ENERGY CRISES IN PAKISTAN General One of the major problems facing the Pakistan is the energy crisis, which

are intense, costly and multi-dimensional. The unprecedented electricity and gas disruptions are pushing the cost of living thus making the life difficult for people. Ever soaring crude oil prices have been registering Energy Crisis in Pakistan all-time-highs, shooting 50% in the past year. The country has nearly gone energy bankrupt while a total disaster appears to be round the corner. It cannot be denied that something has been wrong down the line that caused this crisis. The golden age for energy in Pakistan has been 1960s and most of the 1970s, that is when Tarbela and Mangla dams were put into operation and other dams, including Kalabagh, were actively pursued. In subsequent years, action in the field of energy has been utterly recklessness. The prevalent crisis is a consequence of imprudent energy policies over the last three decades. However, the crisis is still addressable as long as there is due vision and devotion. Pakistans Energy Profile

The starting point of any remedial efforts should be an acknowledgement of the fact that the crisis is a self-inflicted one. It is also important that lessons be learnt from the past mistakes on part of relevant circles. One of the major limitations that have hindered energy prosperity in the country is short-sightedness. There has not been a meaningful and coherent energy policy in place over this period. The approach has been "project-oriented," rather than "goal-oriented." Almost every regime has dealt with energy on an ad hoc basis. Long-term and sustainable planning

of energy have been an alien concept. The reason is fairly simple; energy projects usually require huge investments and commitment, making them undesirable to any regime. The attitude of delaying new projects, as far as possible, has been the common practice and is in fact the recipe of the present crises. In doing so, when things start getting out of control, haphazard and quick-fix measures are sought. A typical example is the Independent Power Producers (IPPs) saga of the 1990s. In an attempt to avert an approaching energy crisis, as a result of negligible capacity addition during the 1980s and the early 1990s, the regime in 1993-94 decided to go for thermal generation through the IPPs. Undoubtedly, the IPPs provided a very healthy contribution at the supply end, enhancing power generation capacity by more than 5000MW. Nevertheless, this power addition cost the country a fortune apart from the controversial tariff structure, the move was against the spirit of energy sustainability and security for the country. The fact that the IPPs were set up at the terms of the investors suggest that it was a move made in panic. The last few years provide a perfect example of failure to make a timely response to the growing energy needs. A threefold increase in energy demand over the last two decades has been responded to with an illproportioned increment at the supply end. Consequently, with the advent of 2008 the gap between demand and supply grew to 4,500MW indicating a 40% deficit of electricity. The prevalent energy crisis has not appeared overnight -- the omens were evident for a number of years but the authorities failed to react in time. Senior WAPDA officials claim that in 2002 the government was officially warned about the approaching electricity crisis and was asked to take immediate measures to enhance generation capacity. The timely warning failed to receive any appreciation. The attitude of the relevant authorities has thus indirectly contributed to the growth of the dire crisis. Another example worth quoting here is that of the 969MW Neelam-Jehlum hydroelectric project. It was to

be constructed in 2003 at a cost of $1.5 billion. It got abandoned until the present power crises intensified towards the end of 2007. The revised estimate is around $2.25 billion. The delay is costing the country a fortune an extra $750 million in terms of project cost, apart from enormous monetary dents inflicted by the five-year delay. It is also noteworthy that WAPDA has traditionally pursued the major projects of national interest but failed to get the due positive response from the policy- and decisionmakers. Interestingly, WAPDA plays the role of a scapegoat, because the common man blames WAPDA for his sufferings. It is also important to plant relevant and qualified people at the key policy and decision making positions. Quite often, these positions are offered to utterly irrelevant, ill-qualified and incompetent people. The track record suggests that energy offices are amongst the most coveted ones in any regime, simply because they are considered to be the most lucrative ones. There are examples when undergraduate and utterly irrelevant people have been appointed to run energy offices. There are also cases when the crucial positions have been used as incentives during political bargaining. The unhealthy attitude towards sensitive energy positions is enough to explain how the field of energy has been traditionally toyed with. Another aspect of the bankrupt policies is politicisation of projects of national interest. The paramount example is that of Kalabagh Dam. It has been politicised to such an extent that its orchestration now appears to be next to impossible. Evidences suggest that the issue has been used to serve the vested interest of regimes and certain political and ethnical forces. With the emerging post-lection sense of national reconciliation on the political arena, it is expected that such projects would be looked into with cool heads. It is time to move on. The technical issues, if there be any, have to be addressed on the drawing Energy Crisis in Pakistan 43

board, rather in processions. It has to be realised that the delay in project has not only made the country suffer but also people that come from all provinces. In order to tackle the existing crisis and ensure a prosperous energy future, the backbone of the future energy policies would have to be reliance on domestic resources (hydropower, coal and solar and wind energy) and energy conservation. Decisions on energy projects should revolve around national interest rather than nave political and personal gains. Energy offices should be run by qualified, committed and deserving people equipped with due mandate. Relevant ministries and departments should also be overhauled.

