CHAPTER 2

HISTORICAL ANALYSIS OF PAKISTAN’s ENERGY SECTORS

Introduction
Energy is the main and important need for the development of society. It is the basic requirement
for an adequate standard of living. As there is increase in population the economy of the country
also increases and hence the need of electricity demand also increase and if this demand cannot
meet the supply then it take a shape of crisis(Muhammad Amir aman,2018).

Pakistan is suffering from electricity crisis since independence in 1947. Pakistan’s main power
producer sectors are; WAPDA, Karachi Electric Supply Company(KESCO), Pakistan Atomic
Energy Commission (PAEC), and Independent Power Producing Sector(IPPs). They are
distributing electricity through various transmission lines across Pakistan. Pakistan’s power sector
after independence was managed by two public sectors WAPDA and KESCO. WAPDA was
established in 1959 and various hydel and thermal power units functioning under it. KESC was
established in 1913 while Pakistan took control of KESC in 1952 . The KESC company supplies
electricity to the Karachi city and the nearest villages of Karachi. In 1960s government of Pakistan
established (PAEC), to start work on atomic energy. Pakistan despite that was lacking in installed
power generation capacity, though Pakistan started an IPP sectors to contribute in electricity
generating (Pakistan economist, February 16,2016).

Total installed capacity of electricity in Pakistan has risen from 60 MW at the time of independence
in 1947 to 24857 MW in 2016. Pakistan nowadays needs round about 22,000MW electricity per
day. However, currently it is able to produce almost 17,000 MW per day very hardly. And the
energy shortfall is increased 4,500mw to 5,000mw per day(Mohammad,2016).

The increase in shortfall in Pakistan has many causes ; the government did not take any serious
efforts to install new capacity of generation. Moreover, rapid population growth, industrial
development and electricity demand , transmission losses due to outdated infrastructure, power
theft and seasonal reductions in the availability of hydropower and so on, have worsened the
situation. The government finds it a bit difficult to solve out these issues. Consequently, the
demand exceeds supply and hence load-shedding is a common phenomenon throughout Pakistan.
This shortage is badly caused shut-down of many high profile industries in Pakistan (Khaleeq
kiani, May 18,2017).
All this is happening in such a country where there is abundant of water resources, vast reserves
of coal and gas and also a lot of power of renewable energy. If these resources are properly utilized,
it can meet the country requirements for years. (Kifayat Ullah , 2017)

The Energy Resources in Pakistan

At the time of independence, Pakistan inherited 60MW of power generation capability for a
population of 31.5 million, yielding 4.5 units per capita consumption. In 1959 when Water and
Power Development Authority (WAPDA) was established, power generating capacity was
increased to 119MW. Pakistan’s power sector at that time was managed by two integrated public
sector WAPDA and KESC. Karachi electric Supply Company had been established in 1913 during
the British India. After partition it came under Pakistan control in 1952. It supplies electricity to
Karachi city and to the nearest areas of Karachi. In 1964-65, the electricity generation capability
rose to 636MW from 119MW in 1959, and power generation to about 2,500 MKWH from 781
MKWH. The rapid progress witnessed a new life to the social, technical and economic structures
of the country, mechanized agriculture started, industrialization picked up and general living
standards improved in another five years the generating capability. The task of accelerating the
pace of power development picked up speed and by 1970, rose from 636MW to 1331MW with
installation of a number of thermal and hydel power units. In the year 1980 the system capacity
touched 3000MW which rapidly rose to over 7000MW in 1990-91. From 1990/91 to 2004/05,
Pakistan’s total installed power generating capacity increased nearly threefold, from 7000 MW to
17,500 MW with thermal power units producing 64% of that total, while total hydel power
installed capacity is 6,823MW. So, total installed capacity of electricity in Pakistan is 24857 MW.
However, total per day production of electricity in Pakistan is 17,000MW and the demand is
round about 22,000MW. In order to this regard per day electricity shortfall is increased to 6000-
7000MW(NEPRA, 2016). Following are the electricity producing sources in Pakistan;

Thermal:

A power plant where heat energy is converted into electrical power is called thermal power plant.
Most of the electricity in Pakistan is produced from thermal power plants by using resources like
oil, gas and coal. Some of them are combo-cycled, steam turbine and gas turbine. Total number of
thermal power plants in Pakistan are 49 located in Punjab, Sindh, and Baluchistan. Pakistan is
producing 61% of electricity from Thermal power. Total thermal installed capacity of Pakistan is
16599MW. The biggest thermal power plants are Guddu with capacity 2402MW, Thermal Power
Station (TPS) Muzaffargarh 1350MW, Kot Addu with 1638MW capacity and HUBCO
Baluchistan with 1200MW capacity. The oldest one is National Gas Power Station (NGPS)
Multan, made in 1960 with installed capacity of 195MW. Pakistan have recently installed three
biomass fuelled power plants with 67MW capacity. At present, thermal power generation stood at
8,300MW but these plants have low conversion efficiencies and are expensive to maintain and
operate. Most of the thermal power plants installed by IPPs, use furnace oil which has become
very expensive over the recent past(Dr.S.R.Malik,2016).
Hydro Power:

