Rana Ahsan
Pakistan, the fifth most populous country in the world, is currently in the grip of a pressing power sector crisis. This crisis, believed to be a key factor contributing to its struggling economy, demands immediate attention. Despite the government’s efforts to boost power generation capacity to 43,775MW, the transmission infrastructure can only manage 22,000MW, resulting in a substantial gap. This imbalance has led to a surge in tariffs, exacerbating the challenges faced by the energy sector. Additionally, plans to expand the power generation capacity by another 17,000MW have raised concerns about the potential burden on the citizens.
The ‘Advancing CTBCM – A Multi-Stakeholder Conference’ shed light on industry leaders’ doubts about the government’s ability to effectively manage the electric grid. They have raised apprehensions about the surplus generation capacity and the expensive take-or-pay contracts, which compel Pakistan to pay fixed charges to Independent Power Producers (IPPs) regardless of actual electricity usage.
Furthermore, reports from the Pakistan Credit Rating Agency (PACRA) and the Power Division highlight the substantial financial costs incurred as a result of transmission losses and projected losses by distribution companies (DISCOS). The mounting circular debt in the power sector, reaching Rs2,655 billion by May, has escalated concerns about the sustainability of the current system.
To address these challenges, experts are advocating for the implementation of the Competitive Trading Bilateral Contract Market (CTBCM) regime. This regime would allow bulk power consumers, such as industries and commercial entities, to directly purchase electricity from generators, bypassing the government’s role as the sole buyer and seller of electricity. Under this proposed market structure, consumers would have the freedom to negotiate prices and terms with multiple generators, fostering competition and potentially leading to lower electricity prices. This differs from the existing single-buyer model, which industry representatives argue is limiting and inefficient.
Former NEPRA Chairman Tauseef H. Farooqi emphasized the pivotal role of CTBCM in resolving Pakistan’s energy crisis and its significance for the country’s economic stability. Additionally, industry stakeholders stressed the importance of competitive energy prices for the survival and competitiveness of businesses in the global market. They cited examples of significantly lower electricity costs in neighboring countries, posing significant challenges to Pakistani businesses. This should make the audience feel the urgent need for a solution to the current energy crisis.
Moreover, the advocacy for CTBCM is grounded in the potential benefits based on global examples, such as the reduction in household energy prices in the European Union due to increased competition and efficiency gains. Proponents argue that fostering competition among power producers in Pakistan could lead to decreased electricity prices, benefiting both households and businesses. This potential for positive change should instill a sense of hope for the future of Pakistan’s energy sector.
The transition to a market-based electricity generation, supply, and distribution system is viewed as a critical juncture, albeit one that necessitates thorough considerations and planning to ensure a just and equitable transition. However, the promise of this transition lies in the potential for increased adoption of renewable energy sources, provided that CTBCM is effectively implemented.
Renewable energy advocates have highlighted the cost-effectiveness of solar and wind energy and anticipate significant growth in these sectors with the implementation of CTBCM. Beyond price implications, the sustainable aspect of this transition is expected to have far-reaching impacts, particularly in meeting international regulations and reducing greenhouse gas emissions.
In conclusion, the conference culminated with the presentation of a Charter of Demands, supported by major industrial associations and chambers, calling on the government to take specific actions to open up the electricity market for businesses. This includes announcing a competitive figure for use of system charge and setting a date for the first bilateral transaction. Overall, the discussions and demands underscore the urgency and significance of addressing the power sector challenges to secure a sustainable and competitive energy landscape for Pakistan’s economic growth.