There is no quick solution to electricity shortage and the trend of surging prices is irreversible. There is very little the government can do on this in the immediate term. At best, the problem can be prevented from aggravating until a sustainable solution is struck. Tough decisions will have to be made, and executed with commitment.

Pakistan is undergoing a severe energy shortage. There is no gas or electricity. While there electricity load-shedding is shared between industry and domestic users, gas load-shedding is shared between industry, fertiliser plants, domestic users and CNG stations. It has led to a severe economic and social impact on our country, leading to daily strikes, baton charging and tear gassing. Millions of manpower hours of wages have been lost, pushing our impoverished population further below the poverty line, while the economic loss to our country is runs into billions of rupees. There seems to be no end in sight due to the short-sightedness of our planners and policymakers.

While the capacity to generate electricity is over 19,000 MW, supply has fallen to half as much due to a multitude of reasons. The demand for electric power in a developing country like Pakistan, with a fast growing population, is very high, and there is need to double it to at least 40,000 MW in the next 10 years if we wish to light our villages and provide power to the industrial sector. Even that is not enough, for to move forward and become a developing country in the real sense, Pakistan should have at least 80,000 MW, which is what the UK had 40 years over ago with a population less than half as much! Similarly for gas, while the production today is around 4 billion cubic feet per day (bcfd), the current demand is 6.5 bcfd. By 2020, natural gas production will fall to 2 bcfd due to depleting reserves, and demand will increase to 8 bcfd. While all this demand for energy was projected a decade ago, not much has been done to find alternative solutions or develop indigenous resources by the interim governments. Pakistan is bestowed with abundant natural resources. It is well known that Pakistan has proven reserves of 30 trillion cubic feet (tcf) of natural gas, and another 40 tcf are trapped as tight and shale gas. These could easily have been harnessed had the governments embarked on an ambitious plan to exploit these gases. The proposed Iran gas pipeline would provide only about 1 bcfd at a cost of $1.25 billion, while the proposed TAPI gas pipeline would provide 3.2 bcfd to three countries at a cost of $7.6 billion. At half these costs, our own gas reserves can easily be harnessed by available and indigenously developed technologies. We have 175 billion tons of coal at Thar, the largest lignite deposits in the world, which is worth about $25 trillion. Thar has more energy reserves than the oil of Saudi Arabia and can provide 100,000 MW for 300 years. The coal can also produce clean methane gas through coal gasification, which can fulfil the needs of Pakistan for the next 100 years. Gasification

of coal as a policy was also highlighted by me in the PPP Election Manifesto five years ago. Pakistan has the 21st largest river in the world in terms of annual flow, many small rivers, and one of the largest irrigation systems in the world with abundant canals. There is proven potential to generate more than 40,000 MW by hydroelectric power alone. A large number of small dams can be easily constructed by entrepreneurs under a liberal public-private partnership policy. Hydroelectric power should be given top priority as it is the cleanest and cheapest form of energy. Wind energy has been the fastest growing sector in the last decade. China is generating over 44,000 MW, the US 40,000 MW, Germany 27,000 MW, Spain 20,000 MW and India over 13,000 MW, with plans to double it within five years. Pakistans wind corridor in the south has the potential to generate over 50,000 MW but has hardly taken off with the same momentum as in other countries around the world. Solar PV prices have dropped drastically to half as much in the last four years, from $3.7/w to $1.0/w, which has now made it very feasible for widespread use. As a result, solar power has been the fastest-growing sector worldwide in recent years, almost doubling from 22 GW in 2009 to over 40 GW in 2010. Even Germany, which is not in the tropical zone, is now producing over 23,000 MW by solar, while India is fast increasing its solar capacity, which is expected to reach 20,000 MW by 2020. Pakistan has an abundant solar belt, with almost 365 days of sunshine in most parts of the country, and has the potential to generate large amounts of electricity, or energy, whether thermal or photovoltaic. Last but not least, nuclear electric power has huge potential. Pakistan hardly generates 750 MW by nuclear means, while India generates 6,000 MW, and has ambitious plans to increase its capacity to 64,000 MW by 2032. Worldwide, 378,000 MW are generated by nuclear means, and expected to increase to 800,000 MW by 2050. Technologically Pakistan is