Pakistan has 23 hydroelectric power plants including three mega dams Tarbela (3,478 MW), Ghazi
Barotha (1,450 MW), and Mangla (1000 MW). Almost all of which lie in the K.P.K, Punjab and AJK.
These power plants are mostly made on river Indus, river Jhelum, and on some small canals.
Installed capacity of these hydro power Plants is 7115 MW out of which 4304 MW is in Khyber
Pakhtunkhwa, 1699 MW in Punjab and 1114 MW in AJK. Total production of these power plants
are 32074GWh which is 34% of total power generation of Pakistan (The Express Tribune, 2016)

Nuclear Power:

The government of Pakistan planed to initiate work on atomic energy to produce electricity . Thus
Pakistan established Pakistan Atomic Energy Commission in 1966. Pakistan Atomic Energy
Commission (PAEC) is responsible for all nuclear energy and research applications in the country.
Because of International Atomic Energy Agency (IAEA) doubt to use nuclear power plants for
military usages, Pakistan is largely excluded from trade in nuclear power plants or materials, which
slow down its development of civil nuclear energy but china is ready for nuclear co-operation with
Pakistan. Pakistan’s first nuclear power reactor Karachi Nuclear Power Plant (KANUPP) with
137MWe capacity started in 1971 and is located in Sindh province about 25km west of Karachi.
Chashma Nuclear Power Plant 1(CHASHNUPP 1) was installed in Chashma city , Sindh province
with 325MWe capacity in 2000. In 2011 another Chashma Nuclear Power Plant 2 (CHASNUPP
2) was installed on Chashma venue, Sindh province with 325MW capacity. Pakistan is producing
only 3% of total electricity from three nuclear power plants which has total capacity
787MWe(Abbas, M. N. (2015).

Wind Power:

Wind is a clean source of renewable energy with no air or water pollution, unlike
conventional power plants, wind plants emits no air pollutants or greenhouse gases. The increase
in cost of fossil fuel and different environmental problems, Pakistan is working to produce
electricity from renewable resource like Wind and solar power. In 2013 Fauji Fertilizer company
is installed with 50MW capacity in Jimpir, Sindh. Zorlu Energy Wind Power with 56.4MW
capacity is established in 2014 in jimpir, Sindh. In 2015 two wind power plants Foundation wind
energy-I and foundation wind energy-II with 50MW , 50MW capacities are established in Gharo,
Sindh. Another wind power plant named Three Gorges First Wind Farm with 50MW capacity is
installed in jimpir/Sindh. These 5 wind projects with installed capacity of 256.4MW are in
operation. Wind power contribution to Pakistan’s total power production is less than 1%. In 2014
total wind power production of Pakistan was 457GWh( Abid, M., & Ashfaq, A. (2015).y

Solar Power:

Solar power is produced by storing sunlight and converting it into electricity by solar
panels. Pakistan is in initial stages to produce the electricity through solar power. Pakistan is
building solar power plants in Punjab, Sindh and Baluchistan. These programs are under
development by the International Renewable Energy Agency, China, Sweden, and Pakistan
Alternate Energy Development Board (ABED). May 2015 Pakistan launched its first solar power
plant called Quaid-e-Azam Solar power Plant with 400,000 solar panels spread over 500 acres
(202hectares) of sun-baked in Bahawalpur, southern Punjab Province. This solar Park has 100
MW of nominal power which is less than 1% of total installed capacity of Pakistan. This capacity
will be increased to 1500MW in two year. The plant is built by China's Tebian Electric Apparatus
Stock Company Limited (TBEA), took a year to build at a cost of $190 million(ADB,2016).

Crisis and Shortfall:

Pakistan is facing serious energy deficit from last 10 year. Bad governance, inability,
lack of transparency, lack of implementation of international agreement policies, distribution and
transmission losses(most probably due to theft),have made Pakistan one of the worse country as
far as energy production is concerned. There is a big gap between demand and supply resulting in
load shedding of electricity. Pakistan is continuously suffering from power crises as nearly one
third of demand for electricity ,during last year could not be met because of supply constraints.
Pakistan has had too much potential to get electricity, but very few power producing plant were
installed due to lack of any integrated and proactive planning to fulfil future needs. As a result,
supply shortages noticed on average was 5000MW, which further increased to 7000MW last July.
Such a big gap has led to load-shedding of 12-16 hours across the country(Rizvi, Jawad. 2016).

