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The long-term forecast of Pakistan's electricity supply and demand: An


application of long range energy alternatives planning

Article  in  Energy · December 2015


DOI: 10.1016/j.energy.2015.10.103

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Energy 93 (2015) 2423e2435

Contents lists available at ScienceDirect

Energy
journal homepage: www.elsevier.com/locate/energy

The long-term forecast of Pakistan's electricity supply and demand:


An application of long range energy alternatives planning
Usama Perwez*, Ahmed Sohail, Syed Fahad Hassan, Usman Zia
Sustainable Energy Research Group, Department of Mechanical Engineering, NUST College of Electrical & Mechanical Engineering, National University of
Sciences and Technology (NUST), Islamabad, PO Box 44000, Pakistan

a r t i c l e i n f o a b s t r a c t

Article history: The long-term forecasting of electricity demand and supply has assumed significant importance in
Received 26 April 2014 fundamental research to provide sustainable solutions to the electricity issues. In this article, we provide
Received in revised form an overview of structure of electric power sector of Pakistan and a summary of historical electricity
6 October 2015
demand & supply data, current status of divergent set of energy policies as a framework for development
Accepted 10 October 2015
Available online 19 November 2015
and application of a LEAP (Long-range Energy Alternate Planning) model of Pakistan's electric power
sector. Pakistan's LEAP model is used to analyze the supply policy selections and demand assumptions
for future power generation system on the basis of economics, technicality and implicit environmental
Keywords:
Electricity forecasting
implications. Three scenarios are enacted over the study period (2011e2030) which include BAU
Electricity scenarios (Business-As-Usual), NC (New Coal) & GF (Green Future). The results of these scenarios are compared in
GHG emissions terms of projected electricity demand & supply, net present cost analysis (discount rate at 4%, 7% and
Energy policy 10%) and GHG (greenhouse gas) emission reductions, along with sensitivity analysis to study the effect of
Pakistan varying parameters on total cost. A concluding section illustrates the policy implications of model for
LEAP futuristic power generation and environmental policies in Pakistan.
© 2015 Elsevier Ltd. All rights reserved.

1. Introduction Energy economics is a scientific analysis of allocating resource


for supply of energy in a society. It is heavily reliant on policies and
As the per capita electricity consumption and power outages demand & supply response of the energy market, which is the main
continually increase in Pakistan, it has become a national public source of uncertainty for energy planners who focus mainly on
issue to introduce measures and policies for power generation developing the environment for capital investment in energy sector
infrastructure up-gradation to keep up with consistently increasing [3]. Clearly, the future energy policy orientation is based on wide-
energy demand. Electricity infrastructure planning is mutually ranging economic parameters as well as environmental and polit-
related with the power demand and rise of GDP (gross domestic ical factors that determine the type of technology to be deployed to
product), especially in a developing country like Pakistan. Accord- meet the future energy demand. In terms of energy economic dy-
ing to Jamil and Ahmad, Pakistan portrays unidirectional causal namics, Pakistan's electricity sector is facing the worst financial
relationship between economic activity and electricity consump- crisis in its history. Pakistan's electric power sector has failed
tion which indicates increasing electricity demand with higher miserably due to substandard maintenance of power plants
economic growth [1]. In Pakistan, the electric power demand resulting in de-rated capacity, misuse of subsidies in power tariffs
increased exceptionally due to stable 6% GDP growth per annum and faulty forecasting of energy mix which resulted in electricity
from 2002 to 2007 and with no proper infrastructure planning in shortfall of 7000 MW [4] and build-up of circular debt worth $6.6
power sector, the country faced severe power cuts which resulted billion in 2011 according to Special Parliamentary Committee on
in 2.5% GDP loss, unemployment of 0.535 million industrial Energy Crisis [5,6]. In addition to the above factors, there are some
workers and loss of exports worth $1.3 billion in 2010 [2]. other issues in Pakistan regarding energy security and infrastruc-
ture up-gradation for reliable electricity supplies that will also in-
fluence future policy implications.
The foremost of such issues relates to the need for increasing
* Corresponding author.
E-mail addresses: usama13perwez@hotmail.com, usamaperwez@yahoo.com generation capacity; adequate electricity supplies are necessary
(U. Perwez). and vital for the economic growth of a country. Another issue at

http://dx.doi.org/10.1016/j.energy.2015.10.103
0360-5442/© 2015 Elsevier Ltd. All rights reserved.
2424 U. Perwez et al. / Energy 93 (2015) 2423e2435