considerably advanced in nuclear-power-generation and has plans to increase its nuclear power-generation capacity to 8,800 MW by 2030. However, this could easily be increased to at least twice within the same time period. There is also the possibility of exporting this technology and sending manpower to countries in the region by teaming up with them. Recently oil-rich UAE signed a $20 billion agreement with South Korea to build 4X1,400 MW of nuclear power by 2020. Pakistan has huge energy resources which can be developed indigenously to fulfil domestic needs, as well as provide a surplus for export. We have qualified knowledge workers available at our universities, research organisations and firms who can accomplish this task. And a greater human resource can be developed through a strategic plan at our institutions. Development of indigenous energy options will also generate tremendous employment opportunities for our people. All that is needed is leadership and political will.

Table of contents

Energy sources Reliance Extend network Capacity concerns Renewable energy Energy efficiency Ownership Competition Energy framework Energy debates Energy studies Role of government Government agencies Energy procedure Energy regulator Degree of independence Regulatory framework Regulatory roles Energy regulation role Regulatory barriers Energy sources Total installed electricity capacity (2008): 19,420 MW Thermal: 66% Hydro-electric: 30% Nuclear: 3% Others: ~1% Total primary energy supply (2008): 82,389 ktoe Biomass: 34.8% Natural gas: 31.9% Oil and products: 24.1% Coal: 5.8% Hydro-electric: 2.9% Nuclear: 0.5% The annual growth of primary energy supply increased from 3.17% to 4.3% during 1997-98 to 2006-07. Energy supply in Pakistan is highly dependent on oil and gas, which together contribute more than 77% of the total primary energy supplied. The average share of gas and oil were respectively 44.36% and 32.58% from 1997-98 to 2006-07. The remaining sources of energy supply consist of hydro-electricity and coal, with shares in total energy supply around 12% and 6% respectively. Energy supply for final consumption is 36,005,255 TOE. Electricity is used for domestic, commercial, agriculture and industrial purposes. Despite its high per unit price, household demand for electricity

is growing. This sector is the largest consumer of electricity in the Pakistan with a share of 42%, whereas the industrial and agriculture sectors shares are 25.2% and 13.3% respectively. In 2008, the total generation capacity from WAPDAs own hydro and thermal sources plus generation from two nuclear power plants, KESC and IPPs stood at 19,420 MW. At present, total RE produced in the country accounts at 40MW which is about 0.21% of total installed generation capacity. Reliance At present Pakistan meets 75% of its energy needs through domestic resources, including gas, oil and hydroelectricity production. Only 25% of the country's energy needs were managed through imports, in which oil has taken a major share. Pakistan imported 20.22 MtoE of energy in 2009. Since October 2002, Pakistan has been importing electricity from Iran. Further, Pakistan has planned to import 1,100 MW of electricity from Iran for supply to Gwadar and other coastal areas of Balochistan. Extend network Population Access to Electricity (2008): 57.6% Rural: 46% Urban: 78% 70.4 million people do not have access to electricity. Two separate grids form the electricity transmission network in the country, the national grid operated by the National Transmission and Dispatch Company, and a dedicated grid for Karachi. These networks are interconnected via a 220 kV line. The NTDC currently operates approximately 4,160 km of 500 kV transmission line, and a further 4,000 km of 220 kV line. Capacity concerns Pakistans energy infrastructure is under-developed and insufficient. Pakistan has been facing a severe energy crisis. Despite strong economic growth and rising energy demand during the past decade, no serious efforts have been made to install new capacity for the generation of electricity. Consequently, demand exceeds supply, and load-shedding is a common phenomenon through power shut-down. Pakistan needs around 14,000 to 15,000 MW of electricity per day, and the demand is likely to rise to approximately 20,000 MW per day by 2010. Presently, it can produce about 11,500 MW per day. This shortage is affecting industry, commerce, and daily life, and posing risks to the continuation of economic growth. Renewable energy The nation is currently facing a 3 GW power supply shortage, the most severe energy crisis to have ever hit the country, yet abundant indigenous resources such as wind, solar and biomass remain virtually untapped. Solar Pakistan lies in a region of high solar irradiance; as such, it is ideally suited for solar energy projects. Pakistan receives about 15.5x1014 kWh