As mentioned above in paragraph Pakistan has installed capacity of about 24958 MW, but
instead demand is 17000 MW. Pakistan generating 95730 GWh electricity but 5000-7000
MW shortfall was faced in 2015. This is because Pakistan’s power sector is facing number of
very serious issues(Mohammad,2016). The key to success in the power sector lies in the resolution
of these issues. The main issues are discussed below:

Iran-Pakistan Gas Pipeline:

Iran- Pakistan gas pipeline was formally signed in 2018 to import gas from Iran land. It was
proposed the project initially will have capacity to deliver roughly 22 billion cubic meters per year
which then would evolve to a maximum of 55billion cubic meters and the supply would begin by
December 2014. Unfortunately, this project till now has not been implemented and Pakistan is
deprived from this huge energy resource. This was to cover a lot of energy shortfall in
Pakistan(noor-ul-haq,2017).

Trans-Asian or TAPI Gas Pipeline:

The Turkmenistan, Pakistan, Afghanistan, India Gas Pipeline project was signed between the
respective governments in 2002 and 2006 to transport the Turkmenistan gas to the South Asian
region via Afghanistan. The TAPI is 1680km long gas pipeline emanating from Turkmenistan’s
dulatabad gas fields would cover 4.45km long in Turkmenistan,735km in Afghanistan, 800km
long in Pakistan and enter to India. The proposed project is expected to generate 5 to 6MW
electricity for energy starved Pakistan. Besides this Pakistan will earn huge revenue from gas
supplies to India. Regrettably and unluckily, work on this project like IP Gas pipeline has not been
started till now to operational, due to some challenges. Pakistan by bad luck is deprived from this
achievement which would have to cover a lot energy shortage(Nikita Mndkovich,2016).

Maintenance of Power Plants:

Poor management plays a big role in electricity crises. Pakistan has installed capacity
which is more than its demand, but at same time only 60 % of this installed capacity is used
because of some thermal power plants are off-grid and some of them are not operating
efficiently due to the lack of maintenance. Due to instability in political government,
management totally ignored necessary repairing program for these power plants and as a
result of which they remained off-grid. Also some hydro power projects are worth mentioning
here as they are not working to their full potential due to lack of government timely attention
to their maintenance(Daily Times. 2016).

Circular Debt:

Circular debt is seriously affected Power sector as well as created financial problems.
Power generation companies when failed to clear their dues to fuel suppliers, caused this
debt. The fuel suppliers in turn default on their payment assurance towards refineries, oil and
gas suppliers. This happened when Distribution companies (DISCOs) cannot collect revenues
efficiently because of electricity theft, transmission/distribution losses and below cost power
tariff. As a result, most of the thermal power plants were forced to operate at a very low
capacity factor and hence low generation of electricity Couse increase in shortfall. We know
Pakistan produce 64 % electricity from thermal power, Due to non-availability of oil and gas
supply as well as lack of funds, the country lost between 2000 MW to 3000 MW potential of
thermal power generation by some power plants as they remained off-grid.
The above mentioned inefficiencies, theft, transmission/distribution losses and fluctuation of
oil prices are resulting in debilitating levels of subsidies and circular debt. Currently,
estimated circular debt (as in 2015) ranges from 5 to 6 billion U.S dollars according to
government of Pakistan(Mustafa, Khalid. 2016).

Imbalance Energy Mix:

Total current installed generating capacity from hydro is 34% and 61% is from thermal. These are
the main sources of electricity generation in Pakistan. Whereas, nuclear power shares is only 5%,
wind and solar power also has very small contributions. From last 20 years Pakistan did not take
interest in hydro power generation, instead they installed thermal power plants which caused the
share of hydro power to go down in the national electricity generation. Therefore hydro
contribution in total electricity generation has reduced from 45 percent in 1990 to less than 30
percent in 2015. The remaining 61 percent has been filled by thermal power. This has increased
the overall cost of power generation in Pakistan because of relying more on non-renewable
resources(Anam, Zeb. 2016).

Renewable energy from hydroelectric power stations is the economical and most
environment friendly. Pakistan is capable to produce more than 60,000MW of electricity
from hydro power but unfortunately the installed capacity of hydro power is only 7115MW,
which is about 12% of total potential. Also this 7115MW of capacity can only be available if
the hydro power stations work to their full potential. Sometimes, only one third of electricity
is generated because of the shortages of water in Dams. Pakistan have potential to produce
electricity from Coal sources which is the cheapest source of fuel in the thermal production. We
have 185 billion tons amount of coal reserves. But Pakistan have only 1 thermal power plant that
is working on coal which have a capacity of 200MW(Ibid).

