Hassanwazir's List: hydro politics

• Surprisingly, the total energy produced in the country has actually decreased nearly 10 per cent between 2007 and 2010.
  This is primarily due to lower-capacity utilisation, which in turn has been the result of ‘circular debt’, a concept that has been bandied around freely over the past few years as the primary problem that besets energy production in Pakistan.
• The two most glaring reasons behind the present mess Pakistan finds itself in are the 1994 energy policy and the resultant extreme over-reliance on expensive imported fuel mix.
• highly generous 1994 power policy for independent power producers (IPP). At that time the country’s electricity generation relied on a fuel mix of approximately 70:30 in favour of hydro versus thermal. This changed dramatically over the next decade with the fuel mix going to 30 per cent hydro and almost 70 per cent thermal by the end of 2010.
• As per the National Power System Expansion Plan 2010-2030, as of 2010, Wapda (employing hydro production) generated electricity at Rs1.03/kWh ((1.2 cents/kWh) while public-sector thermal power plants provided the same at Rs8.5/kWh (10 cents/kwh)
• However, the IPPs (primarily thermal) provided the same at Rs9.58/kWh (11.2 cents/kWh). As a result, the average blended cost of generation was Rs6.6/kWh (7.7 cents/kWh) in 2010 which further increased to Rs9.81/kWh (11.5 cents/kWh) for the end consumer due to line losses and theft in the transmission and distribution systems.
• Most new thermal IPPs are charging in the range of 15-18 cents/kWh at current oil prices.
• The estimated cost of energy stands at 1.6 cents/kWh for Kalabagh dam with a vast majority of new hydros expected to come under 4.5 cents/kWh as per a recent NTDC (National Transmission and Despatch Company) report
• Furthermore, the country has so far completely failed to develop its coal reserves (only 30MW coming from coal) which are estimated at 175 billion tonnes (the second largest in the world). Engro estimates a tariff of 10-12 cents/kWh for Thar coal-based power production based on the current policy. Incredibly, the world average for coal-based power production in the energy mix is 40 per cent while it is only 0.1 per cent in Pakistan.
• To make matters worse, many of the thermal IPPs set-ups under both the 1994 and 2002 power policy are of inefficient design (single cycle rather than more efficient combined cycle) since these policies provided cost plus equity return of 15 per cent irrespective of the efficiency of the technology/fuel source being used in the power plant.
• Circular debt is a red herring. The core problem lies in wrong policy choices made in the early 1990s that have continued since then

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