National energy policy finalised

Jun 26, 2013

ISLAMABAD,: The government has finalised a national energy policy to increase electricity generation to 26,800MW, reduce average electricity rates by more than 30 per cent, achieve zero loadshedding, encourage huge public and private investment and import electricity from India, Iran and Central Asian states in three years.


Prime Minister Nawaz Sharif chairs a review meeting on New Energy Policy at PM Office in Islamabad on Monday, June 24, 2013. – PPI Photo

The policy would be shared with provincial governments on June 29 at the forum of Council of Common Interests (CCI) for maximum ownership before it is announced by Prime Minister Nawaz Sharif in a couple of weeks.

This was decided at a meeting presided over by the prime minister on Monday.

Under the new energy policy, four separate sectoral policies would be put in place to cover four major areas of the power sector — supply chain of the power sector, generation system, transmission and distribution system.

The overarching target of the policy is to increase generation from the current 12,200MW to 26,800MW in the medium term (3-5 years) and reduce average generation cost from Rs14.67 per unit to about Rs10 per unit by bringing in efficiency, merit order and transparency in the entire spectrum of the power sector.Under the supply chain policy, cost neutrality would be introduced by extending oil and gas pipelines to power stations to reduce oil and gas theft and losses during transportation because a major loss was currently taking place due to transportation of furnace oil through tankers.

On top of that, oil and gas exploration would be expedited through fresh incentives and conserve gas currently in use of non-productive or less economic uses and divert it to power generation for cost reduction. To achieve this, performance assurance contracts would be signed with the Pakistan State Oil and other fuel suppliers and generation companies.

The supply chain policy notes that heavy consumption of gas was taking place in some uneconomic sectors because of its low cost and seeks to rationalise gas tariff so that all sectors of economy enjoy similar rates for ultimately maximising its supply to the power sector. Different gas rates for different power plants would also be done away with. It seeks aggressive investment in expansion of Shale and Tight gas production that has brought about a revolution in the US market.

Under the generation policy, efficiency and merit order for supply of oil and gas and payment of bills would be the basic principle so as to increase supply and maximise generation from efficient plants. Low cost generation would be achieved through improved energy mix by focusing more on cheaper sources like hydel, nuclear, coal- and gas-based power plants to achieve 26,800MW of generation in 3-5 years and ensure zero loadshedding from 12,200MW of generation and average 10 hours of loadshedding.

PRIVATE SECTOR: The private sector would be offered fresh incentives. The prime minister directed the energy committee to come up with an investment plan for increased generation on June 27.

The policy seeks to bring into utilisation the existing capacity that was out of the system due to various reasons and speed up completion of power plants that are currently in the pipeline for implementation by encouraging power sector investment through fresh incentives. The general policy also seeks to phase out inefficient power plants, commonly known as gas guzzlers.

It also calls for accelerating power imports from neighbouring nations like 1,000MW from Central Asian states, 500MW from India and 1,000MW from Iran and restructure and renovate or replace public sector generation plants through public-private investment.

Under the transmission policy, efficiency, loss reduction, automation and transparency would be the guiding principles. This would be achieved through performance contracts to leverage disparities in various areas to reduce transmission losses from the current 3.6 to 2.5 per cent in two years and then less than two per cent in about four years by heavily investing in SCADA (supervisory control and data acquisition) system and software introduction.

Under the distribution policy, the government seeks to devolve distribution system to provincial governments over the long term. In the short term, efficiency, automation, infrastructure development and improved collection would be the key directions for an ultimate objective of privatising distribution system or introduce management contracts and public-private partnership.

Distribution companies would be held accountable for performance under performance contracts while “smart metering” would be introduced throughout the distribution network. Punitive action would be taken against power theft and collection of receivables would be made through a system of federal adjustor.

At the meeting the prime minister said efficiency, transparency and provision of maximum relief to the common man would be the hallmarks of the new energy policy to be announced after the completion of a consultative process with all the stakeholders, including all federating units, according to an official statement.