ASSESSMENT OF ENERGY AND POWER SITUATION IN PAKISTAN AND GAP ANALYSIS

ASSESSMENT OF ENERGY AND POWER SITUATION IN PAKISTAN AND GAP ANALYSIS:

Assessment of the energy and power sector achievement s  presents impressive gains in addition of power generation capacity and in adding LNG to the system, which eliminate both electric power load shedding and gas rationing in the immediate future. This impressive performance does mask some areas that need attention, these are:

Energy Sector:

1.       Energy mix. The energy mix has been “rectified’, to an extent, by addition of local and imported coal. Imported coal plants have already been added, Thar coal plants are in the process of being added. By 2023 the mix would be corrected in so far as coal in total mix is concerned.  The glaring failure has been the stagnated share of hydroelectric energy in total energy, up to 2018; even up to 2023 this share will not change. 

2.       Indigenous sources of energy. Capacity addition in the power sector and induction of LNG in to the system has eliminated shortages, this however has been achieved, partly, by addition of coal fired power generation (capacity based on imported coal) and addition of two LNG terminals that will allow RLNG to replace depleting domestic gas supplies. The share of imported energy in total energy has risen from 67% in 2015 to 69% in total commercial energy; this ratio is set to increase in 2017 and onwards, with increased supplies of imported coal. During the period 2018 to 2023, the share of imported energy will be somewhat reduced by addition of Thar coal but this will be offset by increasing RLNG supplies to cater for depleting domestic gas supplies and to feed newly constructed LNG based power plants .Thar coal will assist in improving share of local energy sources in the energy mix, the share of other local coal is stagnate and is not set to increase, unless special attention is accorded. Share of biomass has also not registered a significant increase, although bagasse based power plants have been induced and are also scheduled to be added in the period 2018 to 2023 (due to over capacity there are attempts to reduce the number of bagasse based power plants and also the regulator is offering guaranteed off take only in the cane crushing season) Use of biogas, bio mass, solar and wind will need to be increased to achieve the self reliance targets. Conversion of tube wells to solar, biogas and bio mass need to be accelerated. Exploration for gas and oil has not received international attention due to: Decreasing size of finds; and partly due to regulatory dysfunction exploration activity has faltered (although it must be pointed out that oil and gas exploration activities registered increase by eighty percent with forty percent success rate. Oil and Gas Exploration and Production companies drilled over one hundred and seventy-nine exploratory and one hundred and ninety-four appraisal wells resulting in one hundred and one new discoveries during the past four years, which is eighty percent higher than the finds made during same period of the previous government.) . Shale gas and off shore drillings have not taken place, although in recent moves government has formed a consortium of two local firms to drill for shale gas. .: 

3.       Energy efficiency. The above analysis shows that there has been a small change in Energy GDP ratios. Energy efficiency and conservation has received insufficient attention during the period.  Publically owned generating plants have not been turned around and continue to operate much below their design efficiency. Losses in gas and electricity sector are still high. Losses in the electricity sector have come down to about 17 %. This is still significantly higher than the 10% loss figure deemed reasonable for Pakistan .Unidentified gas losses have increased to about 12% these are much above international norms. Power sector savings would be significantly higher when seen in the context of efficient LNG based plants now being lined up for commercial operations and would run at up to 62 per cent efficiency compared to a maximum of 45pc plant efficiency a few best maintained furnace oil-based projects could run at. Shifting from carburetor based car engines to EFI (efficient fuel injection) engines would also be an energy saving move.  Pricing is an essential instrument of energy demand management not only of its direct effect on the level of energy consumption but also because it indirectly influences the choice of energy-using technology. If energy prices are set below the economic cost of supply, the wrong priorities may be set for investments that will consume energy and technologies may be chosen whose use in not in the nation’s economic interest . At artificially low prices consumers will not have enough financial incentive to improve efficiency of energy use.

4.       LNG supplies. LNG has been added to the system and after addition of two terminals 1.2 B CFD of gas is set to be made available to the system. Four   LNG based power plants are in the various stages of development; these will need an additional pipeline to make available the RLNG to power plants under construction. An agreement with Russia has been signed for construction of a pipeline from Karachi to Lahore, there is need to coordinate the timeline for this pipeline with completion schedules of the LNG based power plants (The gas pipeline project comprises two portions Karachi to Sawan gas field in Khairpur district and from Sawan to Lahore. The section 1 and 2 are to be launched and completed by SSGC and SNGPL, respectively, due to delays in providing financial guarantees and signing of agreements, the project has by end of 2017 not been launched, with construction activities to commence in 2018 the project is likely to be completed by end of 2019, this may create some bottlenecks   in flow of RLNG to Punjab and to the RLNG power plants).

