Solutions for Energy Crisis in Pakistan i ii Solutions for Energy Crisis in Pakistan Solutions for Energy Crisis in Pakistan iii iv Solutions for Energy Crisis in Pakistan Acknowledgements his volume is based on papers presented at the one-day National T Workshop on the topical and vital theme of Solutions for Energy Crisis in Pakistan held on December 17, 2014 at Marriott Hotel, Islamabad. The Workshop was jointly organised and financed by the Islamabad Policy Research Institute (IPRI) and the Hanns Seidel Foundation, (HSF) Islamabad. We are grateful to the contributors who presented their scholarly papers at the workshop and the chairpersons who presided over the lengthy proceedings and summed up the findings of each session with their valuable comments. We are also thankful to the representatives of public sector institutions who accepted our invitation to participate in the workshop as discussants. All efforts were made to make the workshop as productive and result- oriented as possible. However, if there was any area left wanting in some respect the workshop management owns responsibility for that. Solutions for Energy Crisis in Pakistan v CONTENTS Acknowledgements Acronyms Introduction 1 Welcome Address Ambassador (R) Sohail Amin 5 Opening Remarks Mr. Kristof W. Duwaerts 7 Concluding Remarks Ambassador (R) Sohail Amin 9 Chapter 1 Solutions for Energy Crisis in Pakistan Air Cdr. (R) Khalid Iqbal and Aftab Hussain 10 Chapter 2 Review of Energy Sector with Focus on Electricity Tariff Determination Advocate Ameena Sohail 19 Chapter 3 Implementation of National Energy Policy: Challenges and Options Ashfaq Mahmood 32 Chapter 4 Fund Raising for Energy Projects in Pakistan Dr. Vaqar Ahmed and Huma Dad Khan 56 Chapter 5 Autarky in Energy and Power Dr. Shaukat Hameed Khan 84 Chapter 6 Issues in Energy Policy Syed Akhtar Ali 95 vi Solutions for Energy Crisis in Pakistan Chapter 7 Nuclear Power – An Essential Part of Solution for Energy Crisis in Pakistan Yusuf Raza Zaidi and Mr. Ghulam Rasool Athar 191 Chapter 8 Hydro-Power: An Affordable and Sustainable Option for Pakistan Dr. Shaheen Akhtar 197 Chapter 9 Diplomacy and International Dimension of Energy Management: Progress and Development since December 2013 Dr. Nazir Hussain 221 Chapter 10 Universities and Think Tanks as Drivers of Energy Conservation in Pakistan Muhammad Mustansar Billah Hussain 228 Chapter 11 Solutions for Energy Crisis in Pakistan: Energy Efficient Buildings Dr. Ashfaq Ahmed Sheikh 234 Chapter 12 Legislation for Energy Conservation in Pakistan: The Judicial Response in 2014 Barrister Aemen Zulfikar Maluka 248 Chapter 13 Recommendations 255 Appendix National Power Policy 258 Contributors 280 Index 285 IPRI Publications 288 Solutions for Energy Crisis in Pakistan vii ACRONYMS ADB Asian Development Bank AFD Agence Française de Dévelopement Bcf Billion cubic feet BCMA Billion Cubic Meters per Annum BOO Build, own and operate BPD Barrels Per Day CASA Central Asia South Asia CCI Council of Common Interests CHASCENT CHASNUPP Centre of Nuclear Training (Pakistan) CNG Compressed Natural Gas CNNC China National Nuclear Corporation DRO Debt Retirement Organisation E&P Exploration and Production EIA Energy Information Administration ENERCON National Energy Conservation Centre ENI Ente Nazionale Idrocarburi ETS Emissions Trading Scheme EU European Union FDI Foreign Direct Investment FPCCI Federation of Pakistan Chambers of Commerce & Industry GDP Gross Domestic Product GENCO Power Generation Company GHCL Genco Holding Company Limited GIDC Gas Infrastructure Development Cess viii Solutions for Energy Crisis in Pakistan GNP Gross National Product GoP Government of Pakistan GUSA Gulf-South Asia HEC Higher Education Commission IAE International Energy Agency IAEA International Atomic Energy Agency IDB Islamic Development Bank IMF International Monetary Fund IP Iran-Pakistan gas pipeline IPC Iran-Pakistan-China IPI Iran Pakistan India IPPs Independent Power Producers JEXIM Japan Export Import JICA Japan International Cooperation Agency KANUPP Karachi Nuclear Power Plant KfW Kreditanstalt für Wiederaufbau KINPOE Karachi Institute of Power Engineering KKH Karakoram Highway KOMIPO Korea Midland Power Company KPT Karachi Port Trust LCDC Lakhra Coal Development Company LEED Leadership in Energy and Environmental Design LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas MBTU Million British Thermal Units MIT Massachusetts Institute of Technology Mcf/d Million cubic feet per day MMCMD Million metric cubic meters per day Solutions for Energy Crisis in Pakistan ix MMTOE/MMOE Million metric tons of oil equivalent MoU Memorandum of Understanding MTPS Muzaffargarh Thermal Power Station MW Mega Watt NBT Nordisk Bageriteknik NCNDT National Centre for Non-Destructive