hand is the lack of prospective financing. With these issues in Producers) that were drawn into the system due to the government
Pakistan's electric power infrastructure taken into consideration, policy which was introduced in 1994 to attract private investment
three long-term energy scenarios have been appraised to depict the for thermal power generation. KESC (Karachi Electric Supply
diverse sustainable resource planning solutions to these electricity Company) is the only vertically integrated power company
problems. Three different long term energy scenarios are modeled involved in the generation and distribution of power supply to
which include BAU (Business-As-Usual), NC (New Coal) and GF entire Karachi [30].
(Green Future). Each scenario evaluation considers 2011 as the base The transmission segment of the sector is handled by NTDC
year and concludes in 2030. LEAP (“The Long-range Energy Alter- (National Transmission and Despatch Company). NTDC is a national
native Planning”) software is employed to assess these different grid company with objective of transmission of electricity across
scenarios which is an accounting scenario-based energy modeling Pakistan except areas under vertically integrated KESC, intercon-
platform [7]. At local and national level, LEAP model is feasible to nection of national grid with new power plants and preparation of
analyze the energy supply and GHG (greenhouse gas) emissions investment plans for transmission network and grid stations. The
[8e13]. The model can also perform exploratory or normative distribution segment of the sector is managed by eight public
analysis of energy scenarios [14e24]. By using the LEAP model, it is DISCOs which serve the end consumers with additional re-
possible to analyze emissions according to the change of electricity sponsibility of electricity bill recoveries. According to NTDC (Na-
generation structure or diffusion of some generation technologies tional Transmission and Despatch Company), per capita electricity
[25e29]. The initial segment of this paper illustrates the power consumption in Pakistan has increased to 640 kWh from 457 kWh
sector structure of Pakistan. The following section introduces the which is around one fourth of world average [31]. Accordingly, it is
energy pathway as an extensive tool for long-term energy planning necessary to plan for electricity demand side management for the
and sketches the study method of scenario development for BAU, future (Fig. 2).
NC & GF pathways. The third portion examines these scenarios and
provides simulated results (by using the energy modeling tech- 2.2. Analysis of electricity demand
niques) to evaluate the future electricity demand, electricity gen-
eration patterns, capital investment cost, running cost and GHG The electricity end users in the country are predominantly
emissions associated with these scenarios during the study period. categorized as domestic, industry, agriculture, commercial and
other services. The domestic sector makes nearly 80% of electric
2. The electricity sector in Pakistan consumers which is growing at an average of 3.6% annually for last
decade making the power supply system very complex thereby
2.1. Power sector structure greatly increasing the difficulty when it comes to oversee load
management at peak hours. At present, population access to elec-
The organizational structure of Pakistan's electric power sector tricity has comparatively increased from 62.4% to 67.4% in last five
consists of four main divisions including WAPDA (Water & Power years that is still relatively less than the neighboring India [33,34].
Development Authority), PPIB (Private Power & Infrastructure According to sixth five year plan of Pakistan (1983e88), 16,400
Board), PEPCO (Pakistan Electric Power Company) and KESC (Kar- villages were electrified which only accounted for 8% of rural
achi Electric Supply Company), the latter undergoing privatization population, resulting in the launch of village electrification pro-
in 2005 as shown in Fig. 1. gram in 1983 [35]. With continuous focus on this program, rapid
WAPDA is a semi-autonomous entity with the statutory au- expansion of the electric network to villages and other un-
thority which was created in 1958 to deal with infrastructure electrified areas were carried out that increased the electrified
development of water and power projects. In 2007, WAPDA was village count up to 164,532 in 2010 e leading to a mammoth
split into two separate entities: WAPDA and PEPCO. WAPDA is now growth of domestic consumers [36]. Also, industrial sector con-
only liable for hydropower generation and infrastructure devel- sumers are growing at an average of 2.58% annually consisting
opment. PEPCO which consists of four GENCOs (Generation Com-
panies), eight DISCOs (Distribution Companies) and NTDC (National
Transmission and Despatch Company), is assigned the role to re-
form and restructure these 13 corporate entities into commercially
viable enterprises. PPIB deals with IPPs (Independent Power

Fig. 1. Pictorial view of electric power sector of Pakistan. Fig. 2. Comparison of per capita electricity consumption of some countries [32].
U. Perwez et al. / Energy 93 (2015) 2423e2435 2425

mostly of normally rhymed production cycle industries, such as


cement, textiles and leather products, requiring extensive constant
electricity supplies [37]. The sector-wise analysis of Pakistan shows
that the energy policies should be drafted with the view to provide
sufficient power supply that is essential to improve the produc-
tivity in manufacturing and service sector because these sectors are
more oriented towards electric power need than agriculture [36].
The commercial sector mainly consists of high tension consumers
and is growing at 2.46% per annum in terms of electric consumers
[39]. Meanwhile, electric consumer growth rate for agriculture is
3.02% per annum providing employment to 45% of population in
Pakistan as shown in Table 1 [40].
Table 2 shows the electricity consumption across the five de-
Fig. 3. Electricity load shedding in Pakistan.
mand sectors of Pakistan. The total demand of electricity grew from
48.6 tWh in 2000 to 112.9 tWh in 2011, with an annual average
growth rate of 4.74%. Among the various sectors, domestic sector
power generation e 62 percent in total of which natural gas and
constitutes major share of electricity consumption that increased
furnace oil provide 31.5% & 30.5% respectively. Fossil fuels are fol-
from 22.8 tWh in the year 2000 to 36.1 tWh in 2011 due to
lowed by hydropower which is 33.5% of the overall generation [42].
improvement in standard of living. In the year 2011, electricity
Based on data from Economic Survey of Pakistan (2011) and Hy-
demand for industrial sector was 22.6 tWh, for agricultural sector it
drocarbon Development Institute of Pakistan (2011), the electricity
was 8.6 tWh, for commercial it was 6 tWh and for other services it
supply in Pakistan grew from 68.1 tWh in 2000 to 95.6 tWh in 2011,
was 4.7 tWh. Energy intensity is the ratio of amount of energy
with an annual average growth rate of 2.39%. The installed capacity
consumption per activity and its unit in this study is kWh/con-
of electricity generation increased at a meager growth rate of 1.88%
sumer. In terms of growth in energy intensity, commercial sector,
from 17.3 GW in the year 2000 to 22.4 GW in 2011. The difference
which includes high tension commercial complexes and adver-
between electricity demand and generation growth is due to cir-
tisement billboard connections, have registered highest growth of
cular debt issue in the supply chain mechanism of electric power
4.23% for the last decade with agriculture, industrial, domestic and
sector.
other services sector energy intensity growing at 3.17%, 3.04%, 1.88%
Pakistan's electricity supplies are provided by WAPDA,
and 1.61% respectively [41]. This analysis also considers the quan-
IPPs, GENCOs, KESC and PAEC (Pakistan Atomic Energy Commis-
tification effect of electricity shortages by examining the patterns of
sion). Fig. 4(a) shows the installed capacity of electricity supply
electricity demand and supply from 2007 to 2011 as shown in Fig. 3.
entities in Pakistan. IPPs (Independent Power Producers) have
The load shedding is done by NTDC (National Transmission and
a maximum installed capacity of 8363 MW which mainly
Despatch Company) when a gap exists between electricity demand
consists of gas and oil power plants. WAPDA own gross installed
and consumption. In 2007, the load shedding accounted for
capacity of 6481 MW, all of which are hydroelectric based power
14.6 tWh; 23.4 tWh in 2008; 27.2 tWh in 2009; 31.6 tWh in 2010
plants. GENCOs are the oldest government owned entities
and 34.9 tWh for 2011.
having aggregate installed capacity of 4900 MW of which
2142 MW is generated from natural gas based thermal power
2.3. Analysis of electricity supply plants, 2608 MW is from oil based power plants and 150 MW is
generated via coal power plants. KESC share is 1946 MW which
Electricity supply for Pakistan is gravely focused on non- includes mainly gas based power plants with some contribution
renewable resources. Fossil fuel provides the huge chunk of coming from oil power plants. PAEC only deals with nuclear po-
wer generation and it has installed capacity of 787 MW. With low
international oil prices in early decade of 2000 and huge quantity
Table 1
of retrievable gas reserves relative to country demand, the focus of
Number of electric consumers across the five demand sectors of Pakistan (million).
investors shifted toward thermal power generation which fueled
Year Domestic Industry Agriculture Commercial Other services Total the establishment of oil and gas based power plants. The present
2000 10.045 0.196 0.180 1.737 0.008 12.16 share of oil and gas based power plants in Pakistan are 39.7% and
2005 13.390 0.222 0.220 2.068 0.010 15.91 27.1% respectively. The total installed capacity of hydroelectric
2011 17.808 0.284 0.282 2.466 0.012 20.85
plants is 6481 MW, nuclear energy plants have a capacity of