5.       Structure.  Induction of LNG which will include private sector import and sale of LNG necessitates a revision in structure of the gas sector. The present is two vertically integrated entities.. Currently the sector is domination   by two distribution companies (SNGPL & SSGC) there is no provision of third part y use of transmission. LNG is being presently supplied to power sector. The subsidy to the domestic customers at cost of industrial customers has been maintained. With depleting local gas supplies at some point in the future this subsidy has to be eliminated and LNG will then form a part of the total gas mix and priced accordingly. Provinces demand a say in oil and gas regulation and in allocation of concessions.

6.       Planning.  Presently the energy plan is comprised of a number of documents. This was basically because the energy sector governance was split into many different entities. Formation of a Ministry of Energy is a step towards integrated energy planning.  In the past Integrated Energy plans were prepared, the practice was subsequently discontinued. There are efforts to prepare an   Integrated Energy Plan. US AID funding  is  available and a team is being assembled to: provide the tools for preparation of an IEP; and to prepare an IEP. Planning is presently restricted only to commercial energy, it is very important that energy planning also encompass non commercial energy. Non commercial energy data is scarce, although in the near past some gains in this regard have been made, such as a biomass Atlas of Pakistan has been prepared. Even with scant data planning should include non commercial energy and HCIP should have their mandate (and funding) extended so that in future they are also engaged in collection of statistics related to non commercial energy. There need to be close  linkages of energy planning with  water and forest planning , already WAPDA  has complained of disconnect in hydropower expansion planning and transmission system expansion planning, in the past transmission lines were not available  even after the power plants were commissioned .Hydropower planning is split between WAPDA for publically owned plants and PPIB for privately owned plants .  Macroeconomic factors need to be included in the analysis of different plans. Excessive reliance upon imported sources of energy will create balance of trade   problems. Foreign exchange needs to be shadow priced.

7.       Energy Technology Indigenization.   Indigenization does not occur due to lack of an adequate market. A lot of energy and power equipment is labor intensive, bulky and transport cost sensitive, paving way for local cost efficiency. Except for turbine-generator, the rest of power plant (about 50% of the total) can be locally manufactured with lower costs and higher efficiencies. There is abundant evidence from India and China, where coal power plant and wind power plant are produced at 50 per cent of the price level presenting in OECD countries. Western companies do not even compete when Chinese/Indian suppliers are expected to bid. In automotive sector, vendor industry has been developed largely under tariff protection, which cannot be done in the case of energy sector, where near zero tariffs regime exists due to the need of keeping energy prices competitive, if not low enough. In the case of power (equipment) industry, the Energy Fund may go a long way towards development of local indigenous industry creating jobs, self-reliance, saving foreign exchange and reducing costs. Apart from cost reasons, local availability is expected to facilitate speedy project completion and lesser cost escalation risks. Assembly and manufacture of solar panel and wind turbine blades deserves attention.

8.       Energy for households, cooking.  LPG or kerosene is about 10 times more expensive than subsidized natural gas provided for residential use. The price differential between natural gas and petroleum-based fuels is exacerbating socioeconomic disparities between the urban middle class and the rural poor (and urban consumers in small towns) typical gas bill for a middle-class household is about 500 rupees (Rs.), or about $5 per month, for cooking and water heating, whereas LPG users spend over Rs. 2000 ($20) per month for cooking purposes alone. Commercial energy is mainly consumed by the upper and middle classes. The poor rely upon wood and ion commercial sources of energy. The energy needs of the poor will be better served if some of the resources spent on subsidizing commercial energy, were diverted to expanding fuel wood production or strengthening support for improved stoves.

