The geopolitical landscape is changing rapidly in the aftermath of Russia’s invasion of Ukraine. Russia is exploiting European countries’ heavy dependence on its gas supplies to coerce them to reverse their previous move which Russia had perceived as a threat to its security. The prices of fuels in the global market as a result have hit the roof and pose serious threats to the economic and political stability of many countries including Pakistan.
This situation has prompted local strategists to reiterate the criticality of energy self-reliance by shifting from imported fuels to local resources. Adding 10,000 MW of solar photovoltaic (PV) systems in the country on a fast track is motivated by these concerns. Energy self-reliance, however, is a mirage that may not be worth the cost. A better goal to pursue is “energy security” which embraces within its folds, a practicable proportion of indigenous resources.
Of the total 87 (million tonnes of oil equivalent) primary energy supplies during FY2020-21, we imported 42.71 mtoe (or 49%) which cost us USD 23.5 billion (excluding coal imports). This import dependence exposes our economy, defense, and society to high risks from supply disruptions, price volatility, and our ability to pursue independent foreign policy. Since 14.62 mtoe (or 35%) of the annual fuel imports went to power generation, this makes it a prime target for the efforts to eliminate, or at least alleviate, our dependence on imported fuels to make the country energy secure which ultimately, contributes to national security.
Energy security generally involves four attributes: availability, reliability, affordability, and sustainability. Availability is the ability of a country to access its energy supplies and requires an extensive market, sufficient physical resources, investments, technology, and legal and financial frameworks. Reliability refers to the extent energy services are protected from disruption, resilient to handle shocks, and recover from failures. Affordability involves low and equitable prices relative to income and stability. Sustainability refers to minimizing socioeconomic and environmental damages from energy systems.
Pakistan’s current and previous efforts to secure its power supplies have largely focused on the availability of generation facilities and of primary fuels upstream of them. Though the government plans have never missed listing affordability of supply as an objective, they have assumed that developing supply infrastructure at least cost would automatically ensure this objective. As we discuss below, the security of power supplies does not hinge on supply alone but involves the demand side as well.
The electricity supply system is among the most complex and expensive infrastructure facilities for any country. It’s also the lifeline for its economy and society. Most of the complexity (and cost) in the electric system is due to consumer demand which varies randomly from moment to moment, over the day, week, and season, and also over the years. This demand is often classified into three major categories: base load that remains on the system round the clock, peak load that comes on the system only for a few hours in the year, and intermediate load that falls in between.
An electric utility must have resources and facilities available and ready to match demand, from the next moment to the next couple of decades. A variety of technologies have evolved to enable utilities to serve demand on their systems reliably and economically. High upfront but low fuel cost plants like coal and nuclear are used to serve base load. Low upfront but high fuel cost plants like combustion oil and gas turbines and diesel generators are used to serve peak loads. And, there’re a host of other technologies to serve the intermediate loads.
The portfolio of generating technologies a utility employs to serve its customers is termed the power “generation-mix”. This mix is of two types: “capacity-mix” which serves to ensure reliability in the system and “energy-mix” which serves to minimize operating costs. Generation-mix (capacity or energy) for a system is not static but can vary over time, albeit slowly.
For Pakistan, for instance, the capacity-mix in 2011 was 65.3% thermal, 32.4% hydel, and 2.3% nuclear. Last year, the capacity-mix was 58.8% thermal, 27% hydel, 7.2% nuclear, and 5.6% renewables. The energy-mix in 2011 was 67.4% thermal, 29.4% hydel, and 2.9% nuclear. Last year, this mix was 58.4% thermal, 30.1% hydel, 8.4% nuclear, and 3.1% renewables.
Apparently, the power generation-mix has shifted over the past decade due to an increase in nuclear generation in the system and renewables making a small entry. This mix is expected to see a major shift over the next decade as more hydel and renewable power plants are added to the grid.
The main considerations in finding out an appropriate fit of a power plant in the overall generation portfolio include its: (1) duty-cycle: base, intermediate, or peak load; (2) operational flexibility; (3) capital cost, lead time to construction, and useful life; (4) fuel and O&M costs; (5) technical maturity; (6) availability of primary resource; (7) availability and dependability; (8) impact on local, regional, and global environment; (9) impact on local industry and employment; and (10) contribution to national security.
It’s an endless struggle for a utility to match the continuously changing demand on its system with a supply portfolio that itself is subject to changes as a result of technical developments, global and local market upheavals, and a continuously varying geopolitical landscape. It’s more like chasing a moving target all the time.
Many tools have been developed to deal with the multitude of variables both on the demand as well as supply sides, still, the goal of finding a generation-mix for a system that can be considered perfectly “secure” remains largely elusive. The best we can do is to identify multiple sets of plausible demand scenarios and the technology and resource choices available for serving this demand in the most cost-effective manner, honoring the socioeconomic priorities of the government, and respecting the expected technical and environmental constraints.