Table 2
Electricity consumption across the five demand sectors of Pakistan (tWh).

Year Domestic Industry Agriculture Commercial Other services Electricity shortfall Total

2000 22.8 14.3 4.9 3 3.5 e 48.6


2001 23.2 15.1 5.6 3.2 3.5 e 50.6
2002 23.6 16.2 6 3.5 3.4 e 52.6
2003 25.8 17.4 6.7 3.8 3.6 e 57.4
2004 27.6 18.6 7 4.4 3.8 e 61.3
2005 30.7 19.8 7.9 5.1 4 e 67.5
2006 33.3 21.1 8.2 5.7 4.4 e 72.7
2007 33.7 20.7 8.5 6 4.5 14.6 88.08
2008 32.3 19.3 8.8 5.7 4.3 23.4 93.86
2009 34.3 19.8 9.7 6.1 4.5 27.2 101.6
2010 35.9 21.2 9 6.1 4.8 31.6 108.7
2011 36.1 22.6 8.6 6 4.7 34.9 112.9
2426 U. Perwez et al. / Energy 93 (2015) 2423e2435

Fig. 4. (a) Installed capacity of electricity supply entities in Pakistan, (b) installed capacity of electricity by source in Pakistan.

787 MW and the coal power generation capacity is 150 MW each sector requirement. The government has already started the
(Fig. 4(b)). energy efficiency program by introducing energy savers and other
energy saving appliances in 2011. This effect is assumed to be taken
3. Methodology as per “NTDC Electricity Demand Forecast Report 2011”. Fig. 5
shows the electricity module framework developed for Pakistan
3.1. Pakistan's LEAP model framework LEAP model.
The transformation module is modeled using a scope of power
In this methodology, the LEAP (long-range energy alternatives generation technologies which includes different types of gas tur-
planning) system is used as an energy accounting modeling tool bines, oil combustion turbines, combined cycle cogeneration, hy-
which matches demand with supply-side electricity generation droelectric generation (large and small-scale), wind turbines and
technologies and outline the system impacts including electricity PV solar systems. For each technology type, dispatch rule, process
generation by source, electricity production cost at different dis- efficiency, historical production, exogenous capacity, endogenous
count rates and GHG (greenhouse gas) emission potential. On the capacity, life time of the plant, maximum availability, capital cost,
basis of Pakistan's electricity system, three scenarios are developed. O&M (operation & maintenance) cost and fuel cost are required. In
The year 2011 is used as the foundation year for all the energy the supply side of LEAP model, new and additional capacities are
pathways. The BAU scenario is an energy pathway focused on the added either exogenously or endogenously to the power sector
current policies and plans by WAPDA (Water and Power Develop- infrastructure on the basis of planned additions or retirements to
ment Authority), PEPCO (Pakistan Electric Power Company) and meet the demand sector requirement. The study also analyses the
NEPRA (National Electric Power Regulatory Authority). The NC and GHG (greenhouse gas) emissions linked with each fuel type for the
GF pathways focus on the objectives set in “National Power Policy power generation in Pakistan. The TED (Technology and Environ-
2013” and “AEDB (Alternate Energy Development Board) Medium- ment Database) is embedded in the LEAP system which includes
Term Development Framework” respectively. the emission factors stating values for CO2, NOx and SO2 emissions,
In LEAP, the data set consists of various modules such as key associated with the combustion of different fuels in electricity
assumptions, demand, transformation and resource. The key generation [43]. In order to demonstrate the focus and the system
assumption module includes data such as nominal GDP (gross boundary of LEAP, a block diagram is shown in Fig. 6.
domestic product), GDP growth, total population, population
growth and other such parameters. The demand module consists of 3.1.1. Main assumptions in the LEAP model
five sectors which include domestic, agriculture, commercial, in- In this section, the assumptions for the main parameters
dustrial and other services. The module incorporates GDP and other involved in modeling Pakistan's electric power system are provided
socio-economic variables with energy intensity growth rate as shown in Table 4 and Table 5. The average compound growth rate
(Table 3) and electric consumer projections for end use sectors to of GDP is forecasted to be 5 to 6 percent during the study period. It
forecast demand. The calculation for electricity generation depends is assumed that T&D (transmission and distribution) losses which
on the input of electricity usage by the each sector. For demand stand at 20.2% are expected to be 10.4% by 2030 [31]. The planning
analysis, the data required for the final energy intensity was not reserve margin is estimated as 12 percent [44]. Reserve margin is
available for Pakistan and thus the level of activities and total the percentage of additional generating capacity relative to peak
annual consumption by each sector were used to determine the load in a period of time to manage unpredictable surge in demand.
final energy intensity. In this case, level of activities stands for the The system load duration curve for Pakistan's electric system is also
amount of electric consumers while the final energy intensity drawn as shown in Fig. 7. The load duration curve is a curve that
represents electricity consumed per consumer. In LEAP model, describes in percentage terms how the peak power requirements
technologies are dispatched to meet the demand side based on vary from the highest load down to the lowest load. The GHG
emissions and environmental parameters are assessed on the basis
of Tier 1 emission factors as stated by the IPCC (Intergovernmental
Table 3 Panel on Climate Change): revised guidelines for national green-
Energy intensity growth rate of various sectors [31,41,42,47].
house gases inventories, Volume 3 [45]. Elasticity index exhibit the
Sector Growth rate (%/year) ratio of growth in energy consumption to the economic growth. It is
Domestic 1.88 pertinent to mention that the government of Pakistan has fore-
Industrial 3.04 casted the elasticity index to reduce from 1.15 to 1 by 2030 [31].
Agriculture 3.17 Hence, simulating these pathways would be feasible to evaluate if
Commercial 4.23 the target is indeed attainable under the present plans and stra-
Others 1.61
tegies of the scenarios. The salvage value is assumed to be 10
U. Perwez et al. / Energy 93 (2015) 2423e2435 2427

Fig. 5. Electricity module framework for Pakistan LEAP model.

