Energy band-aids

Energy band-aids — Robert M Hathaway & Michael Kugelman
Daily Times, May 21, 2008

The federal cabinet’s announcement last week of new energy conservation measures is a welcome recognition of the urgency of the country’s energy crisis. But Pakistanis should not fool themselves. Closing markets early and moving the clocks forward won’t fire many boilers or cool many homes this summer.

Pakistan will not be able to attain and sustain substantial economic growth in the absence of affordable and secure supplies of energy. Neither Pakistanis nor their governments have adequately focused on this inevitable and unbreakable linkage.

Fortunately, widespread agreement already exists on at least the broad outlines of what Pakistan must do in order to meet its energy needs. Indeed, both the previous government and the current one have taken modest steps to rationalise the country’s energy policies. But what has been lacking is a comprehensive strategy, reflecting the multitude of ways in which decisions in the energy sector impact the lives of Pakistanis.

Such a strategy would incorporate, at a minimum, the following elements:

Pakistan derives nearly 80 percent of its energy from natural gas and (largely imported) oil. Coal and hydro, on the other hand, though potentially plentiful, are under-utilised. The current disproportionate reliance on natural gas and oil is simply unsustainable. Pakistan must move toward a meaningful diversification of its energy mix.

The institutional fragmentation of the energy sector has produced a haphazard approach to energy planning and implementation, notable primarily for a lack of coordination and communication among the various government ministries and bureaus with an energy responsibility. Existing ad hoc interagency bodies have failed to override bureaucratic and organisational rivalries or give Pakistan a coherent energy policy. One solution — there are others — would be to bring the various components of the government that deal with energy into a single ministry. If this is not feasible, then Islamabad should at least create a mechanism for better coordination of planning, decision-making, and implementation.

The government ought to accelerate its privatisation programme. The private sector has the ability to mobilise capital and share risk, and can provide both operational efficiencies and new technologies. Past governments have paid lip service to privatisation, but these efforts have frequently been halting and erratic. Now is the moment to move forward with new vigour and resolve.

Economic growth is important, but it is not the only top-tier priority facing Pakistani decision-makers. In designing its energy policy, the government must not lose sight of other priorities, such as equitable development and poverty reduction. Development and the raising of living standards for Pakistan’s people must be full-fledged components of a comprehensive energy strategy, even if this complicates the task of the country’s energy planners.

An energy strategy worthy of its name will recognise that energy has important social, environmental, and human development implications. If energy planning is to be comprehensive, representatives from all important social groups in Pakistani society must have a voice in the fashioning and implementation of the country’s energy policies. Energy policy must be far more inclusive than it has historically been.

Those responsible for Pakistan’s energy policies must acknowledge the links between energy and gender. A lack of access to modern sources of energy reinforces Pakistan’s gender divides and contributes to the continued marginalisation of women, especially rural women. Social scientists agree that a country will find it exceedingly difficult to modernise so long as its women confront social, economic, and legal inequities. But if energy must be an integral component of Pakistan’s modernisation strategy, gender issues must be an integral component of the country’s energy strategy.

Pakistan must expand its sources and supplies of renewable energy. For starters, in calculating the relative cost of various forms of energy, Pakistanis must consider the full social costs of carbon emissions produced by conventional energy sources; to do otherwise places renewable energy on a seriously tilted playing field. A comprehensive energy strategy must also finance investment in renewable energy technologies and support the creation of technology institutes and research centres.

If increasing supply is one-half of the energy equation, reducing the growth of demand is the other. One of the best ways to reduce demand is through greater energy efficiency. While any efficiency strategy must emphasise conservation, infrastructure improvements will be equally key. Inadequate or antiquated infrastructure is a major problem in Pakistan; by some estimates, poor infrastructure results in a 30 percent loss of transmission annually. A nationwide audit of current inefficiencies would constitute a good first step in combating the extraordinary inefficiencies of the present system.

Several of Pakistan’s closest neighbours have developed promising business models that might be applicable in Pakistan. Nepal has successfully commercialised household biogas plants. Bangladesh and India have adopted successful rural electrification schemes that give customers a voice and a stake in decisions affecting them. Sri Lanka and Bangladesh offer attractive examples of the commercialisation of solar home systems. Pakistan’s energy planners should not hesitate to borrow from the successes of other countries.

Throughout Pakistan’s history, implementation has never matched ambition; political will has been in short supply. And this gets to the heart of the matter — the need for Pakistan’s leaders to adopt a long-term perspective and to make politically difficult decisions, even at the cost of angering constituents. Islamabad, for instance, should adopt an energy pricing system that more closely reflects the true cost of energy (except, perhaps, for its poorest citizens), rather than using subsidies and other mechanisms to shield the consumer from paying internationally determined fuel tariffs. The government must also move forcefully against power theft — another step that will not be popular with many Pakistanis. Losses due to illegal connections, meter tampering, and other forms of theft may total Rs 25 billion per year. At the same time, however, policymakers must not forget their other obligations, such as poverty reduction and the provision of a social safety net to the country’s least well off. Wisely balancing these competing priorities will itself require political courage.

Pakistan’s energy situation is seriously troubling today, but absent careful planning and implementation, it will get far worse in the years ahead. The country does not have the luxury of further dawdling. Band-aids and ad hoc measures will not suffice. The cost of inaction, of further muddling through, is both great and growing.

Robert M Hathaway is Asia Programme director, and Michael Kugelman a programme associate, at the Woodrow Wilson International Centre for Scholars. They are co-editors of the forthcoming Powering Pakistan: Meeting Pakistan’s Energy Needs in the 21st Century.

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