Techniques NDFC National Development Finance Corporation NEP National Energy Policy NEPRA National Electric Power Regulatory Authority NPPs Nuclear Power Plants NREL National Renewable Energy Laboratory NSG Nuclear Suppliers Group NTDA National Transmission Dispatch Authority NTDC National Transmission & Despatch Company NUST National University of Science and Technology OECD Organization for Economic Cooperation and Development OGRA Oil & Gas Regulatory Authority PAEC Pakistan Atomic Energy Commission PBC Pakistan Business Council PEC Pakistan Engineering Council PEPCO Pakistan Electric Power Company PIEAS Pakistan Institute of Engineering and Science PMD Pakistan Metrological Department PNRA Pakistan Nuclear Regulatory Agency POL Petroleum, Oil, & Lubricants PPIB Private Power & Infrastructure Board PPL Pakistan Petroleum Limited x Solutions for Energy Crisis in Pakistan PPP Public Private Partnership PQA Port Bin Qasim PSEDF Private Sector Energy Fund PWI Pakistan Welding Institute PWR Pressurized Water Reactor RPPs Rental Power Plants SECMC Sindh Engro Coal Mining Company SHS Solar Home Systems SNRS School for Nuclear and Radiation Safety SNS School for Nuclear Security SROs Statutory Regulatory Orders T&D Transmission and Distribution TAPI Turkmenistan-Afghanistan-Pakistan-India TPES Total Primary Energy Supplies UNOCAL Union Oil of California USAID US Agency for International Development WAPDA Water and Power Development Authority WB World Bank WHS Wind Home Systems Solutions for Energy Crisis in Pakistan 1 Introduction Ambassador (R) Sohail Amin Air Cdre (R) Khalid Iqbal and Aftab Hussain slamabad Policy Research Institute (IPRI) in collaboration with Hanns I Seidel Foundation (HSF), Islamabad office, organised a National Conference on ―Solutions for Energy Crisis in Pakistan‖ on May 15-16, 2013. Soon after the IPRI-HSF National Conference, a new elected government took over which announced a National Energy Policy (NEP) in July, 2013. The NEP is reflective of a number of recommendations put forward by the IPRI-HSF National Conference. As a continuation of the effort, and to analyse the progress in energy sector after the National Conference, a one day workshop on ―Solutions for Energy Crisis of Pakistan‖ was organised by IPRI and HSF on December 17, 2014 at Marriott Hotel, Islamabad. This book covers the proceedings of the conference and the workshop. The workshop was divided into two parts. In the first part, four eminent experts and scholars made presentations on topics ranging from ―Review of Energy Sector‖ to ―Challenges and Options for Implementation of National Energy Policy‖ and from ―Fund Raising for Energy Projects‖ to ―Resource Mobilization in terms of Fuels and Finances‖. In the second part, ten discussants offered their comments on the energy policy of Pakistan. Ms. Advocate Ameena Sohail, independent energy analyst and practising lawyer, spoke on “Review of Energy Sector with Focus on Electricity Tariff Determination” and discussed the legal and regulatory institutional arrangements. She highlighted the constitutional provisions on power and authority of each institution and discussed their functions. She reviewed the current energy crisis and highlighted the huge gap in demand and supply. She noted that after the 18th amendment, low investment had been observed in oil and gas sectors. She discussed high tariff thermal power generation which prevented initiation of new projects with low tariffs on short term basis due to non-availability of funds. She emphasised the need for an effective control mechanism to check frequent breakdowns, shortage of supply and theft. What Pakistan needed was a national vision 2 Solutions for Energy Crisis in Pakistan for sustainability and affordability of power based on indigenous resources, she said. Mr. Ashfaq Mahmood, former Federal Secretary Water and Power and former member Planning Commission of Pakistan, in his presentation on “Implementation of National Energy Policy: Challenges and Options” said that Pakistan did not have an integrated national energy policy. He said that Pakistan needed a low cost and sustainable power sector to meet its energy requirements. He mentioned various indigenous and external options along with challenges that hindered the progress of projects. He discussed Pakistan‘s commercial energy supply mix in detail and emphasised the need for adopting energy conservation methods especially in oil and gas sectors. Dr. Vaqar Ahmed, Deputy Executive Director, Sustainable Development Policy Institute (SDPI) talked about “Fund Raising for Energy Projects in Pakistan”. He discussed government‘s investment policy to raise investment for energy projects which due to lack of reforms, low revenue collection, circular debt, failure to exploit cleaner