Table 5
Summary of energy efficiency assumptions.

Defined rules

Resource 1. Penetration of renewable energy generation


availability must be less than its physical potential.
2. Fossil fuel demand must be less than
maximum supply capability.
3. Power generation facilities can be
imported from overseas.
Process efficiency 1. Process efficiency for renewable technologies
and capacity has been assumed as 100 per cent [11,22].
factor 2. Capacity factor of coal-fired power is 69% in S1 and
Fig. 6. Block overview of exogenous inputs and endogenous variables of LEAP. S2 scenarios. In S3, capacity factor of coal-fired power
can be lowered to zero for more penetration of
renewable energy generation
percent of the capital cost of the power plant [24]. In LEAP, the
capacity credit of an intermittent plant is the ratio of the availability
of the intermittent plant to the availability of a standard thermal generation is assumed to exhibit similar behavior to existing
plant. The capacity credit for different energy technologies are technologies. On the other hand, the energy technologies, such as
assigned based on previous studies [11,12]. The cost characteristics solar and biomass, which have not yet been deployed or are not
of the supply-side energy technologies are considered on the basis operational in Pakistan, IEA cost estimates are used as shown in
of two costing methodologies. For existing energy technologies Table 6. The effect of LNG (liquefied natural gas) delivery price, 18 $/
such as hydro, nuclear, wind, gas turbines and oil turbines, the new mmbtu, on gas tariffs are taken into consideration for economic
analysis.
Table 4
Summary of model input parameters [31,41,42,47]. 3.1.2. Limitations in the LEAP model
In this model, there are several data constraints and framework
Parameter
limitations. Foremost, the capacity of transmission network
GDP growth NTDC estimates of 4.8e6.5% annual GDP growth constraint combined with spatial analysis of power plants are not
Electric consumers growth Calculated according to “Economic
Survey of Pakistan” data
considered in this model. This model makes the assumption that
Transmission and Refers to NTDC published estimate of 10.4% the electricity supplies can be transmitted to any load station at any
Distribution losses time with no constraint. A second set of assumption is related to
Reserve margin Approximated as 12% based on previous study future cost characteristics (2020 and 2030 year) which are based on
System load duration curve Calculated according to “Pakistan Energy
source of IEA. A further set of assumptions is that the system cost is
Year Book” data
Environmental parameters Refers to the Technology Environmental not dependent on capital costs but only on generation sales. As for
Database within LEAP modeling limitations, the model does not consider hourly load
Merit order Maintained according to NEPRA dispatch order profiles but rather it calculates annual generation profiles. One of
Elasticity index Reducing it from 1.15 to 1 the drawbacks of this limitation is that the model does not incor-
according to NTDC estimates
porate any correlations of weather patterns impact on renewable
2428 U. Perwez et al. / Energy 93 (2015) 2423e2435

Fig. 7. System load duration curve of Pakistan's electricity sector.

technologies such as hydro, solar and wind. Finally, the impotence plan and official forecasts that define the shape of the sector for the
to predict public and political situations severely limit the model's next two decades. The objective of this scenario is to illustrate the
ability to develop interactive pathways. To overcome model limi- future through the analysis of the strategies and policies of the
tations, a more complex modeling platform and in-depth data are government, and portray the relationship of electricity sector with
required to be incorporated such as spatial location and charac- the political, economic and environmental happenings in the re-
teristics of power plants, the capacity and characteristics of trans- gion. In this scenario, “NTDC Electricity Demand Forecast Report
mission network, hourly load profiles based on seasonal renewable 2011” has been consulted for the growth in electricity generation by
resource maps and a system cost calculation parameters dependent different sources [31]. One of the common approaches, interpola-
on capital costs. tion method, is used for ‘load forecasting’. With respect to the
supply side, oil fired power plants will be converted to coal by
3.2. Scenario development replacing the oil based boilers to sub-critical coal fired systems
[49,50]. However, it is also expected that the gas shortage will be
Scenario planning is a constructive technique to develop the much more severe in the next two decades and could result in an
long-term electricity infrastructure plans and deals with the economic crisis [51,52]. To minimize this gas shortage effect, the
unpredicted perspective requirement for power. “It permits the government plans to import 500 mmcfd LNG from Qatar and half of
development of potentialities that are linked with diversity of it will be directed to gas fired power plants [53]. Moreover, IPPs
policies and technological pathways with the intention of evalu- (independent power producers) will remain the main contributors
ating efficiently the doubts that lie forth in the energy, economic to electric grid but major chunk of it will also come from WAPDA
and environment segments” [48]. In energy research, long-term especially in terms of hydropower generation. Similarly, the gov-
energy pathways therefore offer different narratives that propose ernment has given a go ahead to PAEC (Pakistan Atomic Energy
a ‘set of other possible situations for searching the future which Commission) to install 2200 MW nuclear power plants in Karachi
may unfold in different ways’ [14]. Each scenario is assessed based with the co-operation of China [54]. These main assumptions are
on the supply side characteristics and assumptions according to the considered in the supply side system to construct S1 scenario.
particular philosophies which resulted in the framing of particular
energy strategy. 3.2.1.2. S2 scenario (NC). S2 scenario is based on “National Power
Policy 2013” as issued by government [55]. The vision of this policy
3.2.1. Supply side scenarios is to direct electricity sector, over a short term, towards least cost
3.2.1.1. S1 scenario (BAU). S1 scenario portrays the energy scenario power generation technologies and emphasize on shifting thermal
that is based on the current trends by using government policy, mix towards coal. S2 scenario implies the strategy that Pakistan

Table 6
Cost characteristics of energy technologies used in LEAP [11,22,46,47].