9.       Province Role. The 18^th. Amendment of the constitution altered the provincial relationship with the federation. Some issues were shifted to the concurrent list and some were made provincial responsibility. The provinces, mainly Sindh and KP, have not been satisfied by decision making in the oil, electricity and gas sectors by: Federal governments; NEPRA; OGRA; and exploratory regulator. Provinces have demanded greater role in decision making related to: allocation of exploratory rights; allocation of new oil and gas finds; electricity, oil and gas pricing; and LNG pricing .Both provinces (KP and Sindh) have argued that only the Council of Common Interest (CCI) had the power to formulate and regulate policies on matters pertaining to Part II of the Federal Legislative List and that they should supervise and control related institutions. The two provinces have reportedly prepared their own gas allocation policies for upcoming gas fields by prioritizing industrial units, power generation and fertilizer plants, residential areas and CNG stations, in that order. There are also disagreements over how to distribute hydro and coal royalties among provinces, and also the energy investment-imperiling uncertainty and confusion arising within provinces following recent constitutionally mandated decentralization

10.   Tariff Equalization.  The government decision to ring fence the price of expensive, imported  LNG  being supplied to Punjab-based factories for over a year, has created a ‘price distortion’ in the country’s energy market: for the first time the same consumers are getting the same fuel at different prices in Punjab and the rest of the country. The whole tariff equalization idea  need to be revisited. Presently electricity, gas and oil tariff for the same customer category class is the same.  If this regime is maintained the application of full cost recovery based tariffs will not be possible to implement..

11.    Infrastructure deficiencies. Qatar Gas had been operating Q-Flex vessels medium sized ships at sub-par capacity because of port constraints. Q-Flex vessels were bringing 151,000 cubic meters per trip against its capacity of 210,000 cubic meters. The Port Qasim authorities need to improve the channel and create birthing pockets (space) for allowing crossing of multiple ships to ensure maximum capacity utilization of 142,000 cubic meters per ship that would enhance supply from the FSRU to 690mmefd. The port operator is charging a fee for ship and terminal operators to raise funds for additional dredging which should take place at the earliest. Qatar Gas has been supplying LNG through 74 conventional ships having lower capacity due to port constraints and inducted only 26 Q-Flex carriers, at suboptimal capacity, after these constraints were party overcome early this year.  Growing traffic of ships, particularly vessels loaded with Liquefied Natural Gas (LNG), warranted the need for an additional channel which the authority is now planning to develop, Port Qasim Authority Chairman .As a safety measure, currently PQA stops general movement of all ships when a vessel loaded with LNG arrives or leaves the port, causing delays  At present, a vessel loaded with LNG calls at the port every five days and after the operation of another LNG terminal by the end of this year, this cycle could be reduced to every third day ..The traffic will increase after the opening of another terminal by end of the year.  Four more LNG terminals are in pipeline. Presently around 16 terminals are operating at the port. In order to meet the needs of China-Pakistan Economic Corridor, Pakistan Railways is also laying down a dual rail track from Port Qasim up to Pipri along with a road network   Pakistan will need 25-30 million tonnes of LNG by 2023. The two floating storage re-gasification units have an annual capacity 4.5m tonnes each. Coal was being imported and handled at Karachi Port until about two years ago when the Sindh High Court (SHC) restricted its storage level at the Keamari  Groyne because it was polluting the surrounding area. The court restricted the volume to only 200,000 tonnes against the storage capacity of around one million tonnes, he added. As a result, importers could no longer import coal in larger vessels having a capacity of 60,000 tonnes as they needed a draft of around 13 meters which is only available in Karachi Port’s berths . However, in order to meet the economies of scale coal importers found a way out and kept importing coal in larger vessels having 13-metre draft. But this lengthened the unloading process as vessels initially unloaded 30 per cent of the coal at Karachi Port and later reported at Port Qasim where draft is around 10.5 meters. The use of two ports raised the handing cost of vessels and port charges also doubled.  The biggest coal importer currently imports around 250,000 million tonnes a month, which means four to five vessels with a load of 60,000 tonnes each have to call on both the ports.

 Power Sector:

1.       Energy mix. The power generation energy mix has changed with induction of coal and LNG, but the share of hydroelectric energy in total energy generated has declined. Energy mix is in the process of shifting from costly imported oil towards coal and LNG. Renewable and Nuclear share in total energy has also increased. This trend is set to continue in the period 2018-23. Objective of increased reliance upon indigenous energy will only be party met as increased Thar coal supplies with be offset by increased imported coal and LNG supplies.

