Energy Security for Pakistan.

Prof. Dr Shahida Wizarat Director Research, Chief Editor PBR & HOD Economics, IOBM

What is energy security? There are four dimensions of energy security. Dependency, certainty, affordability, availability. We will try to explore whether Pakistan is energy secure in the light of these dimensions of energy security. At the time of independence, coal met about 50 % of the commercial energy demand of Pakistan. After the discovery of natural gas at Sui and development of hydel energy we witnessed a sharp decline in coal consumption. The share of coal in the overall energy mix at present is only around 13.7 % whereas in power sector its contribution is a mere 0.1 %. At present coal is consumed in the brick-kiln and cement industries. The only coal based power plant is located near Lakhra which has power generation capacity of 150 MW. The plant is working far below its operating capacity due to lack of maintenance and host of other factors. Hydel Power At present 35% of power is contributed by hydel sources. It is the cheapest and cleanest source of energy. But at present only 16 % of total hydel potential of 41,722 MW has been realized in Pakistan. Hydro power projects entail huge capital cost and displace a large number of people from their homes and lands increasing human miseries due to relocation. A major draw back of hydel power is its unreliability during droughts. Moreover, lack of consensus in the provinces has created hindrances in increasing the share of hydel power. Nuclear Power Nuclear power contributes only 3% to the total. It is a clean source, but involves a huge capital cost. Availability of nuclear fuel is dominated by rich countries, who have strong biases on which countries should get civilian nuclear technology and which countries should not. The US and Europe are reluctant to help Pakistan acquire civilian nuclear programme. Thermal Power Of all the fossil fuel CO2 emissions are the lowest from natural gas. It has lower capital cost than coal or nuclear power plants, shorter construction time and greater operational flexibility. However, its operating cost is more than all other fossil fuels except oil due to depletion in supply. Pakistan’s domestic gas reserves are fast depleting and the country is expected to face a shortfall of gas supply of 6.47 BCF by the year 2020 . On the other hand, oil fired power plants are the most expensive due to escalation of fuel cost. As a result fossil fuel based power plants (oil and gas) are uneconomical and increase the country’s dependable on foreign countries. Thermal Power Plants based on natural gas and oil account for 62.4% of the total installed power generation capacity of 22477 MW. Coal based power Coal is the most popular fossil fuel used all over the world for power generation. Its major advantages are its cheap cost, stable prices and its availability across the globe. IEA has predicted that in future coal will be used extensively for power generation as crude oil reserves will last 41 years, natural gas 67 years and coal 192 years. Coal is considered safe and reliable fuel in countries with little or no domestic production. Japan is the biggest coal importer where 28% of the electricity is coal based. Moreover, development of coal energy can generate thousand of job opportunities as it is a labour intensive activity. The major draw back with coal is that it is not a clean source of energy. But clean coal technologies are available to take care of this problem. It’s contribution in total power generation is only 2 %. Renewable Energy Amongst the renewable source of energy wind solar (Photovoltaic) is of interest to Pakistan due to its enormous potential. The advantage of wind power is that it is a free and clean source of energy. However, it is an unreliable source due to its dependance on wind speed. Wind energy can only displace, not replace, fossil fuels as it requires a back up source during unfavourable wind conditions. Solar energy (Photovoltaic energy) is also free but its output is severely affected due to overcast conditions and times of the day when sun is close to the horizon, due to which solar plants need a backup. Solar power is also more expensive and its overall contribution is smaller as compared with wind. Solar energy can fill the gap when there is no national grid and for remote site water pumping. Factors reducing our energy insecurity: Rapid population growth rate, increase in energy prices, declining energy production, import of oil and gas from abroad, privatisation of OGDCL and PPL shares in the international capital markets. Countries, both big and small try to reduce their dependence on other countries for strategic resources. The statements emanating from the European Union about reducing their dependence on Russian gas and the moves by the US government to explore oil to make itself self sufficient in oil are cases in point. This brings us to the discussion of privatisation of strategic units. Oil and gas are considered strategic resources and countries want to avoid being dependent on other countries for the import of these resources. China is a role model of a liberalised country. It