Bite the Bullet or Wait for Godot

Pakistan is faced with an epic energy crisis that has led to chaos and misery in the country.

Here are some solutions.

Measures with effect in the next two to three years:

Ramp up coal generation. Coal contributes less than one percent of Pakistan's total generation. The Thar desert contains possibly the world's third-largest coal reserves. Indian firms are already keen to exploit the resource on their side. Surely, some kind of collaboration can be worked out.

Worldwide, coal contributes about 40 percent of total generation. Even green countries like Germany are installing coal plants. In generating electricity, coal clearly remains the choice of first resort.

Pakistan has a "circular debt" of electricity of $5 billion because there is no effective regulator to monitor generators and utilities. The National Electric Power Regulatory Authority was set up in 1997, but has proven to be ineffective. It lacks empowerment and is often staffed with generalists, who are unable to tackle as complex a task as energy.

In the West, regulatory commissions are led by energy specialists. Fixed tenures, relative autonomy from political interference, as well as empowerment to punish generators and utilities minimize gaming of the system.

A strong regulator checks and balances; a weak one allows governments to run rampant. They then set tariffs as they see fit, send linemen to collect kickbacks from electricity thieves, and give away electricity freebies to vote banks. Utilities go bankrupt, their slate is wiped clean, the debt of course re-emerges, and round and round we go.

The Pakistani government must create a cadre of energy specialists who are sent to western countries to study regulatory mechanisms. When they return, they must be allowed to set up regulatory commissions that function with little fear or favor. Civil service generalists will want to grab the opportunity of overseas junkets, but the government should choose young and idealistic people, with little baggage. And pay the new energy technocrats handsomely. The benefits accrued from their expertise will far outweigh their salaries.

Decouple agricultural and consumer supply networks in rural areas from each other, otherwise households benefit unfairly from the less expensive agricultural tariffs. The state of Gujarat in India has increased electricity revenues substantively by bifurcating the two networks. The model should be easily replicable in Pakistan as the electricity grid is similar in South Asia.

The IP pipeline is a no-brainer. Sure, the U.S. will exert pressure, but both China and India are bucking it to buy Iranian oil. The Saudis have issues with Iran, but that is their problem. And what if one of these days the international community reaches an accord with Iran? Won't policy makers in Pakistan have egg on their face if they ditch the IP?

Other than the U.S., India frets over the security situation in Balochistan. But if Pakistan's establishment can secure nukes, surely it can protect another critical asset. The IP becoming IPIB (B for Bangladesh) would be a boon for the entire region.

The Tapi pipeline is more fanciful, but has the advantage of having both Pakistan and India vested in calming Afghanistan. On the other hand, Pakistan and India seem to be working at cross-purposes there, which can only lead to an implosion.

Natural gas, which has extensive use in power generation, transportation, and manufacturing, can also be imported from abroad. The Indian ambassador to the U.S. recently pleaded with America, which is seeing a glut of natural gas, to allow its export. American giants like Dow Chemical who utilize natural gas to make plastics protest in the fear that domestic gas prices will escalate. Even European companies like BASF are flocking to the U.S. In case the U.S. allows the export of natural gas, Pakistan should be ready to import.

Measures with effect in the next three to ten years:

Install smart meters to curb electricity theft and measure usage more accurately. Losses due to outright theft and unpaid bills approach nearly half of all electricity generated in Pakistan. Which business can be run like this?

At their current price of Pakistani Rs10,000 apiece, smart meters can return investment in them in about a year. Sweden, which has very minor theft compared to Pakistan, gains a third of a percent in annual GDP from smart meters. The energy crisis costs Pakistan about four percent of its GDP. Smart meters alone can alleviate the situation substantively.

Slum-dwellers steal power through illegal connections, but they are less culpable than the bourgeoisie who pay off meter readers to record low readings, or refuse to pay bills altogether. Naples, Italy's third-largest city with a population of a million, had similar problems as Pakistan, but smart meters have been effective in curbing theft and tampering with meters and supply lines.

Shale gas is a form of natural gas that is obtained from sedimentary rock through a process called hydraulic fracturing, or "fracking." The U.S. is benefiting from a boom in shale gas. Pakistan too has substantial proven shale gas deposits. The technology is field-tested and easily acquired; there is no reason to delay shale gas exploration.

Methane hydrate, or methane ice, is another promising source of natural gas. It is stored in broad, shallow layers beneath the seafloor, along continental margins throughout the world, including South Asia. Japan has taken the lead in mining methane hydrate, and India is spending $30 million a year on methane-hydrate R&D. While commercialization is at least a decade away, what is Pakistan doing in the meantime?

There is no magic wand to resolve the energy crisis. Load can only be shed if there is load to be shed. Decisions taken today have their impact a couple of years later. But if one does not bite the bullet now, then one might as well be waiting for Godot.

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