by 9,000 GWh. Only one 1,320 MW coal power plant can produce this amount of electricity. It was enough to serve the growth in industrial consumption during that period.
Pakistan needs economic growth. It has a circular problem: it needs cheaper electricity to boost industry, but it needs more industry to lower electricity costs. Natural gas and electricity prices are sensitive to foreign exchange rates. Even Thar coal is dollar-indexed, increasing the economy’s vulnerability.
The gas-based captive power industry uses over 10,000 GWh of electricity a year. Shifting this industry to the electric grid can lower electricity prices. It would cut the T&D losses and spread the cross-subsidy among more consumers.
Developing countries like Pakistan cannot afford to serve the growing non-economic demand. Policymakers may need to consider a 20-year policy of summer loadshedding for the domestic sector. Or they could use a load curtailment policy. Load curtailment means reducing the residential peak demand in summer. Each customer will have a limited maximum allowed load in summer. If customers exceed the summer limit, they must pay a penalty for overloading the system and a higher tariff. Distribution companies can implement load curtailment billing with existing meters. Shaving the peak load will reduce the need for more generation projects.
Policies like load curtailment and loadshedding have a political aspect. They go against citizen expectations. Political parties must own the policy and communicate its needs to the people. Electricity access and supply are part of the political economy. All citizens must have access to electricity. Supply could be only to a manageable extent.
Available solutions to economic problems are complex and political. The collapse is easy to foresee without a legitimate political government implementing reforms.
Writing about policies in today’s institutional and political chaos feels odd. Nonetheless, we should reform the sector, manage demand, and plan for cheaper electricity. Pakistan should focus on the Thar coal cluster for future baseload power. It must use competitive bidding to contract new power plants. It should only do this at the right time and for the required capacity. It needs to focus on industrial supply and suppress residential demand. These will fix some structural issues and support the economy.
The writer is a former Member Energy of the Planning Commission.
Published in Dawn, September 7th, 2024
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Umer Farooq
IN these times, when the protesters of the Baloch Yakjehti Committee (BYC) are demanding fundamental rights in Balochistan, it may appear insensitive to discuss the province’s mineral resources. However, this is precisely the moment to contextualise these resources. In December 2022, the government quietly pushed through the Foreign Investment Promotion and Protection Act (FIPPA), a move aimed at paving the way for the various foreign investment initiatives, including the Reko Diq mining project in Balochistan. These projects were envisioned as the beginning of our national economic revival. However, achieving these goals seems difficult with thousands protesting across the province.
Balochistan is rich in minerals but plagued by discontent. The state appears to have failed in addressing the grievances of its people. While the government uses force to suppress dissent, it simultaneously seeks foreign investment for the region’s mineral wealth. This presents an alarming inconsistency in the federal policy.
Mining presents a rare chance for the state to rebuild trust with the people of Balochistan. But when we speak of the people, we don’t just mean the elite or those in power. We refer to those who are protesting on the streets, demanding justice. They seek fair trials, the right to see their loved ones, the freedom to choose their leaders, and the ability to voice their concerns against the centre. They fight for their rightful share of resources. The old strategy of controlling the people through nawabs and sardars has run its course. The current mass mobilisation is proof that suppressing the voices of the people is no longer a sustainable option. The state must listen, or risk losing the opportunity to heal a long-fractured relationship.
To engage with indigenous people has always been the foremost step in the development of a mining operation — from exploration to mine closure. This sector extends an opportunity for indigenous participation through training, employment, social investments, and procurement. These efforts could make the mining industry one of the largest private/public-sector employers of Baloch in their province. But what we see, on the contrary, is people begging for fundamental rights.
As an outcome of the various geoscience and feasibility studies, the consensus is clear that the most valuable minerals, including copper, lithium, and gold, are concentrated in some of Pakistan’s poorest regions, ex-Fata and Balochistan. Yet, instead of designing policies for local development in these areas, these resources are primarily processed abroad, with most of the export taking place to China. At this point, we lack the capabilities of manufacturing to compete globally, however, there could be some initiatives that could help gain the trust of local communities.
Securing access to minerals of Balochistan and processing is essential for a successful revival of the writ of the centre in the province. The access must be managed with care, ensuring that federal policy decisions do not overlook local engagement at any stage.
The path to utilise Balochistan’s natural resources must first pass through addressing the deep-seated grievances of the Baloch people. At the heart of their discontent lies the unresolved issue of enforced disappearances. In such a situation, conferences to attract foreign investment held in Islamabad are irrelevant until the basic human rights of the people are recognised and restored.
Once the outstanding issues of fundamental rights are adequately addressed, the conversation can shift to what is equally important: equitable sharing of the province’s natural resources with its rightful owners — the Baloch people. It’s an irony that a region home to resources like the Saindak copper-gold project, the Reko Diq mine, and the Sui gas field sees its people languishing among the world’s poorest, with per capita earnings below $1,000. When evaluating any development index — whether it’s the ratio of provincial per capita GDP to the national per capita GDP, gross regional product (GRP), Human Development Index, literacy rate, or any other measure — Balochistan consistently ranks at the bottom. This disparity demonstrates a contradiction of the federal policies that continue to neglect Balochistan’s rightful share in its own prosperity.
The young women who are leading the BYC are offering Islamabad a crucial opportunity — a chance to engage in meaningful dialogue. They are hurt. This is a call to listen with an open mind, free from prejudice, and to expand the conversation to include the rightful and just distribution of resources. The time for action is now.
The writer is a public policy specialist.
X: @umerasks
Published in Dawn, September 7th, 2024
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