Mr Daniyal Bin Tanveer is studying law with a minor in Economics from the Lahore University of Management Sciences (LUMS).
Introduction to the Policy Problem
It was only 7 months ago, at the dawn of 2023, that Pakistan’s Minister for Information and Broadcasting Marriyum Aurangzeb announced the formulation of a national emergency plan to deal with the nation’s growing population, which could rise up to roughly 331 million by 2050 (Geo News, 2022).
In light of these rapid economic and demographic alterations, the need to increase energy sources and production, among other similar commodities, is at an all-time high. Not only is it needed to sustain a larger population, but it is also mandatory if Pakistan wishes to step away from its overreliance on fossil fuels as a means of energy production.
To further illustrate the lack of energy, the current nationwide shortage stands at about 7500 Megawatts (‘Pakistan to double Hydroelectric Output to meet power shortage’, NDTV). While some of the issues can be resolved by reducing theft, line losses, and inefficiencies, more investment is still required to boost the capacity of energy production. Thus, owing to various reasons such as the immense potential, relatively low cost, and environmental friendliness of Pakistan, micro hydropower projects (MHPs) might just be the tool that pulls us out of potential turmoil.
The Prevalent Market Dynamics
The market for the generation of energy in Pakistan has changed significantly in recent years. As the bulk of the nation’s energy mix, which consists mostly of coal, gas, and oil, Pakistan is significantly dependent on fossil fuels. However, there has been a push recently towards sustainable energy sources like solar and wind energy.
Two significant state-owned businesses, Pakistan State Oil (PSO) and Oil and Gas Development Company Limited (OGDCL), control the majority of the country’s energy market. These two businesses are in charge of the nation’s oil and gas production, exploration, and distribution. The three main types of energy used to generate electricity in Pakistan are thermal power, hydropower, and renewable energy. The majority of Pakistan’s electricity is produced by thermal power facilities that use natural gas and oil as fuel.
Although the development of renewable energy sources like wind and solar power is still in its infancy, the government has set ambitious goals to raise their proportion in the energy mix. The formation of the Private Power and Infrastructure Board (PPIB) and the Alternative Energy Development Board (AEDB) are only two actions the Pakistani government has taken to promote private participation in the energy industry. These organizations are in charge of encouraging the growth of independent energy projects across the nation.
The monopoly power of state-owned firms like the Water and Power Development Authority (WAPDA) and the Karachi Electric Supply Company (KESC) has been a key problem in the context of electricity production in Pakistan. These businesses have held a monopoly on the power market, which has hampered competition and raised consumer prices.
The circular debt problem has also had an impact on Pakistan’s energy market’s pricing patterns. The energy industry has suffered financial losses as a result of the buildup of unpaid bills between power producers and distributors, which has resulted in frequent power outages and shortages of electricity. Consumers have been negatively impacted as a result since they must pay more for electricity as a result of these inefficiencies.
Methodology
I will use a variety of academic materials to help us understand the mechanisms, justification, and viability of micro hydropower projects (MHPs) in Pakistan. The work “Current and Future Prospects of Small Hydro Power in Pakistan: A Survey” by Uddin et al. helps us to comprehend their operation and to provide an understanding of the components utilized in MHPs.
According to the authors’ calculations, Pakistan may save about “120 million tonnes of coal and 83.3 billion liters of oil in a year” by using small and micro hydropower projects (Uddin et al., 2019, p. 173). The author demonstrates that a single generator capable of producing 0.1 MW is adequate to house around 200 homes using SSP and MHPs.
I assess the viability of MHPs in India’s irrigation sector and their effects thanks to Adhau et al’s investigation. This research aids in our analysis of the viability of MHPs in Pakistan’s northern areas and how they can benefit the irrigation industry. Reliance on this paper stems from the topographical, geographical, and economic similarities that Pakistan has with its neighbor.
In addition, the paper by Siddique et al. assists us in identifying specific regions around the Indus Basin that could be used as suitable sites for MHP installation to support the community. The Indus River is the first to inhabit 54 projects on it, followed by the Bola Das River, the Astore River, the Jhelum River, and so on (Siddiqi et al., 2012, p. 231). The majority of MHPs can be built alongside rivers on the canals that branch from the Indus River.
The bulk of projects that are possible on canals fall into the category of MHPs, as shown in the figure above. The figure above also shows that although the canals possess significant potential for MHPs, only a small percentage of them are being harnessed, with the majority remaining untapped, posing a fantastic opportunity to cultivate energy production and by extension, the livelihood of people.
Findings and Analysis
Far from Full Capacity
It is significant to highlight that my article primarily focuses on micro hydropower plants (MHPs), which have an energy output of no more than 0.15 MW. There is currently only one hydroelectric power plant with a 0.1 MW installed capacity, according to the Pakistan Energy Yearbook 2020 in Changan, Azad Jammu Kashmir.