of solar irradiance each year, with most regions receiving approximately 8 to 10 sunlight hours per day. The potential installed capacity of solar photovoltaic power is estimated to be 1,600 GW per year, providing approximately 3.5 PWh of electricity (approximately 41 times current power generation in the country). Current utilisation is still at a developmental stage, with several pilot projects being implemented. Wind Wind energy also has strong technical potential in Pakistan, particularly in the southern regions of Sindh and Balochistan. Pakistan has approximately 1,000 km of coastline with steady average wind speeds ranging between 5 and 7 m/s. The projected installed capacity for wind energy is estimated at 122.6 GW per year, providing approximately 212 TWh of electricity (approximately 2.5 times the current power generation level). The Alternative Energy Development Board (AEDB) has awarded 19 contracts to IPPs for construction of wind power plants, all with capacities exceeding 50 MW. Biomass Biomass availability in Pakistan is also widespread. Approximately 50,000 tonnes of solid waste, 225,000 tonnes of crop residue and over 1 million tonnes of animal manure are produced daily. It is estimated that potential production of biogas from livestock residues is 8.8 to 17.2 billion meters3 of gas per year (equivalent to 55 to 106 TWh of energy). Annual electricity production from bagasse is estimated at 5,700 GWh about 6% of Pakistans current power generation level. Hydropower Hydro is the only sustainable energy resource which Pakistan has used for large-scale power generation. Currently, Pakistan has installed hydropower capacity of approximately 6.6 GW. This is 16% of total hydropower potential, which is estimated to be roughly 41.5 GW. Biogas A total biogas generation potential of 14.25 million m3/day is available. The Pakistan Council of Renewable Energy Technologies is designing, developing and disseminating biogas plants. During the last 3 years, more than 1600 plants, mostly of 5 m3/day capacity, have been installed by the PCRET. NGOs and private sector companies have performed similar numbers of installations. This means that a total of 0.016 million m3/day of biogas capacity was utilised during the last 3 years, with an annual exploitation factor of 0.374 to 10.3. The working status of biogas plants installed before the last 3 years is uncertain, as there are no repair and maintenance services. Geothermal Pakistan has considerable potential for geothermal energy (80,000 MW) as there are numerous fumaroles and hot springs. However, the extent of the commercial potential is not known, and further studies are needed. Energy efficiency

Pakistans energy demand will increase in the coming 20 years.The Pakistani energy sector has discovered that it has huge untapped energy efficiency potential. Past attempts to mainstream energy efficiency projects could not get expected results because of lack of management capacity and financing. The government of Pakistan wants to implement a systemic energy efficiency program and has been seeking a flexible public sector financing mechanism and to establish private sector financing to (i) scale up the deployment of proven energy efficiency technologies, and (ii) set up an energy efficiency market. Ownership Electricity The power sector is a mix of hydro and thermal units dominated by two (in generation, transmission and distribution) utilities, the Water and Power Development Authority (WAPDA, www.wapda.gov.pk) and the privatized Karachi Electric Supply Corporation (KESC, www.kesc.com.pk). In addition, there are two nuclear power plants, KANUPP and CHANUPP, and a number of IPPs and small power producers (SPPs) established since 1994. Since October 2007, the state-owned WAPDA has become two distinct entities i.e. the WAPDA and the Pakistan Electric Power Company (PEPCO, www.pepco.gov.pk). The WAPDA is responsible for water and hydropower development, whereas the PEPCO is responsible for the management of the WAPDAs 14 public limited companies in thermal power generation, transmission, distribution and billing. The PEPCO supplies electricity through its nine Distribution Companies (DISCOs); the Lahore Electric Supply Company (LESCO, www.lesco.gov.pk), the Gujranwala Electric Power Company (GEPCO, www.gepco.com.pk), the Faisalabad Electric Supply Company (FESCO, www.fesco.com.pk), the Islamabad Electric Supply Company (IESCO, www.iesco.com.pk), the Multan Electric Power Company (MEPCO, www.mepco.com.pk), the Peshawar Electric Power Company (PESCO, www.pesco.gov.pk), the Hyderabad Electric Supply Company (HESCO, www.hesco.gov.pk), the Quetta Electric Supply Company (QESCO), and the Tribal Electric Supply Company (TESCO), to all sectors in the country. Oil and gas Pakistan State Oil (www.psopk.com) is a state-owned enterprise, responsible for the majority of the marketing, distribution and sale of petroleum products in the country. Pakistan Petroleum Limited (PPL, www.ppl.com.pk) is the majority-state-owned organisation responsible for the exploration and development of oil and natural gas products in Pakistan. Competition The Pakistani power sector has historically been dominated by the public sector utilities, WAPDA and KESC. Over the years, these institutions became large, vertically-integrated utilities with problems with

