Dreaming Excellence in Power Sector of Pakistan (Episode 2)

Major Power Sector Reform - Opening up of Wholesale Market in Pakistan:

I tried to fulfill the 30-year dream of this nation by launching CTBCM (Competitive Trading Bilateral Contract Market) to open up Pakistan’s Wholesale Power Market by introducing Traders/Electric Power Suppliers to supply electric power to Bulk Power Consumers using more than 1 MW through Bilateral Contracts at their mutually agreed price. The Authority approved the High-level Design of the CTBCM in December 2019, followed by the CTBCM Detailed Design and Implementation Roadmap, which was approved in November 2020. The Federal Government approved the CTBCM design in 2021 while it was also endorsed by CCI under the National Electricity Policy 2021. Under the Legal, Policy, Regulatory, and Contractual framework development, thousands of pages of policies, rules (07 Nos which include System operator, Market operator, transmission, distribution, supplier, trader, and registration rules), regulations (16 Nos which includes licensing, registration and standards regulations), codes (03 Nos includes Market Commercial Code, Grid Code, Agency Code), agreements, guidelines, and standard operating procedures, etc. have been developed. The Distribution Code, IAA registration of PPIB and AEDB, as well as the Connection Agreements, are in the final stages of development.

Under the institutional strengthening actions, various interventions are made and some are underway at the implementing power sector entities including DISCOs, CPPA, PPIB, AEDB, NTDC, and NPCC to reinforce their organizational capacities. All ten (10) DISCOs have established a first-of-its-kind dedicated 20 team member department called the Market Implementation and Regulatory Affairs Department (MIRAD) to undertake the Transmission Planning, Forecasting, Contract Management & Regulatory Affairs functions within DISCOs. After extensive restructuring at CPPA, the CPPA has attained the strength of around 40 dedicated professionals to perform the operations of the Electricity Market Operator of Pakistan after obtaining a Market Operator license from NEPRA a year before on May 31, 2023.

The restructuring of the System Operator to bring it to par with international standards and best industry practices is underway. PPIB & AEDB are being merged to undertake the function of Independent Auction Administrator (IAA) of the competitive wholesale market and NEPRA is in the final stage of granting the IAA registration. On the technology front, NTDC has implemented the state-of-the-art Secured Metering System (SMS) by installing 711 Automatic Meter Reading (AMR) meters at all the common delivery points (CDPs) of demand and supply side across the country. The SMS project is the heart of the CTBCM and all the market transactions will rely on the transparent and accurate meter readings at the CDPs. Supervisory Control and Data Acquisition (SCADA) is also being expanded across the NTDC network and Phase III of the project is expected to be completed in 2025.

The most essential, yet often ignored, component of any reform process is the people. However, under the power market reforms over the last four years, the power sector entities have been given extensive training. As of today, around 5,000+ man-days of training have been undertaken. Better yet, this journey is set to continue. CPPA-G in collaboration with LUMS, has established the Power Sector Center of Excellence (PSCE) that shall impart trainings to over 1000 men and women from power sector entities under 14 training programs spanning over 30 modules, after a comprehensive Training Need Assessment (TNA).

The delivery of market-related training by CPPA-G through the PSCE is one of the main mandates of the market operator under the approved CTBCM Plan. The main objective of the PSCE initiative is to train key resources from each power sector entity through a central platform specialized in power sector training and equip them with the latest knowledge, skills, and tools to enable them to better serve the nation.

During my term, I have ensured the active participation of NEPRA in developing the National Electricity Policy 2021, ARE Policy 2019, National Electricity Plan, and other key assignments. NEPRA made sure that the best techno-commercial and regulatory input was made available to the Government through active advisories, especially in improving Governance through effective consultations, encouraging the hiring of the right people for the right jobs, and strengthening the transmission and distribution infrastructure. In this regard, numerous meetings, in addition to detailed written correspondence, were held with Government bodies to ensure all stakeholders are on the same page in the pursuit of an affordable, reliable, and sustainable future for the consumers of the Power Sector of Pakistan.

Availability of Electricity to Population At Large – A Serious Challenge:

I personally didn’t see any credible report on this but it is estimated that at least 30 million people are without electricity in Pakistan. Moreover, those who are connected to the Grid face frequent tripping as well as load management or loadshedding as we call it in Pakistan. One of the major reasons for this loadshedding is the government’s AT&C (Aggregate Technical and Commercial Loss) Policy whereby DISCOs limit the supply of electricity to non-paying or less paying consumers as per their defined policy e.g., 6 hours of forced loadshedding on any feeder with over 40% losses etc. NEPRA being the Power Regulator does not approve of this policy. We term it a ‘Collective Punishment’ and have been pushing DISCOs to move towards smart metering to monitor individual consumers based on their payment or default pattern instead of punishing the best paying consumers sharing the same feeder; or at least go to PMT (Pole Mounter Transformer) level for applying the AT&C Policy to lower the extent of ‘Collective Punishment’ as much as possible while we arrange investments to install Smart Meters using AMIs (Advanced Metering Infrastructure) and AMR (Automated Meter Readings).