Our planners’ primary focus has been to forecast demand as accurately as possible. A critical aspect they apparently miss is the influence they can exercise on electricity demand. Consumers do not demand or consume electrons but need them to serve their basic needs for comfort, lighting, food preservation, providing commercial services, or producing industrial and agricultural products (and lately mobility). They’re indifferent to how the grid provides these electrons as long as it serves their needs reliably and at an affordable price.
But for a utility, it does matter as the cost of generation, transmission, and distribution can vary substantially from one generation technology to another and also how it’s transmitted and delivered. While the magnitude of demand is important, when and where in the system it’s demanded is even more important because it impacts all four attributes of energy security.
Pakistan currently faces a daunting challenge in eliminating its dependence on imported fuels for power generation. It doesn’t have any mentionable oil reserves and its gas reserves are dwindling fast. The issue isn’t just shifting its current oil- and gas-based generators from imported fuels to local resources but finding a substitute for the services these generators provide in the system. If it earnestly wants to reduce its reliance on imported oil and gas for power generation, it will have to shift its focus from the supply side to the demand side.
By carefully guiding the temporal and spatial growth of demand with a clear sight of the country’s energy resource endowments and the transmission and distribution requirements to serve the demand, our planners can explore the viability of different supply and demand options with respect to the four security attributes and develop a plan that best serves the country’s development and strategic objectives.
There are numerous options that the government can use to alleviate the power sector’s heavy reliance on imported fuels, provided it’s willing to use imagination and back it up with a strong political will. A couple of such prospects are discussed below just to illustrate the point. These are barely scratching the surface of many others that exist and should be used instead of continuously chanting the mantra of energy saving and efficiency improvement.
System “load factor” is a metric utilities use to gauge the extent of utilization of its supply facilities. A higher load factor means that the supply facilities in the system are being used efficiently and reflect positively on supply costs. A lower load factor indicates that even though assets are being kept to serve demand, these are used only sparingly, thus affecting adversely these costs. Good utilities strive to maintain load factors in their systems above 70 to 80% with deliberate efforts and strive not to let these fall below this threshold.
The load factor in our system has gradually declined from 70% only a decade back to 62% last year. This means that the share of round-the-clock industrial and similar loads in the grid has either gone down or that of the non-productive sectors such as domestic and commercial consumers has increased. A system with a flatter demand profile enables the utility to serve it using base-load generation while for a system with sharp peaks it’s compelled to use quick-start and fast-response plants.
An option well within the government’s reach is to seek improvement in the system load factor by incentivizing demand from industrial and agricultural consumers and discouraging it from residential and commercial consumers. A 10% improvement in the system load factor could provide an additional 30,000 GWh to the system worth 380 billion rupees of revenue annually (valued at DISCOs’ current average sale price of 18.29 rupees per unit), thus lessening the severity of the present crisis.
We often hear lower-than-expected power demand blamed for the under-utilized existing generation capacity thus leading to rising capacity costs. Recent statistics from the NTDC indicate that the actually served peak demand in its system in FY2021 was 23,792 MW against 34,822 MW of installed capacity whereas the computed demand was estimated to be 27,193 MW. This reflects a disturbingly high reserve margin in the system of roughly 46% against an industry norm of 15 to 20%. This should have caused some stirs in the power sectors’ high-ups, but it has not.
It’s ironic that, despite having surplus capacity in the system, over 3,400 MW of demand went un-served last year. There may be valid constraints preventing the grid from serving this demand, but the government should identify these constraints and encourage serving them in the future by removing these constraints. This measure can also add roughly 20,000 GWh of energy worth 340 billion rupees annually that also can help further alleviate the present crisis.
Another promising option to flatten the currently peaky “system demand curve” is developing feasible options for storing electricity produced from the under-utilized power plants during lean demand periods and releasing the stored energy back to the system during peak periods. “Pumped-hydro”, “compressed-air”, and similar other large-scale and long-duration energy storage options can be used to further relieve the crunch.
Even though some existing hydro plants can be modified into pumped-hydro storage schemes, their true benefit will come if some natural terrains in Balochistan can be developed for this purpose. Similarly, with some investment, the empty oil and gas fields in that province can also be converted into compressed-air energy storage facilities. These facilities can also store excess electricity from renewable power generation not only in Balochistan but can also be used to channel excess generation from other renewable resource-rich areas of the country.
Our government will be well-advised to shift its present issue-driven approach in the power sector to a vision-led strategy. Instead of focusing exclusively on the supply-side solutions, it should explore the many opportunities on the demand side as well. These can contribute to energy security of the country at a much lower cost than those on the supply side. By reshaping the future demand, improving the utilization of installed capacities, and developing supportive storage facilities, it can set into rolling a virtuous cycle that will not only improve the security of power supplies but will also provide a much-deserved sigh of relief to electricity consumers.
(Sources of data: (1) HDIP’s Pakistan Energy Yearbook 2021; and (2) NTDC’s Power System Statistics, 46th Edition, June 2022.)
The writer is a freelance consultant, specializing in sustainable energy and power system planning and development. He can be reached via email at: [email protected]