Pakistan also have potential to produce electricity from solar and wind power but unfortunately
government of Pakistan did not take serious steps to produce electricity from wind and solar
system. In 2015 Pakistan with the help of china launched Qauid-e-azam solar power plant with
100MW capacity in Bahawalpur, southern Punjab. Also 5 wind power projects with 256.4MW
capacity launched in 2013,2014 and 2015 respectively in Sindh. Both solar and wind power plants
are making 2% electricity very hardly of total(Business Recorder. 2016).

Pricing Policy:

The responsible authorities of Pakistan were not good enough to set the prices for
electric services. Actually they were charging less from consumers than the actual cost and
should be called a bad pricing policy. As we know Pakistan is producing more electricity
from thermal resources which mostly are oil and gas and are imported from other countries.
We also know that oil and gas prices fluctuate regularly so it was hard for the policy makers
to set a fix rate. And as a result of which they have to give subsidy to the consumers. This
created a big gap between actual cost and recovered bills. This difference, which of course
was hard for the government, and was paid as financial add, as a result of this, resources were
deflected from other arrangements. This pricing policy system has caused problems. As
Electric services dues not being recovered fully stopped potential investors to invest more in
power sector. This debt is also connected to circular debt which is the major problem in
Pakistan (Dawn. 2015).
Transmission and Distribution:

Transmission and distribution losses are directly connected to Leakage Current Losses,
Dielectric Losses, open circuit Losses and theft of electricity. Pakistan is facing 20 to 25%
transmission and distribution losses. Of course the tariff is increased due to increase of
transmission/distribution losses. Distribution losses are a bit higher than transmission losses which
are 70 percent. These T&D losses are playing main role in increasing circular debt and that is
because distribution companies failed to cover these losses. The recovered collection of revenue
was not enough to pay back to producers. Pakistan power sector is transmitting and distributing
electricity with overhead line. Lack of proper maintenance, replacement of old transmission lines,
and grid stations also causes T&D losses. Electricity distribution equipment in Pakistan is very
old and not properly installed which gives an opportunity of electricity theft as well as T&D losses.
At the end it can be said that Pakistan is facing T&D losses which are dependent on old
equipment’s and open circuits(The Economist. 2016).

Population Growth and Energy Crisis in Pakistan:

Rapid growth in population is a major problem confronting Pakistan as it is lies at the center of the
country’s economic and political problem. Pakistan is facing today after terrorism rapidly increase
population putting pressure on different life saving sectors exist in the country but almost all on
electricity is high. In Pakistan, almost 24% population has no access to electricity. The reason is
population is greater than that of energy exist in Pakistan. Population growth in Pakistan is double
than that of electricity growth. That’s why far flung areas have no access to electricity in Pakistan.
The government is also not proactive to take steps to develop electricity sectors in far control
areas(World Bank,2016).

Conclusion:

Pakistan has enormous resources of producing energy, which include; thermal system, water for
dams, solar system, wind system, gas and oil etc. At the time of independence Pakistan had 6MW
electricity, now it has total installed capacity of electricity is 24857 MW. The demand is around
22,000MW per day, whereas electricity production is 17,000MW per day, and shortfall is remained
around 5,000MW per day. The reason of shortfall, population growth is double than that of energy
production, and the time government did not make any proactive plan to meet the futuristic
demand, resultantly, over the years demand exceeds supply. Pakistan is producing electricity from
hydel, solar, thermal, wind, oil and gas. But these are unable to meet the demand. The total installed
capacity of hydel power plants is 7115MW. However, water shortage in dams or not well
constructed dams led to less production of electricity than that of installed. Similarly, energy from
gas and oil is very expensive because it is importing things and the prices are very high now a
days. The people are unable to pay high prices of electricity.
However, the next 3rd chapter named “Impact of CPEC on The Energy Sectors of Pakistan’’ will
indicate that how CPEC will boost energy production in Pakistan. The previous government was
seeking foreign direct investors(FDI) to help out in creating energy and building infrastructure in
Pakistan. Eventually, Islamabad and Beijing, inked an agreement in 2015 on the name of China-
Pakistan Economic Corridor(CPEC). CPEC is a $46billion mega project spearheaded by china.
This is a big part of “One Built One Road(OBOR)”. The China-Pakistan Economic Corridor
(CPEC) is a series of energy and infrastructure projects. 80% out of total will be invested in energy
sectors in Pakistan.
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