Nuclear Gas Oil Coal Hydro Solar PV Wind Biomass

Capacity credit (%) 100 100 100 100 100 36 36 100


Process efficiency (%) 33 46 51 42 100 100 100 35
Capacity factor (%) 86 58 54 69 47 25 26 56
Life time (year) 30 30 30 30 40 25 20 25
Capital cost (2011$/kW) 4000 660 910 1700 2600 2590 1480 2180
2020 4264 932 994 1864 2450 1760 1530 2110
2030 4208 890 950 1782 2364 1360 1440 2020
O&M cost (2011$/MWh) 7.99 2.05 3.76 3.96 4.45 11.4 13.0 8.67
2020 12.0 2.71 2.94 6.84 4.79 7.63 13.59 8.44
2030 12.0 2.71 2.94 6.84 5.13 5.89 13.59 8.10
Fuel cost (2011$/MWh) 9.15 35.8 154.5 30.2 e e e 36.1
2020 8.0 67.0 182 31.2 e e e 34.0
2030 8.0 72.0 202 31.2 e e e 32.0
U. Perwez et al. / Energy 93 (2015) 2423e2435 2429

should move to coal power generation in order to reduce its oil 312 tWh in the year 2030, which is approximately a growth of 177%
import bill and overcome the circular deficit in this sector which is over the base year value (Fig. 9). Among the demand sectors, do-
worth $6.6 billion. Pakistan has a large quantity of retrievable coal mestic sector has the major portion for each demand side scenario
reserves assessed to be about 185.5 billion tonnes, which are not which is followed by industry, agriculture, commercial and others
utilized in the power generation and to meet other energy de- respectively. The major reason for demand growth in the domestic
mands. However, this discovered coal is majorly composed of sector is due to increase in the energy usage caused by the eco-
lignite with high sulfur content in Lakhra and low sulfur content nomic growth and higher living standards. In 2011, domestic sector
with moisture in Thar which has a lower gross heating value. With was a leading segment of electricity consumption as compared to
growing concerns regarding the electricity shortfall, new power the other sectors and the scenario remains the same until 2030 that
plants have to be built by the country having the world 6th largest make the load management very complex. It is for this reason that
coal reserves to overcome this crisis [56]. In this regard, the gov- proper policy formulation is needed to meet the requirements by
ernment has planned to shift from oil fired plants worth 4200 MW establishing sustainable electricity supply infrastructure for
to coal fired plants by using these excessive reserves [57]. To lure attaining this objective.
the foreign investors in coal power generation, an energy park is
already in pipeline to be built at Gadani with the generating ca- 4.2. Electricity generation projections
pacity of 6600 MW (10  660 MW) on the imported coal [58]. This
pathway also takes into consideration the Sind Engro Project at The obtained results of installed capacity mix, electricity mix
Thar coal field and Sahiwal coal project for future forecasting which and key performance indicators are shown in Figs. 10e12 and
will be initially be commissioned by 2017 [59]. Table 7. The results show that:

3.2.1.3. S3 scenario (GF). This energy pathway is inspired by the (1) In S1 with 21 GWe hydro power, even though a high level
Go Green initiative that forms the basis of the policies towards the penetration of renewable energy is realized, a maximum of
injection of renewable energy in power generation. S3 scenario is about 7 GWe new gas power plants need to be built by 2030
a very aggressive strategy to promote the renewable energy in the and a maximum of about 30% of gas needs to be imported in
overall energy mix. It also provides the way forward to tackle the terms of LNG from overseas in 2030.
uncertain international energy market and moves the country (2) In S1 and S2 with 11 GWe and 20 GWe coal power respec-
toward energy independence. However, this pathway requires tively, no new oil fired power plants need to be built, and at
better infrastructure for its advancement and for the acquisition of least 75% of furnace oil is saved in 2030 compared to 2011
renewable energy technologies in the overall energy blend. Ac- levels. Furthermore, coal-fired power plants have to operate
cording to the MTDF (Medium-Term Development Framework) at a high capacity factor of about 69% in S1 and S2.
2005e2010, AEDB (Alternate Energy Development Board) will (3) The S2 scenario results in installed capacity reduction of
promote the alternate energy projects which will result in 5% of 1730 MW and 5115 MW relative to S1 and S3 respectively due
total planned national power generation capacity by 2030 [60]. to expansion of higher capacity factor coal power plants
The potential of renewable energy depends upon number of instead of existing de-rated furnace oil power plants.
limitations such as technological, geographical and economical (4) In S3, the penetration level of renewable energy can reduce
ones [61]. In Pakistan, there is abundant potential to harness the dependence on coal and oil fired power, but it needs
renewable energy resources which have remained unexploited till flexible power sources such as gas power to compensate for
date. Hydropower potential is approximately 100 GW with iden- supply variability. This reduction in dependence on fossil
tified sites capable of generating 55 GW so far [62]. According to fuels with the help of renewable energy can reduce CO2
the AEDB (Alternate Energy Development Board), Pakistan has emissions.
potential to generate 360 GW from wind energy which is further (5) Comparing S1 with S2 and S3 introduced in (1) and (2), we
validated by the estimates of 346 GW as per study of NREL (Na- can understand that it is very difficult to remove oil fired
tional Renewable Energy Laboratory, USA) and USAID [63]. How- power plants absolutely in an available, clean and safe future
ever, it is estimated that Pakistan will have exploited potential of electricity system of Pakistan even if renewable energy
30 GW and 50 GW from hydel and wind energy respectively by penetrates as much as possible and energy conservation is
2030 [64]. According to Farooq and Kumar, the potential of solar realized.
and biomass energy will be 169 GW and 15 GW respectively in (6) The S3 has lowest primary resource requirement as
Pakistan by 2030 [65]. The potential estimates of renewable compared to S1 and S2 because process efficiency for
technologies in Pakistan give a positive feedback to construct this renewable technologies has been assumed to be 100 per cent
real-time scenario. With the country's heavy dependence on im- [11,22].
ported furnace oil, a major reduction on this reliance can become a
key energy security solution and will also promote environmental
commitments of the government. 4.3. Economic analysis of energy pathways