2.       Circular Debt. Circular debt has been mitigated but not eliminated. Circular debt is the amount of cash shortfall within the Central Power Purchase Agency (CPPA) that it cannot pay to power supply companies.  The main causes of circular debt are : Poor governance ; Delay in tariff determination by an inadequately empowered regulator compounded by interference and delay in notification by the Government of Pakistan (GoP) ; A fuel price methodology that delays the infusion of cash into the system ; Poor collection by DISCOs; Delayed and incomplete payments by the Ministry of Finance on Tariff Deferential Subsidy (TDS) and Karachi Electric (KE) contract payments ; Prolonged stays on fuel surcharges by courts ; Transmission and distribution losses and theft; NEPRA sets tariff at 100% recoveries whilst DISCOS have managed to collect between 86% to 94% receivables in various years in the last 10 years or so. In 2015 the Ministry of Water and Power elaborated a policy for containment of circular debt (managing Circular Debt Sept., 2015), the salient of this policy were:  Circular Debt was to be capped to about Rs. 320 B by 2018; Losses were to be brought down 1.7% by 2018;. recoveries to be improved by 5% by 2018 ;reduce the gap between  determined and notified tariff   by application of surcharges, reduce TDS ;  Privatization of four better performing DISCOs , proceeds to offset debt held by Power Holding Company ;  remove the gap between allowed efficiencies and actual efficiencies of KE and GENCO thermal power generation capacity  heat rate determination for KE and GENCO thermal plats is to be requested ; Gap between NEPRA allowed losses and actual losses to be reduced by, losses were to be reduced and NEPRA allowed losses figure was also to be revised  .The Plan has resulted in capping of circular debt to about Rs. 400 B , losses have come down to about 17% and recoveries have also improved to about 97% . NEPRA has revised its allowed losses figures and has allowed KE and GENCOs to conduct heat rate tests. By application of surcharged TDS has been substantially reduced; load shedding on feeders has been linked to recoveries.  The issue of circular debt has been contained but not eliminated.

3.       Taxes:   Power sector is facing serious litigations with Federal Board of Revenue. Not only the refunds are blocked with FBR but it has recovered huge amount of money from the bank accounts of Power Sector Companies through coercive actions like attachment of bank accounts. Non-settlement of these issues will have serious financial implications for power sector in future and may become a major hurdle in completion of privatization program.

4.       Governance. The power sector has nominally been restructured and corporatized.  In effect these measures were only carried out due nudge by funding agencies and were only half measures. Publically held organizations, DISCOs and GENCOs present poor performance and financial results. After induction of IPPs   to the system and privatization of KE the process was stalled. The move to a multiple buyer structure has also been stalled 

5.       Power System expansion Planning.  The Government has underestimated the need for integrated planning of the sector. The decision makers went through a number of mid-course corrections in their planning (examples are Gadani coal projects, Nandipur project and Guddu project and two imported coal plants in Karachi had to be switched to domestic coal due to the burden on foreign exchange) which suggests that the government was moving too fast down the road to commissioning new power plants, and neglecting to carry out a proper feasibility study of all the requirements before induction of larger scale power generation into the system. Other decisions like a cap on imported energy and shut down of furnace oil power generation capacity were  also taken in haste without due process .Power system expansion planning is fragmented , a host of institutions carry out such expansion planning , these are : WAPDA ; NTDC; Planning Commission ; PPIB ; AEDB ; CPPA ; NEPRA ;  Provincial Governments ( and Ministry of Finance , which has considerable clout in decision making in the energy sector ) .  These are not closely coordinated efforts. NTDC was previously engaged in Power System expansion planning, WASP was utilized to prepare optimized plans, this has been discontinued and a consultant updates the already prepared Master Plan. This update is not integrated into decision making process..  The main reason for the significant delay in most of the hydropower projects is the absence of any coherent and comprehensive energy policy: Development planning for the hydropower sector by the federal government is essentially left to WAPDA for the public sector and to PPIB for the private sector after the 2002 Power policy. Although both the organizations used to work under the same ministry, there was no  link  between  their  respective  priorities  resulting  in  a  lack  of  mutually complementary development plans. With new arrangements water and hydropower is with Ministry of Water and Power with Ministry of Energy, there is high possibility of even greater lack of coordination in hydropower affairs. The planning and regulation regime  comprising ministry of energy, NEPRA, NTDC, PPIB, AEDB and CPPGA is a product of slow evolution wherein we made a transition from public sector to a diversified power portfolio comprising private sector run Independent Power Producers (IPPs) and eventually where producers and buyers will be  in direct contracts . This process needs to be constantly monitored and tweaked to suit our needs in the transition period. Regulation of Generation, Transmission and Distribution of Electricity Bill 2017 requires the federal government to prepare and prescribe a national electricity policy and plan with the approval of the CCI from time to time for the development of power markets, input and assistance from the National Electric Power Regulatory Authority (NEPRA) would also be required for the development of the policy and plan