maintenance of Infrastructure, financial and technical inefficiencies, and dependence on public sector development resources. In order to mobilise private sector investment for the power sector, an IPP policy was launched in 1994, and subsequently reviewed in 1998 and 2002. A Private Power and Infrastructure Board (PPIB) was set up to provide support to the private sector. The government also set up the National Electric Power Regulatory Authority (NEPRA) in 1997. In 1998, it embarked upon a programme of unbundling the WAPDA through corporatisation and commercialisation. The WAPDA has now been reorganised into nine distribution companies, one National Transmission and Dispatch Company (NTDC) and four thermal generation companies, called GENCOs. The hydroelectric power development and operation functions remain with the WAPDA. To carry out this restructuring a facilitation company called Pakistan Electric Power Company (PEPCO) was also incorporated in 1998. Several IPPs are operating in Pakistan, while a number of projects are under construction. The gross power generation capacity of the IPPs is 5,822 MW. The Kot Addu Power Company (KAPCO) and the Hub Power Company (HUBCO) are the two larges IPPs, with 1,466 MW and 1,292 MW respectively. Energy framework During the mid-80s, Pakistan made its first move towards exploring renewable energy options. The government invested 14 million rupees towards feasibility studies for solar energy and biogas production between 1983 and 1988. However, no significant project developments resulted from this investment. New energy policies were also instituted in 1994, 1998 and 2002. The 2002 Power Policy, currently still in place, encouraged the use of local resources, including renewable energy. This policy aimed to develop approximately 500 MW of renewable (non-hydro) power generation by 2015, and roughly 1,000 MW by 2020. Although various energy policies implemented between 1985 and 2002 stressed the need for employing renewable energy resources, none provided a framework for the implementation of such projects. RE development was virtually nonexistent, as these policies failed to attract private sector confidence and investment. Policy for Development of Renewable Energy for Power Generation The Alternative Energy Development Board (AEDB) introduced the Policy for Development of Renewable Energy for Power Generation Employing Small Hydro, Wind, and Solar Technologies in 2006. This is Pakistans first energy policy aimed specifically at the promotion of RE power projects. The goal under this policy is for RETs to provide 10% of Pakistans energy supply mix by 2015. The policy focuses on solar energy, wind energy and small-scale hydropower projects. The policy objectives are to:

increase the deployment of RETs (thereby diversifying the energy supply mix and increasing energy security); promote private sector investment in RETs through incentives and by developing RE markets; develop measures to mobilise financing; facilitate the development of a domestic RET manufacturing industry (lowering costs, improving service, generating employment and improving local technical skills); increase per capita energy consumption and social welfare, especially in remote and rural areas, where poverty can be alleviated and the burden on women collecting biomass fuel can be reduced; and promote environmental protection and awareness. Realising the importance of biodiesel, the AEDB has initiated the National Biodiesel Programme, and formulated a policy for the use of biodiesel as an alternate fuel in Pakistan. The policy is primarily aimed at reducing the countrys fuel import bill, promoting the demand for biodiesel raw material, which will be the primary commodity for biodiesel production. One of the salient features of the policy is to achieve a minimum biodiesel share of 5% by volume of total diesel consumption in the country by the year 2015, and 10% by 2025. Energy debates Pakistan's power crisis, has led to an acute electricity shortfall and unannounced power cuts of up to 12 hours in many areas of the country. In the midst of the outages, provinces and cities argued about the distribution of power resources, power companies (both state-run and private), accused the other of non-payment of bills, or blamed consumers for stealing electricity and not paying bills, government institutions racked up millions in unpaid debt, and protests happened on a daily basis. Whilst electricity consumption has increased in Pakistan successive governments have not kep pace with demand. As a result, Pakistan now has few power generation plants to cope with the demand. The current government has announced plans to set up power plants and build dams to generate power, but this requires both time and considerable investment, which the government will not be able to pay for on its own. Energy studies Pakistan is part of the South Asian Regional Initiative for Energy under USAID (SARI/E), a program that promotes energy security in South Asia through three focus areas: 1. cross border energy trade, 2. energy market formation, and 3. regional clean energy development. Through these activities SARI/E facilitates more efficient regional energy resource utilisation, works toward transparent and profitable energy practices, mitigates the environmental impacts of energy production, and