4. Results The energy economic dynamics used for this analysis is based on
the fuel cost for each source of power plants and other monetary
4.1. Demand projections assumptions to simulate these scenarios as shown in Table 6.
Moreover, the sunk capital cost is not considered before 2011
The projection of growth in number of electric consumers across because of the difficulty in obtaining the data for the retroactive
the five demand sectors is shown in Fig. 8. The projected electric cost of power plants and their years of construction. However, the
consumers in 2030 is 39.7 million (up from 20.8 million in 2011). comparison of alternative scenarios will be quantified on the basis
The growth rate of electric consumers per annum (2011e2030) for of future cost by considering the overnight capital cost and running
domestic sector would be 2.57%, for agriculture sector 2.27%, for cost (fuel and operation & maintenance cost).
other services sector 2.26%, for industrial sector 2.01% and for The economic considerations are further validated by dis-
commercial sector 1.94%. Electricity demand is anticipated to be counting all the costs over the defined study period. As shown in
2430 U. Perwez et al. / Energy 93 (2015) 2423e2435

Fig. 8. Forecast of Electric Consumers Growth across the five demand sectors in Pakistan.

Fig. 9. Electricity requirement across the five demand subsectors as per demand side scenario.

Fig. 10. Annual electricity generation in the S1 scenario from 2000 to 2030.

Fig. 13, the total cost incurred, includes capital investment, fuel cost every discount rate due to the significantly lower running costs of
and O&M cost, is discounted at rates of 4%, 7% and 10%. The S1 renewables as compared to the other fossil-fuel dominated elec-
scenario illustrates higher figure than the other alternative sce- tricity mix scenarios. This indicates that the benefit of renewable
narios due to the government policies focusing on the existing technology can be assessed over a long term when the initial in-
diversified energy mix infrastructure resulting in higher running vestment recovery is done by large savings in terms of running cost.
costs than other scenarios. Comparison of the alternative scenarios The net present generation cost relative to S3 scenario is shown
show that S3 scenario represents least-cost electricity pathway at in Fig. 14, which provides a useful insight into the dispersal
U. Perwez et al. / Energy 93 (2015) 2423e2435 2431

Fig. 11. Annual electricity generation in the S2 scenario from 2000 to 2030.

Fig. 12. Annual electricity generation in the S3 scenario from 2000 to 2030.

between running cost and overnight capital cost. It is illustrated in in S1 is higher than other scenarios because of the expensive
Fig. 14 that S2 scenario relative to S3 pathway will lead to higher thermal generation and low capacity factor of outdated power
saving of capital cost ($3 billions) but requires higher running cost plants. However, in S3 the cost is lower than other scenarios
($9 billions) during the 20 year study period. In S2 scenario, the because of improvements in productivity and operational efficiency
discounted capital cost (at 7%) for bringing the new power gener- gains related to nuclear, hydro, and renewable generation. None of
ation into the system is $28 billion out of which 50% goes to coal- the scenarios exceeded the current price of 12 US Cents/kWh.
fired power generation capacity building. Meanwhile, discounted However, power generation cost is highly dependent on the suc-
capital cost of S1 scenario during this study period is $29 billion out cessful realization of renewable power cost reduction, fossil fuel
of which 47% share will be spent on thermal power plants. This price in the global market and external impacts on nuclear power
indicates that the initial investment for thermal power generation among other uncertainties.
will result in higher running cost when assessed on long term basis.
The average generation cost per unit electricity is an economic 4.4. Environmental perspective
parameter which is regulated to avoid the scenario becoming too
expensive. At present, renewable energy is much more expensive According to IEA, thermal power plants are the greatest source
than traditional electricity; however its cost is expected to be of CO2 emissions globally which are expected to rise manifold due
reduced greatly to a competitive level against present conventional to increase in the worldwide energy consumption by 2050 [66].
electricity. Although there are many uncertainties in the prices of Similarly in Pakistan, energy generation and combustion activities
fossil fuels in future global markets and economic performance are the main contributors of GHG emissions resulting in 60% of the
improvements of renewable energy, a maximum average power overall emissions [67]. It shows that the power generation growth
generation cost of 12 US Cents/kWh is used here to constrain the will have greater impact on GHG emissions which should be
scenarios. The average power generation cost shown in Fig. 15 is analyzed to assess futuristic environmental issues. In 2011, CO2
dependent on various factors. Share of expensive renewable energy emissions in Pakistan were 442 g/kWh per unit electricity gener-
and excess power ratio leads to capital cost increases, however, ation and 48 Million tonnes in total. The CO2 emission levels in 2011
share of gas power and capacity factor for coal-fired power in- will be used as a standard to evaluate the reduction in the elec-
creases fuel cost. For example, the average cost of power generation tricity system scenarios. CO2 emissions information is shown in
2432 U. Perwez et al. / Energy 93 (2015) 2423e2435

Table 7
Composition of electricity generation for different scenarios in 2030.

2011 S1 (BAU) S2 (NC) S3 (GF)

Install capacity in MW 22477 63815 61455 66570


Hydro 6481 21150 19530 26555
Coal 150 11760 20225 4895
Gas 6094 13210 14595 15280
Oil 8965 10370 2030 1890
Nuclear 787 3390 2820 5250
Wind e 2510 1440 7700
Solar e 1425 815 3250
Biomass e e e 1750