6.       Macroeconomic factors.   Macroeconomic factors need to be included in the analysis of different plans. Excessive reliance upon imported sources of energy will create balance of trade   problems. Foreign exchange needs to be shadow priced. In any economy suffering from lack of foreign income and from balance of payment problems, the conventional methods of assessing then economic merit of an intervention in overall terms may lead to the wrong conclusions. It is essential in such circumstances for shadow pricing to be applied to the foreign currency component so as to be able to form an estimate of what economic disincentive the foreign expenditure entails.  State Bank of Pakistan’s FX reserves declined from US$ 18.0 billion by end December 2016 to US$ 16.5 billion by end of March 2017. Exports and remittances have declined.   Growth prospects of Pakistan’s economy from FY18 onwards would largely depend upon the planned infrastructure projects and capacity expansion in industries .In order to make these plans a success, enhanced coordination amongst all Public sector institutions would become crucial. Also continuity and consistency in policies especially those related to investment and industry would be necessary to ensure sustainability of the growth momentum. Growth would be essential to offset decreasing FX reserves.

7.       Fuel planning. The Oil Companies Advisory Council (OCAC) has  advised creation of a proper forum for planning of energy supplies to the power sector  .The   forum should comprise the representatives of the NPCC, WAPDA,  ministry of energy, power division and petroleum division and PSO and be tasked with the planning for energy supply of the country for the next three months.  Reduction in furnace oil utilization by power plants has resulted in production difficulties in local refineries. Abrupt and isolated fuel substitution decisions are likely to cause issues elsewhere in the fuel chain. Recent decision to reduce furnace oil use by power sector has had an impact on refineries. An integrated decision making approach  would consider for all costs involved in the process of production and transformation of an energy source, where direct fuel  price comparison forms only one of the many criteria for a decision on whether or not to chose a particular fuel source . Intended conversion of furnace oil based capacity to LNG should undergo a detailed analysis and in any case the conversion should be proven to be economically justifiable.

8.       Transmission planning. During the last few years transmission system has   presented some problems as in many instances transmission was not in place to deliver already commissioned capacity. In some cases transmission was unable to deliver the full capacity of a plant. The transmission system master plan does provide detailed plans but these are apparently not implemented in the order and timeline required by the newly added generating capacity. There are also frequent changes in generation addition plans and matching changes in transmission plans are not made or implemented to adapt to these changes. Transmission requirements to deliver the additional capacity that is being added are being studied by NTDC and it’s expected that by 2020 the transmission system will be in a reasonable shape to serve peak demand. The  present arrangement  is that secondary grid system planning is with DISCOs , this has resulted in issues , this decision needs to be reviewed  and at least planning of the secondary grid system needs to revert back to NTDC planning ( with capacity enhancement  and capacity building of NTDC planning)

9.                   Thar Coal development.  Thar coal mining is on track and the progress is satisfactory, there is however, need to ensure    water supply for SSRL Thar Coal Block-I Mine Mouth Power Plant during its construction and operation period by Government of Sindh (GOS). Resettlement of the people also needs special attention. This is because a large portion of Thar population is nomadic and therefore has no claim to any piece of land; special provisions have to be made to compensate these nomadic people for the loss of their grazing lands and cattle. Sindh government is an equity share holder in the Thar coal development and is also an environmental watch dog, a potential conflict of interest situation, this needs attention.