increases regional access to energy. SARI/E countries also include: Afghanistan, Bangladesh, Bhutan, India, the Maldives, Sri Lanka, and Nepal. Role of government Ministry of Water and Power The Ministry of Water and Power (http://202.83.164.26/wps/portal/Mowp), responsible for development of water and power resources in Pakistan, handles all issues related to power generation, transmission and distribution, pricing, regulation, and consumption, and exercises this function through respective organisations. It also performs specific functions, such as coordinating and planning the power sector, formulating policy and specific incentives, and liaising with provincial governments on all related issues. National Economic Council (NEC) The overall planning of the electricity system is under the control of the NEC. The NEC is the supreme body responsible for ensuring balanced development of the country. It was created in December 1962 under Article 145 of the Constitution of Pakistan. The NEC is headed by the Head of the Government. Its members are some of Federal Ministers, the Governors/Chief Ministers of the provinces, and the Deputy Chairman of the Planning Commission. The Planning Commission is the chief instrument for formulating the national plans. The Energy Wing of the Planning Commission estimates the energy demand on the basis of information obtained from all concerned entities, and formulates unified short- and long-term national energy plans. The NEC approves all plans and policies relating to energy/electricity sectors development. Executive Committee of the National Economic Council (ECNEC) The ECNEC supervises the implementation of energy policy laid down by the government, and approves any energy sector project to be built by the public sector. The planning and development of nuclear power is the responsibility of the Pakistan Atomic Energy Commission (PAEC, www.paec.gov.pk). Government agencies Various government institutions have been established over the past 30 years to promote the implementation of RETs. The National Institute of Silicon Technology (NIST) was founded for research and development (R&D) in the field of solar energy in 1981. The Pakistan Council for Appropriate Technology (PCAT) was also established four years later. This group aimed to promote hydropower, biogas and small-scale wind energy. The two institutions were merged, forming the Pakistan Council of Renewable Energy Technology (PCRET), in 2002. The goal of the PCRET is to organise, coordinate and promote R&D within the field of RE. PCRET has performed research and development activities in various fields of RETs. These fields include photovoltaics (PV), solar thermal energy (STE), wind energy (WE), biogas and biomass (BG/BM),

micro-hydro power generation (MPG), fuel-saving technologies (FST), etc. Alternative Energy Development Board (AEDB) The AEDB was established in 2003 to develop RE policies for promotion of wind, solar and small-scale hydropower projects. National Engineering and Science Commission (NESCOM) and the Solar Energy Centre (SEC) The NESCOM and the SEC are two other organisations working in solar energy. The NESCOM and the SEC mostly concentrate on the production of photovoltaic panels, and designing solar thermal appliances, respectively. The SEC is an attached department of the Pakistan Council of Scientific and Industrial Research (PCSIR), and designed and developed solar flat-plate water heating system in the 1980s. The SEC has installed a 500 gallon per day capacity solar desalination system near Gwader, Balochistan Province, for disinfection and the purification of drinking water. Energy procedure To enhance hydropower generation, there are five projects under construction, i.e., the Allai Khwar, Khan Khwar, Duber Khwar, Jinnah and Neelum Jhelum hydropower projects. Dams under construction include the Gomal Zam, Mirani, Sabakzai, and Satpara Dams, and the Mangla Dam Raising project. The future projects announced include the Diamer Basha Dam, the Kalabagh Dam, the Kurram Tangi Dam, the Munda Dam, and the Akhori Dam projects. The hydropower projects about which feasibility studies are being conducted include the Golen Gol, Dasu, Bunji, Keyal Khwar, Lawi, Pallas Valley (Chor Nullah), Spat Gah, Basho, Phandar, Jabban, Thakot and Patan hydropower projects. Presently, the AEDB is working on: Design and development of a 100MW wind farm at Gharo-Keti Bandar, Sindh; Electrification of 800 remote area villages through RETs; development of wind turbines, development of solar PV panels, Establishment of solar thermal power plants in the country, and Formulation of laws and taxes to promote alternative and renewable energy (ARE) projects and products in the country. The AEDB is planning to install an additional 300 micro wind turbines, and has issued letters of intent (LOIs) to 22 national and international companies for the generation of power through wind energy. The AEDB has also signed an agreement with the KPT for the generation of 50 MW wind power. The purpose of such projects is to expand the use of available RE sources. The Asian Development Bank (ADB) is helping Pakistan craft, a comprehensive energy efficiency policy and investment programme to meet the growing energy demands of an expanding economy and