Electricity generation 100 100 100 100


in per cent
Hydro 33.5 33.14 31.78 39.89
Coal 0.1 18.43 32.91 7.35
Gas 31.5 20.70 23.75 22.95 Fig. 15. Electricity generation cost of supply-demand scenarios.
Oil 30.5 16.25 3.30 2.84
Nuclear 4.4 5.31 4.59 7.89
Wind e 3.93 2.34 11.57
Solar e 2.23 1.33 4.88 scenario, S2, has much higher CO2 emissions per unit electricity
Biomass e e e 2.63 compared with S1 and S3 because more thermal power (mainly
Primary resources in tWh 167.5 625.2 662.0 548.7 coal power) is introduced in the electricity system to compensate
Hydro 32.1 116.2 107.7 139.3 for energy shortages in shorter time. However, compared to 2011
Coal 0.2 177.2 294.7 68.0 levels, S1 and S3 scenarios can all achieve an emissions reduction
Gas 65.7 161.4 177.1 173.5
with the help of nuclear power, renewable power and energy
Oil 57.1 90.6 17.7 16.5
Nuclear 12.4 73.6 61.2 113.9 saving. Therefore, for energy-related climate issues to be given
Wind e 4.0 2.3 12.3 serious policy attention, many argue that creating incentives for
Solar e 2.1 1.2 4.8 engagement is a precondition to encourage participation by a va-
Biomass e e e 10.5 riety of actors, particularly investors. It means looking at two
possible avenues: exploring the emissions trading avenue or
reducing local air pollution as a matter of policy priority. The
implementation of S3 scenario will result in lower GDP loss related
to air and water pollution, which is estimated to be 4.1% of GDP per
annum (including malnutrition and child mortality) in Pakistan
according to World Bank [68]. Thus, in view of the compatibility in
the practice of reducing CO2 emissions, incremental changes to
ongoing policies should be drafted to deliver local benefits that may
result in an effective way to gradually embark on a carbon miti-
gation program. However, if environmental and economic aspect is
taken into account relative to other scenarios then S3 scenario
seems to be the least-cost electricity pathway.

4.5. Demand side management of least-cost scenario


Fig. 13. Aggregate NPC at discount rate of 4%, 7% and 10%.
DSM (Demand side management) is an internationally recog-
nized measure which plays important part in bridging demand-
supply gap. The demand is decided by many factors including the
socio-economic situation, disasters and unforeseen technological
development and the uncertainty around these factors are high.
Therefore, in the present study, the demand scenarios are gener-
ated based on assumptions that incorporate these uncontrollable
uncertainties. According to ENERCON (National Energy Conserva-
tion Center), the potential of electricity conservation across de-
mand sector is 30%, 25% for industrial sector, 20% for agriculture
sector and 25% for commercial sector. Therefore, we assume that no
energy conservation strategy is realized in the first demand sce-
nario (D1); 12.5% reduction is realized in the second demand sce-
nario (D2); and a 25% reduction is realized in the third scenario
(D3). In D2, it may be possible to reduce 3% in all the four sectors
through lifestyle changes, efficiency improvements etc. On the
Fig. 14. NPC relative to S3 scenario at 7% discount rate.
other hand, in D3, steeper reductions would be required. The
achievement of the D3 cuts would be reliant on technological
Fig. 16. The CO2 emissions per unit electricity are also affected by improvement or significant policy and economic shifts. The variety
various factors. Higher shares of renewable energy and nuclear of demand reduction strategies are not the key focus of this study,
power and lower shares of thermal power can lead to CO2 emis- however, meeting potential demand levels, and finding the lowest
sions reduction. In the three demand scenarios, the second supply emissions mix under given supply-side policies is the main interest
U. Perwez et al. / Energy 93 (2015) 2423e2435 2433

Fig. 16. CO2 emissions in the electricity supply-demand scenarios.

here which is why 3 levels of demand are used for the least-cost 5. Discussion and policy implications
scenario (S3). As a result of demand side management on S3 sce-
nario, the saving of electricity is 70.6 tWh in case of D3S3 as This paper analyses the electricity supply-demand scenarios to
compared to D3S1 (green future oriented non-energy saving sce- illustrate the most economical, efficient and environmental
nario), which results in installed capacity saving of 13,585 MW friendly way forward for electric power sector and looks at the
(Fig. 17). However, the penetration level of renewable energy re- consequence on the dynamics of Pakistan's energy market. Out of
duces from D1 to D3 with demand reduction because it is hindered several scenarios, D3S3 seems to be most practical and performs
by the base load supply plants. It is shown that when power gen- well from technological, economic and environmental perspec-
eration capacity become big enough relative to the demand, energy tives. The reduction of consumption in case of D3S3 is due to pro-
saving is optional and it is difficult for new renewable energy to posed energy conservation measures.
penetrate into the entire system. Energy conservation measures are aimed at reducing energy
The changes in the cost of least-cost scenario due to different demand through the use of energy efficient appliances/tools/
socio economic assumptions are studied in sensitivity analysis. The equipment or by changing the behavioral patterns of individuals.
total costs of scenarios obtained by changing different variables are Maintaining energy security is one of the major reasons behind
tabulated in Table 8. The reason there are no considerable cost widespread adoption of energy conservation and efficiency mea-
differences for other parameters except fuel cost is due to the fact sures. It is evident from the experience of many countries that
that the cost for fuels account for most of the total costs (63% in energy conservation and efficiency measures are among the
D1S3, 65% in D2S3 and 67% in D3S3) and the proportion of capital feasible options to address issues related to energy shortfall and
costs is relatively low. This shows that fuel cost is the most domi- climate change. However, the internal problems confronting Paki-
nant factor to influence cost in future. In addition, the cost differ- stan's electricity sector which include ineffective governance
ence would be increased in S3 scenario if fossil fuel prices increased structure of sector, lack of credible regulatory regime (NEPRA),
due to depleting resources while the cost of renewable energy extremely high T&D losses, below-cost tariff structures with dif-
technology decreased owing to more installation and penetration ferential subsidies and poor efficiency oriented R&M (renovation
in local market. As fuel and technology cost have increased, the and modernization) of power plants, further delayed the imple-
increase in D3S3 cost is less than other scenarios which makes it mentation of conservation policies. The policy response to struc-
more attractive. The drop in total cost for D3S3 is greater when tural reforms is to move from flaws of centralized electricity system
compared to other pathways as discount rate and salvage cost in- to complementary decentralized system for addressing institu-
crease and hence D3S3 is desirable. The parameters such as higher tional fragmentation issues in sector. The effectiveness of the sec-
discount rates, internalization of GHG emission costs, higher fuel tor's regulatory regime can be enhanced by introducing
prices, and technological development made the D3S3 scenario institutional mechanisms to impose restraints on government
more competitive. administrative interventions and safeguard private investor value.

