Prime Minister Shehbaz Sharif recently warned that if the gross inefficiency and corruption in the Federal Bureau of Revenue (FBR) and the power sector were not corrected timely, these could sink the country. We can't say whether he picked these two due to the sheer size of their problems or because both use the same governance approach--squeezing only the responsible citizens, as taxpayers or ratepayers. We leave the case of FBR to some other analyst and focus on the power sector only.
Pakistan's power sector is indeed in dire straits today. Corruption is rampant, losses are high, bill recoveries are poor, and circular debt is spiralling up. The prime minister's concerns are timely and genuine, but his team's approach to counter this threat — going the traditional route of forming task forces comprising members drawn from various ministries to identify the major issues and suggest solutions within weeks — does not convey much hope. It has been tried before, is ad hoc, and lacks any novelty or ingenuity.
The chances of any respite for the nation are minimal, unless the government rethinks its present approach and aligns it with new market realities that have changed in the past couple of decades. Confucius, the ancient Chinese sage, offers timeless advice: "When it is obvious that the goals cannot be reached, don't adjust the goals, adjust the action steps."
Pakistan had set out to reform its power sector in the early 1990s. The agenda included unbundling WAPDA into generation, transmission, and distribution companies, involving private investors in new generation projects, and introducing competition in generation and wholesale supply. A regulator was established in 1997 to guide, oversee, and regulate the restructured set-up.
Three decades of hindsight — with a circular debt crossing Rs2.6 trillion, annual losses and inefficiencies exceeding Rs690 billion, and the rates moving beyond the reach of most consumers — should be sufficient to convince anyone that either our approach was wrong, or we did not execute it properly. To err once or twice is only human and even necessary for our growth, but to err again and again, is inexcusable.
For much of its history, the electric supply industry (ESI) in Pakistan has enjoyed the status of being the most stable business and a favourite of investors. This was mainly due to "economies of scale" in generation, extended distances between load centres and good generation sites (especially, hydro), and the benefits that interconnecting isolated systems offered by way of reserve sharing, energy trading, and reliability. Alas, no more!
The advent of small gas-fired combined cycle power plants has ended the golden era of the large, central-station supply systems. Distributed energy generation technologies, particularly solar photovoltaic (PV), have dealt the proverbial death blow to the unchallenged reign of the traditional way of governing the ESI — using a central-station portfolio of mega-sized generation projects and delivering electricity produced by them to loads located far away.
Power sector functionaries have treated consumers as captives to the grid and have used them to dump all the misgovernance costs. They are still not willing to wake up to the new reality that the consumers now have multiple choices
Distributed solar technologies—located behind-the-metre or anywhere else in the distribution system—have been making rapid inroads into power grids across the world. Pakistan is no exception.
Pakistan did show an interest in solar technologies, but this has remained focused on their deployment in the power grid. Though important, it's not the only or even the best avenue for their uptake. The only initiative from the government to promote distributed solar has been its net metering scheme introduced in 2015. Most other behind-the-metre solar PV systems have not merited any incentive from our governments.
Precise statistics for distributed solar in the country are not available from official sources but a recent report by "pv magazine" terms it "booming" as the import of PV panels saw a rise from 2.8 GigaWatt (GW) in 2022 to 5 GW in 2023 and may reach 12 GW in 2024. By June 2023, the total number of net metering connections had reached 63,703 with a cumulative capacity of 1,505 MW. The annual addition of new consumers to this list was around 1,596, with a cumulative capacity of 221 MW in 2023.
These statistics indicate that the number of net metering connections and their magnitude are still low, but electricity consumers in Pakistan are opting for non-grid interactive systems in rapid strides to reduce their electricity bills which have become unaffordable.
The rigid mindset of power sector functionaries, from top to bottom, is directly responsible for this alarming trend. They have treated consumers as captives to the grid and have used them to dump all the misgovernance costs. They are still not willing to wake up to the new reality that the consumers now have multiple choices. Distributed solar is just one of these and is destined to grow even more if the grid supply remains unreliable and expensive.
Distributed solar offers many benefits. It can avoid investments in the grid and reduce losses, help manage demand, support grid operation, avoid environmental pollution, spur local industrialisation, promote employment, reduce reliance on imported fuels, and enhance national security and sustainability.
Their presence in the grid does pose some technical challenges. In addition to the two-way flow of power, they add to issues like loss of frequency and voltage control, risks of backfeed to the upstream transmission systems, and impair the power quality.
Imagine thousands upon thousands of square meters of rooftops available for their installation, with no capacity or energy cost burden; distributed solar offers a unique and mouth-watering opportunity for the government to rebuild the country's power sector around secure, affordable, and sustainable technologies
The negative impacts are, however, not insurmountable. Multiple studies around the world have confirmed that when properly planned, integration of distributed solar provides a grid more benefits than their costs, though the magnitude of the benefits could vary from system to system.
A sea change in policymakers's mindset and a new business model is required in Pakistan to provide a fair deal to these technologies. The traditional model — of which the indicative generation expansion plan (IGCEP) is a glaring example —consists of aggregating forecast demand in the country and serving it through a least-cost expansion of the grid assets, which is no longer valid. Its blind following is tantamount to financial suicide for the country.
For a properly managed system, a unit of capacity saved or met using a consumer-sited option helps avoid roughly 1.2 to 1.3 units upstream. For Pakistan, this could be even higher. Imagine thousands upon thousands of square meters of rooftops available for their installation, with no capacity or energy cost burden; distributed solar offers a unique and mouth-watering opportunity for the government to rebuild the country's power sector around secure, affordable, and sustainable technologies.
Edward De Bono, who authored over 85 books on creative thinking — many of them best sellers — writes, "Sometimes the situation is only a problem because it is looked at in a certain way. Looked at in another way, the right course of action may be so obvious that the problem no longer exists."
Ministry of Energy, NEPRA, and top managers of the power sector need to treat distributed solar not as a threat to the grid or a necessary evil that they must live with. The fears currently making the rounds about the stranding of distribution assets due to consumers installing rooftop solar and the cost shifts to non-users are untenable. It's mostly due to the old mindset striving to maintain the status quo and is reluctant to embrace any new option.
All that distributed solar needs a level-playing field to compete with conventional options. The government should provide an enabling legal and regulatory umbrella and an equitable decision-making framework in which every new option for serving the consumers' demand can be evaluated objectively by considering all the costs and benefits to the grid as well as the country.
Let's hope that our government does not miss this historic opportunity that has come its way. As Sun Tzu notes: "Opportunities multiply as they are seized."