population. The activities will include a comprehensive study on the energy efficiency market and build awareness in the country of the need for energy efficiency. Energy regulator The establishment of the National Electric Power Regulatory Authority (NEPRA, www.nepra.org.pk) took effect under the NEPRA Act 1997, the main role of which was to ensure transparent and judicious economic regulation in the power sector. Oil and Gas Sector: the Oil & Gas Regulatory Authority (OGRA) regulates the Oil and Gas sector in Pakistan. Degree of independence Initially, the NEPRA was established as an autonomous body without any administrative control from the government. However, for the sake of interaction with Federal and Provincial Governments, it was initially attached to the Ministry of Water and Power. Later it was linked to the Ministry of Law and Justice. However, in June 2000, the NEPRA was directly attached with the Cabinet Division. The Authority consists of a Chairman and four members (one from each province), all appointed by the government. Funding for the Authority is derived from grants from the federal government, and fees and levies accrued through services provided to the sector. Regulatory framework The AEDB has developed policies and established criteria for the determination of tariffs for power purchase generated from wind energy, in consultation with the NEPRA. Licensing procedures for RE projects have been simplified to lower the cost of the regulatory process for the developers. The AEDB has prepared a standard implementation agreement, and a standard power purchase agreement for wind energy projects, and a schedule for power purchase agreements. The Ministry of Water and Power, working with the help of the Board, issued the Guidelines for Determination of Tariff for Wind Power Generation in early 2006. Finally in December 2006, the government approved the longawaited Policy for Development of Renewable Energy for Power Generation. Regulatory roles The most important regulatory functions of the NEPRA are grouped in the following five main categories: 1. The determination of tariff rates and terms and conditions, 2. Granting licenses, and the approval of power acquisition programmes, 3. The setting and enforcement of quality-of-service standards, and approval of operating codes and investment standards, 4. Industry structure/privatisation, including the transition towards a competitive market where feasible,

5. The protection of consumer rights and obligations, including a complaint redresser. The NEPRAs broad policy guidelines for power sector reform revolve around: 1. Tariff structure, to ensure sufficient resources to cover costs and investment in the short term, 2. Encouraging generation, transmission and distribution capacities on a non-discriminatory basis, to meet existing needs and growing demand in the long term, 3. Quality of service to consumers, as well as ensuring network efficiency, including reliability and reducing voltage disturbances. OGRAs regulatory roles are licensing, tariff setting, promote of competition, market surveillance in the oil and gas sectors. Energy regulation role Currently, the NEPRA is working in a centralised manner. All decisions regarding tariffs and standards need to be approved by the government, prior to their implementation. Hence, the government is heavily involved in energy sector regulation in the country. The Ministry of Water and Power, besides all policy matters relating to development of these two resources, also performs specific functions, such as carrying out strategic and financial planning for the public and private sector. Regulatory barriers Policy and regulatory barriers With the power purchase agreement structured in the form of utilities buying power at fixed rates from generators, there may not be sufficient incentives for power generation from RES with fluctuating costs; A lack of well-defined policies for private participation, and delays in clearances and allotments for private sector projects hinders private participation in RE projects. Institutional barriers A lack of coordination and cooperation within and between various ministries, agencies, institutes and other stakeholders delays progress in RE development and commercialisation; The absence of a central body for the overall coordination of energy sector activities results in a duplication of R&D activities; The non-incorporation of RE issues in the regulatory policy and a lack of awareness among regulators restrict technology penetration.

THE ENERGY SITUATION IN PAKISTAN

Providing enough energy to foster economic growth and social development is also critical to closing the gap. According to Thomas Barnett (2003 and 2004), disconnectedness defines danger, and to address disconnectedness, the U.S. strategy should center on extending globalization in a fair and just manner. As he observes: This new world must be defined by where globalization has truly taken root and where it has not. Show me where globalization is thick with network connectivity, financial transactions, liberal media flows, and collective security, and I will show you regions featuring stable governments, rising standards of living, and more deaths by suicide than murder. These parts of the world I call the Functioning Core, or Core. But show me where globalization is thinning or just plain absent, and I will show you regions plagued by politically repressive regimes, widespread poverty and disease, routine mass murder, and, most important, the chronic conflicts that incubate the next generation of global terrorists. These parts of the world I call the Non-Integrating Gap, or Gap. The only global future truly worth creating involves nothing less than eliminating the Gap altogether. America can only increase its security when it extends connectivity or expands globalizations reach, and by doing so, progressively reduces those trouble spots or off-grid locations where security problems and instability tend to concentrate.