Fig. 17. Electricity generation of the least cost supply-demand scenarios.


2434 U. Perwez et al. / Energy 93 (2015) 2423e2435

Table 8 due to electricity shortages. On the other hand, the analysis shows
Cost sensitivity analysis (billion US$, 2011). that S3 scenario is more economically efficient way forward as a
D1S3 D2S3 D3S3 long term plan in comparison to other pathways. The cleaner sce-
Default cost analysis result (discount rate 4%) 162 154 146
nario pathway in context of Pakistan will bring positive local impact
Discount rate 7% 127 119 111 rather than on global scale until focus on global carbon trading
Discount rate 10% 100 92 84 system gains some pace worldwide. Also, the renewable scenario
Fuel cost (half the price of default analysis) 105.8 99.3 92.8 will become more realistic when alternative technologies will start
Fuel cost (1.5 times the price 218.2 208.7 199.2
to penetrate or emerge into mainstream energy market. The AEDB
of default analysis)
Technology cost (5% decrease by 2030) 160.2 152.4 144.6 in its policy framework, needs to propagate renewable energy by
Technology cost (5% increase by 2030) 163.9 155.7 147.5 encouraging distributed generation, like Cuba and India, devel-
No technology development 166.4 158.2 149.9 oping renewable infrastructure near load centre at convenient
(cost in 2011 lasts until 2030)
location where the grid extension may be difficult, proposal for
Salvage cost (2 times of default analysis) 162.9 154.9 146.8
Salvage cost (0.5 times of default analysis) 162 154 146
establishing MNES (Ministry of Non-Conventional Energy Sources),
Electricity cost (US Cent/kWh) 10.13 9.86 8.83 make it obligatory for the power utilities to ensure purchasing at
least 10% of power in their mix from renewable generation, facili-
tation of funds for international collaboration to solve the grid
T&D (Transmission and distribution) losses, due to poorly main- connectivity issue of existing wind power plants (Zhorlu and FFCEL
tained and outdated transmission and grid infrastructure, inaccu- wind power plants at Jhimpir), establishing central management
rate metering and billing, and electricity theft, pose a very serious system mechanism for monitoring of micro grids by using SCADA
challenge in Pakistan. T&D losses in Pakistan are hovering around (Supervisory Control and Data Acquisition) and abolishment of 32.5
20% which are much higher than in OECD (Organization for Eco- percent custom duties on solar panels.
nomic Co-operation and Development) countries (7%). The policy With these pricings, supply mix, and environmental emissions
response to this issue is to accelerate the timetable for privatizing dynamics, Pakistan's energy planner has to make a decision to
DISCOs (distribution companies) with constraint of revenue cap either to stay on the same course or create a more low-carbon
regulation and granting authority of tariff determination to DISCOs. focused electricity plan.
Tariff policy should be focused toward rationalizing electricity
prices by capping it with international fuel price adjustment factor 6. Conclusions
to generate adequate revenue and also eliminate tariff differential
subsidies that have created huge fiscal burden. For proper efficiency This study focused on the balance and match of supply-demand
oriented renovation and modernization, energy audit of the power in the future electricity system of Pakistan based on different
plants should be carried out each annum to monitor their thermal supply policy selections and demand assumptions. Scenario anal-
efficiency. The non-existence of government policies toward energy ysis on the electricity system was conducted from technological,
conservation has led to the formation of unsustainable energy economic, and environmental perspectives. The results of the an-
system. Immediate actions should be taken such as: alyses quantitatively demonstrate the technological, economic and
environmental impacts of different supply policy selections and
 Approval of ‘Pakistan Energy Efficiency & Conservation Bill 2014’ demand assumptions. The obtained results show that:
from Parliament.
 Develop clear energy efficiency and alternative energy strategies  The S1 and S2 scenarios fail on at least three aspects: (i) both
and targets. increases primary resource requirement, (ii) the carbon inten-
 Establishment of electricity production and consumption sive scenarios fail to address the option of least-cost energy
monitoring as well as the early warning mechanisms. strategy, and (iii) both do not provide cost-effective response to
 Improvement of thermal efficiency and the APR (auxiliary po- restriction on emissions.
wer ratio) of power plants.  With the “electricity crisis” at hand, Pakistan has the opportu-
 Develop and implement building energy codes and obligations. nity to reconsider the current energy policy. For instance, our
 Implementation of labeling energy saving codes for appliances. results show that the pro-thermal generation scenarios (S1 and
 Structural adjustments of the economic sectors with a focus on S2) will neither help in lowering the electricity rates nor will it
the development of low energy intensive, environmental- reduce the stock of cumulative environmental emissions.
friendly and high value-added industries. Instead, substitution of indigenously resource-rich and rela-
 Improve the technological sophistication of grid and their tively low-carbon solutions, such as in S3 scenario, could result
management to introduce energy saving in transmission in relatively cheaper and cleaner electricity in Pakistan. In
segment. addition, such a plan can also make Pakistan's supply mix
 ENERCON should be authorized to provide financial incentives import independent.
to energy conserving consumers.  Based on our economic analysis, fuel cost is the most dominant
 Impose energy efficiency spatial planning. factor to influence cost in future. This also indicates that S3
 Develop pricing policies. scenario appears to be least influenced by fuel cost parameter
 Encourage enterprises to adopt clean conversion technologies over a long term because the huge initial investment for
and promote technological innovations to improve energy implementation of renewable technology will be recovered by
efficiency. large savings in terms of running cost.
 Promote energy audits through energy service companies.  CO2 emissions reduction compared to 2011 level can be realized
 Develop vocational programs that aim to raise awareness readily with the help of renewable energy, nuclear power and
among the public to save energy on regular basis. energy saving by 2030. For all scenarios, apart from S2, CO2
emissions range between 212 g/kWh and 331 g/kWh per unit
If S1 and S2 scenarios are selected, Pakistan will have to face electricity generation comparing with 442 g/kWh in 2011.
unstable fossil fuel availability in global market, CO2 emissions/  The DSM (Demand side management) study on least cost sce-
climate change pressures and possibly slow economic development nario (S3) shows that the penetration level of renewable energy
U. Perwez et al. / Energy 93 (2015) 2423e2435 2435

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