National Electricity Plan – A critical view of development phase

August 3, 2021 By 0 Comments

Pakistan’s power sector has long been the central concern for the governments as they come and go, creating issues from load shedding to mass burden on the country’s circular debt in the form of capacity payments. However, for past 30 years numerous efforts have been made to essentially resolve the problems in this sector and today we stand at the midst of ballooning capacity payments, historic increment in unit cost of electricity, continuous high loss in DISCO with poor performance and loadshedding – that still exist even when peak demand is almost 10000 MW less than the total generation capacity. The abysmal picture makes one think about the effectivity of the strategy of those efforts and several questions pop up in our mind regarding the success of those efforts. For a starter, there is an astonishing similarity in all these efforts – They were all plans/decisions that were never fully or efficiently implemented. For instance, the unbundling of WAPDA in 1992 still hasn’t been realized almost 30 years later with DISCOs still performing the distribution and sale business together. Similarly, the unbundling of gas utilities (SNGPL and SSGC) is still being resisted by the government. More recently, few initiatives including IGCEP, ARE Policy, CTBCM, and National Electricity Policy are among the policies and plans to restart the efforts against resolving power sector issues. The National Electricity Plan (NEP) is now being developed to achieve the objectives of National Electricity Policy, for which public and private sector stakeholder consultations were held last month. Based on earlier experience and observations, such plans need to be analyzed critically, to evolve a plan that is not only good, but also an executable one.

National Electricity Policy and Plan is being developed under the direction of Section 14A of NEPRA Act which stated the “Federal Government shall, from time to time, with the approval of the Council of Common Interests (CCI), prepare and prescribe a national electricity policy for development of the power market”. The consultative session of the plan focused on key areas for the development of the NE plan which are discussed in detailed below:

Objective Identification:

The objectives of the NE plan are bifurcated into two broad categories; i) Physical domain of electricity value chain that potentially include Sustainability, Energy Equity, and Energy Security, ii) Structural and Institutional domain focused on developing an enabling environment for physical domain interventions. These include Governance & Stakeholder interaction, Market Environment, and Research Development & Indigenization. The complete list of potential objectives have also been mapped out as shown.

Although, the list of objectives is very comprehensive, a more closer and critical look on the potential objectives shows room for better classification and priority listing of these objectives. Some of the issues in regard to current list of objectives include:

  1. Transmission losses are one of the major pain point of our power system incurring huge losses to national exchequer. This calls for a separate objective for increasing Grid efficiency, as oppose to clubbing it with Accelerated Energy Efficiency and Conservation, which is more focused on user-end energy efficiency practices – everything in ambit of NEECA.
  2. Resilience which is an objective mentioned in Security of Supply should bifurcated and broken down into sub-objectives: i) Climate Change Resilience ii) Resilience from Cyber and Terrorist Attacks. The action items for both objectives would be very different.
  3. An objective mentioned in Governance & Stakeholder Interaction is Digitization which does not perfectly fit here. Digitization is rather an outcome of the objectives which should be included in the action plan as it is way through which efficiency can be achieved.
  4. One of the most significant revision needed in these objectives is the clarification of efficient market structure. What do we mean by efficient market structure since most of the experts believe it to be a complete open market and deregulation? Federal Gov have different view on that. Objectives should be very clear in terms of what is expected, while efficient market is a subjective term. It should be set as centralization/decentralization, or privatization/not etc.
  5. Although, certain objections were raised in consultative session regarding incorporation of decarbonization in NEP objectives, it still needs to be at least among medium priority areas because: i) It would definitely drive a lot of decision making in longer terms (15 years) , so should be incorporated in NEP as well, ii) With renewables going cheaper with trend, the economical barrier for renewables being cheaper than thermal power production is expected to be broken in upcoming years.
  6. Even though the objectives of NEP are weighted in next steps, in terms of presenting these objectives, the priority objectives must be highlighted like Universal Access, Affordable Supply, Efficient Market Structure, Energy efficiency and Conservation.

Weighing and Scoring:

Once the objectives are set, the NE Plan is set to weigh and score each of the objective in order to attain fundamental balance in attainment of policy goals. Three methods of scoring proposed for the plan include Equal weights, Participatory, and use of statistical models. Out of three methods, equal weights is least recommended as there are few objectives that are much more important than others and deserve more resources committed towards it. Statistical analysis could be used but it requires heavy research to find out which model would be perfect to represent the weightage that each objective should have. Using solely a participatory model would be inefficient as it would include decisions that are biased. As suggested by some of the stakeholders in consultative session, using a hybrid model of statistical and participatory analysis could be beneficial. However, it will pose a difficulty as the decision makers would not have enough knowledge to interpret the data and provide an insightful view regarding the weightage of the plan’s objectives and actions. Ideally, a more comprehensive exercise should be done to develop statistical model in close coordination with all stakeholders. Such a model should be sensitive to the needs of the provinces, in addition to special adjustments that should be made accordingly which are acceptable to all stakeholders. Summing up, the base of the approach should be a statistical model, and then further modifications should be added that are sensitive to regional issues.

Monitoring, Reporting and Accountability:

Once the objectives are weighted, the plan will focus on development of proper monitoring and accountability framework to ensure the compliance of decisions with plan while also evaluating the success of plan towards overall objectives of NEP. The plan sets out the framework for Accountability, Monitoring and Reporting while keeping in view the local cultural context and best practices. However, there are key issues in executing a robust framework for this plan due which mainly arise due to market structure of our power sector. For instance, Performance measurement of individual compliance of electricity supply side entities or DISCOs cannot be done unless those organizations are completely autonomous in their decision-making processes. These entities are so heavily regulated that they cannot be held liable for any risk and potential constraints that are caused, as they themselves do not operate by with independence. However, resolving this issue is not simple either in a country where it takes more than 10 years to simply create the boards of DISCOs followed by corporatization. So, keeping in view the legal, social and cultural hinderances towards making DISCOs anonymous and realizing the extensive time that could be taken in streamlining their businesses, there should be assumptions with key action item of relevant entity and organization that shall jot down the external environment that needs to exist in order for the entity to complete the objective. For instance, if adoption of digital ERP system is one of the action items for DISCOs (like TESCO) for bringing efficiency, then it should be bound by assumptions that all federal government payable/receivables are settled. Otherwise, it may hinder the capacity of the organizations to uptake interventions for completing the action item.