has used liberalisation and privatisation very successfully to increase its rate of growth, reduce income disparities, poverty and develop the country. And yet, China exercises state control over telecommunication, airlines, banks and energy companies. These are considered strategic in nature and China feels vulnerable if these are controlled by foreigners. The recent uneasiness in France as a result of Mital Steel owned by a foreigner and agitation in the USA on the award of a port to a Gulf country leading to its withdrawal by the US government are just a few examples. But they bring out very forcefully, that even countries that are powerful and strong feel vulnerable when their strategic assets are not in their control. The decision of the GOP to float the shares of OGDCL and PPL on international capital markets as a result of IMF conditionality is making Pakistan energy insecure. The GOP will also have to learn how to become a free trade player while maintaining its control over strategic assets. And not only being self sufficient in these strategic resources, countries are creating dependancies in other countries in order to further their politico-social objectives. Even very small countries are positioning themselves to control strategic resources as a way of acquiring power and status, with a view to make other countries dependant on them to bring their behaviour in line with their socio-political objectives, which would not be possible without creating these dependencies. And this dependancy can also be used to subjugate countries. Israel, for example, is positioning itself to become a big energy supplier to the Middle East with a view towards changing the geo politics and economy of a region in which it finds itself isolated. Nobel and Delek are planning constructing an under-sea pipeline from Leviathan to Turkey, Greece, Jordan and the Palestinian Authority. The Financial Times notes that the Israeli Government is promoting the project not only to increase its revenues, but for the “potential positive knock-on effects on traditionally strained relations with its neighbours”.   Some Suggestions on Improving Energy Security 1. Changing energy mix. In order to increase energy security we need to first change our energy mix. Having analyzed, different fuel option to drive the economic engine of the country in the 21st century, it can be safely concluded that coal and nuclear energy by far remains the most viable option to meet the increasing energy demands at affordable prices. They will also reduce the dependance of the country on outside powers. Being an indigenous resource, valuable foreign exchange can be saved and balance of payment issues can be greatly resolved. In Pakistan coal reserves are likely to last for several hundred years, whereas oil and gas reserves are fast depleting as their reserves to production ratio is 13 and 22 years respectively, which also necessitate the need for greater reliance on coal as a major source in national energy mix in future as oil and gas make Pakistan insecure on the basis do all the dimensions of security. Coal and nuclear sources with hydel power generation especially medium and small dams built are ideal from the point of view of affordability, availability, certainty and dependance. Renewable Energy sources like wind and solar will further help to diversify the energy mix. But in order to ensure that renewable energy resources do not make us dependant on foreign countries, it is important that we start manufacturing wind and solar equipment used for generating power from this source. Short term term solution entail controlling line losses, demand management, removing idle capacity. Further, medium term solutions entail development of renewable energy resources like wing, solar. The long term solution involve increasing the share of hydel, coal and nuclear sources in total power generation. 2. Policy towards strategic assets. Comparing the behaviour of the Government of Pakistan (GOP) with the behaviour of the countries cited above we observe the following: First, the GOP doesn’t seem to be aware of the importance of strategic sectors or the problems associated with dependence on outside powers. Second, GOP doesn’t seem interested in retaining control over strategic sectors. Third, GOP is not using its state power for the benefit of the people. 3. Strategic location of Pakistan. Pakistan has the advantage is that it is situated at the confluence of Central Asia, Middle East and South Asia. Instead of being dependant on other countries it can increase the dependance of other countries on Pakistan. And finally, using our strategic location to further our geo political agendas by increasing the dependencies of other countries in line with what is being done by Israel and Singapore can help to increase energy security in Pakistan, but also promote our socio political objectives of the country.   Summary: Diversification of electricity generation mix, diversification of sources of energy supply, taking advantage of Pakistan’s strategic location, creating dependance of other countries on our power, using our strategic location for our geo political agenda.