According to projections in the Energy Yearbook 2020, the country’s entire hydropower potential is approximately 60,000 MW, although as was already indicated in this paper, only 8667.9 MW of installed capacity is found in the nation today. According to these numbers, the global hydro potential is significantly underutilized. Furthermore, the figure below also demonstrates that the number of projects related to MHPs is considerably fewer than that of other hydropower plants, indicating space for progress.
The inhabitants of certain villages create and manage the MHPs privately through committees that they designate to handle connection and invoicing (Ebrahim, 2018). Many MHPs are not even on the record but are operating secretly due to the challenges encountered while installing MHPs due to rough terrain and geography.
However, there have been some promising developments in terms of growth and making use of this unrealized potential. Private NGOs and international organizations have stepped up to work with the government on this project. A non-governmental organization (NGO) called the Sarhad Rural Support Program has installed 353 micro hydropower units in the KPK province of Pakistan so far, benefiting 927,495 people and producing 29 MW of energy (“Green and Alternate Energy Solutions,” SRSP).
In addition, the KPK government intends to construct up to 1000 units capable of producing 100MW of energy in collaboration with the Asian Development Bank (ADB) (Hydropower Status Report 2017, 2017, p. 68).
Scope for Independent Power Producers (IPPs)
Since micro hydropower projects are relatively simpler to set up and more financially feasible than larger projects in Pakistan, there is extensive space for IPPs to enter the market. For instance, according to Ebrahim (2018), the MHP set in SWAT Jukhtai costs PKR 8,152,154 (USD $64275) and provides power to 315 families. When compared to the energy provided by WAPDA, the cost of power utilization for MHPs can be as low as PKR 100 per household each month, thus making it significantly cheaper (Uddin et al., 2019, p. 174).
These minimal costs could attract investors because they would have substantial room to charge a markup and earn a return on their investment. The diagram above demonstrates that there are many places that have been earmarked for the construction of MHPs, and it also highlights the fact that there are currently very few private projects in the Northern Regions.
In Gilgit Baltistan, 40% of potential project locations have been identified, but just 1% of current projects are privately funded. In KPK and Kashmir, there are likely 36% and 14% of locations where new plants may be built, respectively. It’s interesting to note that 51% of the projects in Kashmir are owned by the private sector. IPPs can be encouraged to purchase tenders to install and run MHPs in the designated sites using the aforementioned methods.
Environmental Efficacy
Compared to its alternatives such as coal and fuel-powered energy, hydropower projects have been shown to be more environmentally friendly, as the table below demonstrates. Furthermore, a study also shows that hydroelectricity saves 120 million tonnes of coal or 83.3 billion liters of oil each year, or 0.42 kilograms of carbon emissions, (Uddin et al., 2019, p. 173).
Not only this, roughly 100 billion tonnes of carbon dioxide have been saved in the last 50 years by using hydropower as an alternative to fossil fuels, according to research by the International Hydropower Association (IHA).
What is pertinent to note at this juncture is that MHPs exhibit a range of positive trickle-down environmental effects, which are not strictly limited to reduced greenhouse gas emissions. MHPs tend to prevent deforestation because the use of wood for energy subdues, as was the case in Gilgit Baltistan (Siddiqi et al., 2012, p. 235). Thus, the presented information vehemently highlights that micro hydropower projects (MHPs) are sustainable and eco-friendly for Pakistan.
Additionally, they are a cost-effective option for consumers, relative to the other operational alternatives. A business owner shared that he only spends 350 rupees monthly to power his shop and home using MHPs (Ebrahim, 2018). This is in contrast to the varying prices charged by WAPDA, the main power supplier in the country, for residential and commercial use. Since MHPs have a standardized rate, they are an affordable option for residents in rural areas.
Policy Measures
Quasi market system
My research revealed important information, including the fact that these facilities are run by locally elected committees, with government funding for the facility itself. A quasi-market scheme is what I wish to suggest. With this approach, the government serves as an overarching administrator. Since electricity is a need, this will ensure that no one can be prevented from using it because local committees might only represent wealthy individuals.
Additionally, the government can make sure that the chosen plant locations do not present any current or future spillway or flood hazards. MHPs are ostensibly inexpensive and accessible, although pricing varies significantly between locations. According to my view, government institutions can ensure price regulation by making prices uniform and free from discrimination.
Access to Information
When researching, I discovered that there was a shortage of unified data and that I occasionally needed to go through various resources for distinct variables. Therefore, there is a need for publicly accessible data to ensure that quality research may be done in this area, coupled with better monitoring and policy-making functions.
Given the critical role this can play in Pakistan’s progress, as alluded to in Siddiqi et al., 2012, off-grid electricity production should be highlighted in a section of the energy yearbook since it helps meet the nation’s energy needs and should be included among other sources to help with better policy-making. Additionally, a list of operational units and their ownership structure should also be made public, to facilitate transparency and accountability.
