Published in Money Matters, November 4, 2013 entitled "Energy: Tackling the Crisis"
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Pakistan has been facing a severe energy crisis since 2007, which has badly affected its industrial sector. The main reason for the crisis is that in the past, efforts were not taken to enhance the power generation capacity by installing new plants or building new dams.
The CNG policy has proved to be another nail in the coffin. But the new government has been contemplating to abolish its supply to vehicles, especially in the coming winter in order to provide continuous supply to households as well as to the industrial sector.
Addressing energy shortages has been one of the main priorities of the PML-N government. In fact, Prime Minister Nawaz Sharif’s first public speech (right after winning the elections) focused on addressing electricity shortages. And his political party started working on mitigating the crisis in the quickest time possible by signing international and national contracts for electricity generation as well as paying off a part of circular debt.
According to studies conducted by Pakistan Institute of Development Economics (PIDE), governance, capacity issues and circular debt are the major factors behind the crisis. The crisis can be mitigated by resolving any one of these three issues and can be completely abolished by simultaneously addressing all the three issues.
Apart from that, a USAID and Planning Commission’s Framework for Economic Growth (FEG) report emphasised on governance issues to eradicate the issue of circular debt as well as making circular debt part of debt financing.
The severity of the energy crisis has been increasing since 2007. Undoubtedly, the new government is adamant to eradicate the crisis but it would take three to four years to overcome energy shortfall. Governance, as stated in the Planning Commission’s FEG report, is among the quickest ways to lessen the crisis. Another equally important step, which has been deliberated for weeks by Federal Minister for Water and Power Khawaja Asif, is of energy conservation.
Several energy conservation strategies have been implemented in the country, such as use of energy savers, implementation of daylight saving time (DST) plan and early closure of markets. However, these strategies have failed to achieve the desired result. Let’s take a look at the three strategies:
Daylight saving time (DST) helps conserve electricity by reducing the gap of excess demand, especially in summers. This enables individuals to use an extra hour of daylight in evenings by making use of less artificial lights.
Daylight saving time has been implemented thrice in the country since its inception. As energy demand increased in summer, daylight saving time was implemented for the first time in 2002 from April-October. Thereafter, it was executed again in 2008 from June to October and April to October in 2009.
The daylight saving plan has mostly failed in the country due to non-acceptability. Generally, people used to change their work hours with the plan, which subsided the impact of advancing clocks by an hour. At the commercial level, a minimum of one hour of electricity was saved by the end of the day.
By spreading awareness and executing proper research, the government can implement the daylight saving plan more effectively.
The use of energy savers helps save electricity but it doesn’t reduce consumption. Hence, it is an energy efficiency strategy. Despite the fact that the use of energy efficient appliances have been on the rise since the last one decade, it is difficult to ascertain if the overall consumption has decreased.
Early closure of markets is a vital policy that can save electricity. But either the authorities are fearful of retailers/wholesalers or there is a lack of will as it has not been implemented effectively. In Europe, more than 95 percent of markets shut down by 6 pm or 8 pm and if the same policy is implemented in Pakistan, customers will adjust to timings and thereby save significant amounts of electricity.
Although not a popular measure, increasing electricity prices will compel the consumers to reduce its usage. We recently experienced the reaction of the people, political parties and even the Supreme Court when the government announced rise in electricity prices. Rationalisation of electricity prices is important – be it producer or consumer price rationing.
Similarly, there are certain measures that can be taken at the individual level to conserve energy. These include: building energy-efficient buildings, less use of high electricity consuming appliances and creating awareness campaigns.
The abovementioned conservation strategies can be easily implemented without increasing government’s expenses. Thus, the government needs to pursue different conservation policies by coordinating with households and industrialists.
Most importantly, implementation is the key to get the desired results. Remember, a megawatt saved is better than a megawatt produced