The NTDC has submitted to Nepra a long-term plan of expansion of electrical power generation covering the period till 2040.It is an indicative plan and is a statutory requirement under the Nepra grid code. In this space, we will evaluate various aspects of the proposed plan, its composition and growth pattern, and some reality testing would be done.
Under a medium GDP growth scenario of 5.5 percent, a power peak demand of 80,425 MW has been predicted for the year 2040, to meet which 98,000 MW of generation capacity is to be there, as about 10,000 MW of existing capacity would be retired in the meantime and 5000 MW is for spinning reserves. Installed capacity by 2018 has been taken as 27,715 MW. This means that 55000 MW of new capacity is to be installed in 22 years.
The plan is based on a power demand model under which three assumptions of the economy’s growth rates have been made; 4.5 percent low case, 5.5 percent mid-case and 7 percent high case. Under the prevailing scenario of restructuring and stabilization, 7 percent GDP growth rate appears to be optimistic, at least in the short to mid-term. A median rate of 5.5 percent appears, indeed, to be more realistic. Ironically, the last model developed by JICA assumed 8 percent and 9 percent GDP growth rates.
There are experts who argue for a low-demand growth rate scenario. The NTDC model has come out with a power demand growth rate of 5.13 percent and energy growth rate of 6.24 percent, indicating higher energy demand growth rate than that of GDP of 5.5 percent. In comparable economies like India, the recent trend has been of energy demand growth slower than that of GDP growth .In technical term, energy-GDP elasticity of demand in India is moving from 0.75 to 0.5. In Europe, the linkage is negative; energy/electricity demand is going down, while GDP is going up.
There are several reasons for this, most prominent being energy conservation and efficiency effect. Also, as economies are moving away from raw material production and manufacturing to the service sector, electricity demand is going down. Traditionally, Pakistan’s, electricity generation, if not demand, has been growing at a rate of 4 percent to 4.5 percent.
This is perhaps a conservative and more realistic forecast that has been made hitherto. In the past, grotesque and unrealistic projections of demand had been made of 120,000 MW and even 186,000MW. A doubling time of 10 years and less has been predicted, meaning that demand doubles every ten years or even less. The issue is that investment and institutional capacity do not grow that fast. In this perspective, the forecast appears to be closer to reality.
For 60,000 MW, an investment of $180 billion would be required. In annual terms, it would be around $8-9 billion of investment requirement. Based on a total investment-to-GDP ratio of 16 percent and a nominal GDP of $300 billion, total investment capacity of Pakistan’s economy works out to be $48 billion per year. This would grow with the GDP growth in the plan period. This means that the power sector would consume about 20 percent of the economy-wide investment capacity. By comparison, India invested $35-50 billion annually in the power sector in the recent years. This is a back-of-the-envelope analysis, and certainly, a serious and rigorous estimation and analysis would be required. I wish the NTDC had undertaken this – or does so in the future.
Around 30,000 MW of hydro and 20,000 MW of Thar coal power plants are to be added in the period leading up to 2040 under this plan. Even more unrealistic is the proposition of installing 20,000 MW hydro capacities by the year 2030 – only 12 years are left. Both targets appear to be difficult to implement. Hydro power plants take on average seven years to implement. It is almost impossible to install hydro at this rate unless we become the Chinese. In fact, it would be difficult even for them.
Similarly, the Thar site has limitations. It may be able to accommodate only 8,000-10,000 MW due to a variety of reasons including water issues. For another 10,000 MW or so of Thar coal electrical capacity, Thar coal may have to be transported away from Thar to the south west in or near Karachi or towards the north in Rahimyar Khan and upwards. The technical taboo regarding Thar coal transportation has probably gone away, as companies have already done feasibility studies in this respect.
It is a 20-22 years plan. In today’s world of dynamic changes, and still more the impending energy transition, this is too long a period. In any case, demand models of this nature give erroneous results after 10 years. Too much is changing and the NTDC model has not or could not take those into account. It is almost certain that EV are going to have a significant share by the year 2030 and growing thereafter. Secondly, Solar PV plus storage is expected to be there by 2030, unlike today’s situation when solar piggybacks on fossil power plant and is considered worthy of 10-15 percent due to intermittency and 8-hour only limitations. These issues create altogether a different world.
By 2040, renewable energy has been proposed to be 16,040 MW, about 16 percent of the total installed capacity. However the plan is erratic. Addition of 3970 MW in the period 2020-25, followed by no investment in the period 2025-30, then abrupt increase of 6300 MW in the next five years, and followed by a reduced volume of 3600 MW only. It appears that these are residual balancing figures.
A more serious consideration of RE additions is in order in view of the growing importance of RE in the coming years. Excessive and unrealistic hydro addition, as indicated earlier, may be adjusted with more RE additions in the period 2030-40. There is a whole gamut of issues that need to be taken into consideration; solar-wind hybrid, roof-top solar, storage, distributed generation, rural electrification etc. It is a tall order. There is a sense emerging that the proposed plan is really more of the same, and nothing appears to be changing. The CPPA has done well to induct a consultant for reviewing the proposed plan and do some quality assurance and improvements. It may not be a bad idea to induct some foreign consultants as well. Unnecessary nationalism may not be wise at this moment.
The plan is an indicative only and would be revised annually. The problem is that inappropriate plans are used by vested interests to get inappropriate projects approved. For example, IPPs are such a happy ride with high returns, capital padding and take or pay contract. All risks fall on the government and the consumers. And governments often transfer their loads onto the consumers under good advice from internal and external wise men.
Finally, although the NTDC has quite some exposure and reading of this subject, it should have associated external help for demand modelling. There is abundant expertise available in our universities of able economists and econometricians. Involvement of universities would be beneficial to both, and above all for developing self-reliance in the country.
The writer is a former member of the Energy Planning Commission and author of ‘Pakistan’s Energy
Issues: Success and Challenges’.
Published in The News, April 02, 2019.