Power Reliability – A Harsh Reality of the Pakistani Grid:

Pakistan has almost doubled its installed capacity which now stands at 45,375 MW compared to 22,812 MW in June 2013 that includes CPEC investment along with the addition of a 866 km Pak-Matiari DC Line capable of transmitting 4,000 MW of Power from South to North Pakistan and vice-versa. However, transmission investments in the last 10 years were nowhere close to the upgradation requirements of Pakistan’s ageing Grid System. This results in frequent tripping of the system with intermittent blackouts like we experienced on 9 January 2021 and then 23 January 2023. Pakistan is a longitudinal country with more demand in the North and Center. Most of the recent power supply, especially most CPEC projects, have been installed near the metropolis of Karachi or at the mouth of the mine in Thar, one of the largest coal mines in the world with almost 175 billion tons of coal reserves. In both cases, we had a North-South power swing caused by a huge mismatch between demand and supply as the South was producing 3000 MW excess to meet the demand in central and northern Pakistan. As soon as this phenomenon occurred, many plants started tripping eventually causing a blackout in the country. This requires the revamping of Pakistan’s grid with additional transmission lines and extensive attention to system protection.

Customer Service – Almost Non-Existent in DISCOs:

Customer service is almost non-existent in Pakistan especially when it comes to DISCOs. As Chairman NEPRA, I put a lot of focus on inculcating the idea of ‘Customer Orientation’. However, this is probably the hardest thing to achieve and I must admit a lot more has to be done on this front. That requires a major shift in our outdated governance approach. This problem can be overcome by serving electricity consumers like the private sector does. I fully support privatization of DISCOs to enable modern thinking and employing a customer service focus to best serve the consumers whilst providing them with affordable, reliable, and sustainable power. Theft of power is another menace we face in Pakistan as we have almost 13% non-recoveries of invoiced amounts, the major reason for which is electricity theft. I believe the answer is in better governance by hiring the right people for the right jobs, privatization of DISCOs, use of technology like AMIs and AMRs, a customer centric approach etc. but no financing available at the moment to serve 36.6 M Consumers of Pakistan.

Green Energy Initiatives:

The content of Green Energy is Pakistan’s current Generation Mix is around 5%. This number needs to be seriously increased soon so as to capitalize on the cleanest, greenest and cheapest sources of green energy.

a) This will enhance the much-needed power affordability in Pakistan, as we are the most expansive electricity provider in the region impacting our local businesses as well our competitiveness in the international market.

b) Pakistan has been declared as the 5th most vulnerable country on the Climate Change front, and we need to be extremely mindful of this fact. NEPRA allowed NET-Metering against lots of resistance from the Ministry of Energy Power Division (MOEPD) and DISCOs as MOEPD controls the DISCOs, so there is a huge demand (increased 10 times in the last 3 years) for Rooftop Solar in Pakistan on a small-scale basis. Moreover, the idea that going ahead with mega green projects is the only practical solution to reduce most imported fossil fuel-based generation and combat the serious threat of climate change, has reached wider acceptance in the echelons of power. Pakistan is now embarking upon massive green energy-based projects targeting 10 GW of capacity in next few years.

In addition, Pakistan currently faces growing challenges posed by Climate Change. The Global Climate Risk Index has ranked Pakistan as the 5th most vulnerable country in the world on account of climate change. To combat this risk, we have embarked upon a massive Green Energy Transition in Pakistan. To address this, for the first time in the history of Pakistan, we introduced Competitive Bidding based RE Capacity Expansion (Auctions) and approved the RFP for a 600 MW Solar PV power generation project in South Punjab with a highly competitive consumer-friendly Benchmark Tariff of US cents 3.41/kWh (from historic US cents 17/kWh) to signal a shift towards green energy while focusing on energy affordability. I advised the government to set the mammoth goal of transitioning Pakistan from its current 34% RE (5% Renewable and 29% Hydro) to 62% RE by 2032. We initiated 36 green energy projects in Pakistan including Solar, Wind, and Bagasse worth over 1600 MW. We approved 13,000 MW of solar and wind projects to be inducted into the National Grid by 2030, under the Indicative Generation Capacity Expansion Plan (IGCEP) 2021-2030 Plan. This number went up to over 20,000 MW in the subsequent iteration of IGCEP. This represents the ambitious target set by NEPRA for the promotion of RE projects.

To increase the share of RE in the generation mix, there was a need to make RE cost-competitive in Pakistan. Accordingly, we created an enabling environment for the implementation of RE projects in the country. Aided by the global reduction in prices of RE technology, we offered a tariff of US cents 3.41/kWh to the latest RE Project in Pakistan, down from initial US cents 17/kWh a few years back. We also achieved a lowering of ROE for other projects from 20% to as low as 13% and we expect auctions will lower it further due to competition. It is my conviction that this will be a watershed moment for RE projects in Pakistan. NEPRA also played a key role in the IPP Tariff renegotiations that resulted in a saving of Rs. 870 billion over the next 20 years for Pakistan.