10.   Solar O&M.  Pakistan must carefully evaluate its solar projects and look at water-conserving options from around the world to maximize gains. For instance, Israel a world leader in water conservation dry-cleans solar panels: instead of using water, the 20-acre Kibbutz Ketura solar park in Israel uses a crew of small robots to push the accumulated dirt as they glide along the surface of the panels. Itself solar-powered, the process is remote-controlled and can be repeated every night or as required. However, lack of trade relations with Israel prompts to look for alternatives. For example, in 2010 the prestigious MIT Technology Review highlighted research from Boston University that exploited the fact that dust particles are either charged or can be charged, and therefore a small amount of electric current can repel these charged particles. Moreover, to bolster plans for a $109 billion solar industry in Saudi Arabia, the King Abdullah University of Science and Technology (KAUST) has produced solutions that are reportedly optimized for hot and arid climates.

11.   Tariff distortions.   Electricity tariff subsidizes   domestic consumption at the cost of industrial consumption.  Comparison of the financial tariff to tariff based on marginal costs has been made. The marginal Cost estimates (at an oil price of $ 52/bbl)  are presented as follows: 

Table - : LRMC Estimates
(Based on oil price of US$52)
Voltage Level	Capacity	Peak Energy	Off Peak Energy
	$/kW	c/kWh	c/kWh
Gen	417	10.24	6.39
500 kV	506	10.41	6.51
220 kV	540	10.59	6.58
132 kV	623	10.91	6.74
66 kV	718	11.23	7.00
11 kV	755	13.72	8.96
0.4 kV	970	16.35	10.25

Source: Consultant

Tariff from LESCO web site had been compared with a tariff calculated based on marginal costs. This comparison is presented as follow:    

Tariff : Financial vs. Marginal
		Tariff Rs./kWh
Customer				Financial
Category		Financial	Marginal	% Marginal
Industry		13.46	11.59	16.19
Domestic		10.25	15.29	-32.98
Commercial		16.30	15.14	7.65

The domestic financial tariff is about 33% lower than the tariff based on marginal costs.B1 industry financial tariff is 16% higher than the economic tariff. Financial and tariff based on marginal costs for medium sized commercial customers is about even. The share of domestic consumption in Pakistan is much greater than in most countries at its stage of development. The reason is that the state subsidizes domestic consumption, especially for more affluent households. This happens at the cost of power for industrial consumers. This is one reason why compared to the size of the economy, the country remains less industrialized.  High energy cost impact profitability of investors. Basing electricity tariffs on the long run marginal cost ensures that both the level and structure of tariffs reflect the cost of expanding the power system.

12.   Investor confidence. Investors shy away from the energy sector due to the following reasons: (a) fragmented energy governance in Pakistan (b) low revenue collection by existing energy generation and distribution companies, (c) persistent transmission and distribution losses and theft of both power and gas, (d) distorted fiscal incentives through SROs regime and (e) lack of favorable regulatory and operational environment for alternative energy projects. The business community also pointed out the ambiguous role of the state‖ in the energy market. The state apparatus in Pakistan persistently controls prices, supply quotas and also the import of energy inputs through which power is generated. Such a heavily regulated environment is acting as a barrier to entry for new firms which intend to invest in the energy sector. Foreign investors have also pointed towards controversies surrounding the privatization of DISCOs, for example K-Electric, where the federal government continued to subsidize the operations of this entity after several years of its privatization.

13.    Share of hydropower in energy and power mix. Energy and power data suggest that hydropower share in total mix has stagnated and this trend is likely to continue to 2023 , in fact in 2023 hydropower share will decrease slightly  compared to 2017 .There are several reasons for this . the last many  hydropower plants added to the system  in the public sector have faced inordinate delays ( Golen Gol, Allai Khwar, Khan Khwar, Nelumn Jhelum , Jinnah, Gomal Dam, Punjab and KP Low heads and Tarbela extension ) have also registered significant  cost escalation .Insufficient studies, mismanaged resettlement and land  acquisition,  , indifferent contract management, and funding woes triggered these delays . The unresolved issue of the (‘profits on hydroelectric power generation ‘) royalty also creates indirect hurdles in development of hydropower. Friction between KP and the centre on this issue has starved KPs hydroelectric power potential to be severely underutilized, in evidence the better utilization of AJ&K hydropower potential as compared to KPs potential (KP hydropower potential is generally more economic to AJ&Ks mainly due to superior geology. Large hydro’s take more than 5 years to complete therefore the government which has a mandate for 5 years is not interested in projects that will complete after its tenure completion. There is very little coordination between Provincial/local governments and Federal governments related to execution of hydropower plants. Land acquisition and resettlement issues are poorly tackled. Preconstruction facilities and infrastructure for construction receives insufficient attention, these all emanate from indifferent feasibility studies that are poorly monitored and controlled. HEPO has been weakened, underfunded and its ability to provide guidance in hydropower issues has been compromised. Capacity building has not received much attention. KP has faced issues with transmission lines, there have been instances where   power plants were ready but transmission lines were not. Rules on who has responsibility to construct lines and methodology of resolving transmission issues are not available. KP has now called for building two 500 kV lines for evacuation of power from Chitral. They neither have the financial capability nor the technical capability to perform this task. Small hydropower plants are having issues with approvals, CPPA now wishes to offer: pay what you take basis for contracting capacity; this is the result of faulty planning. Small plants also have trouble getting approval of DISCOs to connect their plant to the distribution system.