Safeguarding and Inviting Private Investment
The investment made in MHPs is occasionally a one-time investment because villages often incur higher rehabilitation expenditures following natural disasters like flooding. Therefore, cognizant of the possibility that their investment could be lost owing to natural disasters, investors may be hesitant to set up these units. Thus, a proposal for a policy that safeguards investors must be made.
One method could be for the government to cover the cost of repairing these units or that there be insurance coverage for losses caused by natural disasters. I have addressed the opportunity for additional IPPs to enter this market; if local NGOs are taking over this function, appropriate energy-producing IPPs shall also be encouraged to invest. As a result, the government can concentrate on bigger initiatives like the Dassu Dam and Diamer Basha projects, while IPPs can take care of these modest rural requirements. It can be advantageous to use IPPs because there will be fewer debt commitments since the required sum to set up a plant is incomparable to that of a dam.
Economic Implications
If the suggested policy is implemented, the first benefit would be that there would be the provision of off-grid cheap electrification to the rural areas which do not have access to it. Currently, the preferred source of electrification in rural north Pakistan is wood which can cause massive deforestation and is not environmentally friendly.
Ensuring off-grid electrification will guarantee that areas that are left behind in terms of education and health can be connected with the rest of the country through the provision of Internet and other such services.
Off-grid electrification can also end the dependency on the public sector electricity provider i.e. WAPDA. Local communities and bodies can govern and overlook the maintenance and functioning of these MHPs under the quasi-market model as suggested earlier. This will enable the empowering of communities at lower levels. Since some areas can be difficult due to terrain and geographical factors, these projects can reduce the burden on the public sector electric companies.
Considering the income levels of rural areas which is much lower than those of urban area, MHPs can provide cheap electricity which will not be a burden for the locals. The cost charged per household for electricity goes as down as Rs 100. (Uddin et al., 2019, p. 174). This is a much cheaper option as compared to the alternative of on-grid electricity provided by WAPDA not only for consumers but for the producers as well, since WAPDA will have to invest a much higher amount than the locals will have to provide on-grid electrification.
Conclusion
In conclusion, exploring and developing alternative energy sources, such as micro hydropower projects (MHPs), is essential given the natural resources and hydropower potential of Pakistan. Due to the difficult topography and lack of grid electricity in the northern highlands, MHPs offer a workable political solution to the problem of Pakistan’s energy generation.
This essay has emphasized the current energy market dynamics as well as the financial effects of implementing MHPs. A network of MHPs can considerably contribute to the nation’s energy mix, lowering dependency on fossil fuels and boosting energy security, with careful planning and implementation. As a result, it is advised that the government and key players prioritize MHP development as a long-term and environmentally responsible response to Pakistan’s energy issue.
References
- Adhau, S. P., Moharil, R. M., & Adhau, P. G. (2012). Mini-hydro power generation on existing irrigation projects: Case study of Indian sites. Renewable and Sustainable Energy Reviews, 16(7), 4785–4795. https://doi.org/10.1016/j.rser.2012.03.066
- Annual Report 2019 (pp. 1–159). (2019). Private Power and Infrastructure Board.
- Ebrahim, Z. (2018, July 27). Small hydropower transforms lives in Pakistan’s mountains. The Third Pole. https://www.thethirdpole.net/en/energy/small-hydropower-transforms-lives-inpakistans-mountains/
- Green and Alternate Energy Solutions. (n.d.). Sarhad Rural Support Programme (SRSP). Retrieved May 4, 2022, from http://aw1.srsp.org.pk/site/alternate-energy/
- Pakistan Energy Yearbook 2020. (2021). Ministry of Energy, HDIP.
- “Pakistan’s population likely to surge past 330 million by 2050.” Geo News. Accessed April 27, 2023. https://www.geo.tv/latest/455923-pakistans-population-likely-to-surge-past-330million-by-2050.
- Pakistan To Double Hydroelectric Output To Meet Power Shortage: Report. (n.d.). NDTV.Com. Retrieved May 1, 2022, from https://www.ndtv.com/world-news/pakistan-heatwavepakistan-to-double-hydroelectric-output-to-meet-power-shortage-report-2934829
- Sharma, A. K., & Thakur, N. S. (2015). Resource potential and development of small hydro power projects in Jammu and Kashmir in the western Himalayan region: India. Renewable and Sustainable Energy Reviews, 52, 1354–1368. https://doi.org/10.1016/j.rser.2015.08.024
- Siddiqi, A., Wescoat, J. L., Humair, S., & Afridi, K. (2012). An empirical analysis of the hydropower portfolio in Pakistan. Energy Policy, 50, 228–241. https://doi.org/10.1016/j.enpol.2012.06.063
- Uddin, W., Ayesha, Zeb, K., Haider, A., Khan, B., Islam, S. ul, Ishfaq, M., Khan, I., Adil, M., & Kim, H. J. (2019). Current and future prospects of small hydro power in Pakistan: A survey. Energy Strategy Reviews, 24, 166–177. https://doi.org/10.1016/j.esr.2019.03.002
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