Key activities being undertaken by the government to increase electricity supplies using both public and private investment include: Encouraging the construction of conventional hydroelectric, oil-fired, nuclear, and coal-fired facilities to generate additional electricity; Encouraging the development of the countrys small hydro, wind, solar, and biomass resources through a recently-adopted Renewable Energy Development Policy, which hopes to build upon the US-prepared wind and solar maps that will be released in June 2007; Encouraging the exploration and development of domestic oil & gas resources through a new draft Petroleum Development Policy, and through an updated scientific assessment of the discovered and undiscovered resource potential of the country; Exploring the potential for developing the countrys coal resources and exploiting them for power generation and petrochemical use; and Diversifying imported gas supplies through possible pipelines to bring gas from Turkmenistan, Qatar, or Iran to Pakistan (see Figure 12), as well as encouraging imports of Liquefied Natural Gas (LNG) through its newly-adopted LNG Import Policy; and Expanding imports of electricity from Iran and participating in the WB/ADB study of bringing 1,000 MW of electricity from Tajikistan to Pakistan. SECOND CHALLENGE: CAPACITY BUILDING TO EMPOWER STAKEHOLDERS As in most countries, the Government of Pakistan at the national and provincial level has taken the lead in the energy sector. However, in discussions with the people of Pakistan both inside and outside of the government, there is a broad recognition that the government institutions lack technical and managerial capacity to carry out policies and programs in the most effective manner. Some specific capacity weaknesses that have been raised are: The ability to perform system-wide planning in the electricity and energy sector as a whole, both in terms of technical analysis and ability to develop and implement plans of action. The ability to analyze project proposals to determine if the tariffs, costs, and contracts being proposed are reasonable, particularly for hydroelectric, coal, and wind projects where the country has less experience. The ability to manage the electric generation, transmission, and distribution companies created by the unbundling of WAPDA as commercial enterprises, with a focus on improving customer service and reducing losses. The ability to expand access to un-served and under-served population groups in the most financially-sound and consumer-driven manner. For example, illegal connections in Karachi need to be rationalized to improve service and safety, and to reduce technical and nontechnical losses, but the community outreach and negotiation ability appears to be lacking within the utility. Similarly, electrifying villages with renewable energy presents unique opportunities and challenges for community organizations to maintain and own the systems while fostering private sector development opportunities. The ability to compile and financially analyze the various economic incentive programs and to develop a more targeted approach that will satisfy both the social and economic goals of the government. The ability to assess the existing resource base of the oil & gas resources of the country to internationally accepted standards. The ability to assess the coal resources to determine if their development is economically and technically justified and feasible. The ability to identify the most pragmatic energy conservation and load management options, and to encourage their widespread adoption, as well as to develop policies and incentives to encourage improved energy efficiency over the mid- to long-term.

While many participants in the discussion focused only on the capacity of government

institutions, the capabilities of the private sector, local governments, and NGOs were also seen as in need of improvement. Some of the observations made were: The private sector lacks knowledge on how to improve its energy efficiency and reduce energy costs. While the furniture industry has been exploring solar kilns as a way to save energy and cut costs, they are probably an exception rather than the rule. The private sector lacks the skills analyze what is the most efficient captive power system to purchase and operate, as well as lacking the knowledge to explore options under existing government policies to sell captive power back to the utility (i.e., net metering) or to invest in power generation facilities such as small hydro or wind facilities that could produce power that the local utility would transmit to the industrial user (i.e., power wheeling plus generator to consumer contracting). Local governments lack the capacity to monitor the energy use of community facilities, and to identify opportunities to conserve energy. Communities and NGOs lack knowledge about renewable energy systems and suppliers, and how they might partner with governments, donors, and the private sector to bring energy services to remote populations in a cost-effective and sustainable fashion (e.g., using livestock wastes to produce biogas, using crop seeds or wastes to produce biofuels). Consumers of energy products and services, along with journalists and community leaders, do not understand that the costs of these services must be covered by either the consumer or the customer there is no free lunch. Consumers and the general public are also not fully aware of the opportunities to make known their points of view on government policies and on energy company performance to regulators and government representatives.