14.   Surplus capacity. The planned and ongoing g power plants suggest that there is likely to be a surplus capacity of about 5000 MW. This is presented as follow s: 

Power Balance PEPCO System  MW
	Derated
	MW							Total
Capacity	2017	2018	2019	2020	2021	2022	2023	MW
Hydro WAPDA	6902	2483					2160	11545
GENCOs	4367				1320	720		6407
Nuclear	1246				1100	1100		3446
Hydel IPP	342	79	125	102	197		1004	1849
Thermal IPP	11391	2973	2120	1253	2640	1950	1320	23647
Bagasse	258	77	583	144				1061
Wind	784	149	299		1224			2456
Solar	400	30	600	600				1630
Import						1000		1000
Total	25690	5791	3727	2099	6481	4770	4484	53041
Realistic	25690	5791	3395	1192	3740	3770	99
G Total	25690	31481	34876	36068	39808	43578	43677	43677
Demand MW	24138	25227	26348	27420	28601	29822	31085
Surplus MW	1552	625	8528	8648	11207	13756	12592
Spinning reserve MW	1931	2018	2108	2194	2288	2386	2487
Routine maintenance MW	2141	2623	2906	3006	3317	3631	3640
Balance MW 4.3 % growth	-2520	1612	3514	3449	5601	7739	6465
Winter Demand MW	21145	22099	23081	24020	25054	26124	27230
Availability Winter MW	21300	25239	28294	29367	32733	36126	36215
Spinning reserve MW	1692	1768	1846	1922	2004	2090	2178
Winter Balance MW	-1537	1372	3367	3426	5674	7912	6806
Demand at 7% growth MW	24138	25828	27636	29570	31640	33855	36225
availability MW	25690	31481	34876	36068	39808	43578	43677
Spinning reserve MW	1931	2066	2211	2366	2531	2708	2898
Routine maintenance MW	2141	2623	2906	3006	3317	3631	3640
Balance MW 7% growth	-2520	964	2123	1126	2319	3383	914
Note :Hydro availability varies  due to hydrological variations

Source: NTDC, Consultant

The above estimate does not cater for hydrological variations which could drive hydro capacity to much lower levels than indicated. Tarbela plant factor has varied from 45% to 50%, Mangla plant factor has varied from 54% to 70% during the period 2010 to 2015.  Pakistan hydrology is cyclic with 10 years cycles, the last 8 to 10 years have been wet, and therefore there is reasonable possibility that the next 10 will be dry years. The above calculation or estimate is based on average hydrology but if the next 10 years are dry the excess capacity will not be there any more, it may even result in shortages. Economic growth, during the period 2108 to 2023, could pick up ( already in 2017 economic growth was 5.3% and the forecast for 2018 is 5.7%, the projections for Pakistanis economy is generally good except for macroeconomic  issues and political instability fears ).  Demand forecasting needs attention, already there is overcapacity and there are now efforts to: only contract bagasse based capacity (only energy supplied in the cane crushing season will be accorded dispatch priority off cane crushing season energy will only be procured on pay what you take basis) and small hydropower plants on pay what you take basis; there is also effort to delay completion of some power plants funded under CPEC. This will cost in either excessive capacity payments or in lost investor confidence. Capacity availability also varies with months, in winter months hydro availability is a fraction of total hydro availability. Power balance at 7% demand growth would, however, wipe out the surplus and plants that are now being deferred or postponed would need to be pushed.