“People and their managers are working so hard to be sure things are done right that they hardly have time to decide if they are doing the right things.” (Stephen Covey)
The days of running the power sector through a centralised grid are over. This business is undergoing a fundamental transformation, unleashed by technology, economic, and environment-driven forces. Consequently, almost all aspects of this century-old business have come under tight scrutiny and severe criticism—its physical infrastructure, institutional structure, operating model, regulatory framework, pricing, performance, and control—and have become targets of reform.
A new approach is sinking in the policy and decision-making circles: to wade through turbulent times and remain solvent and profitable, the focus must now shift to the end of the value chain, the end-users of their service, “consumers.”
Infrastructure industries, once thought to be the exclusive domain of the state due to their capital-intensive, natural monopoly, and public-service nature, could not remain immune to the market forces that pushed them towards deregulation and competition. First to fall was public transport, then the airline industry, and later the telephone industry. Electric utilities, considered the last bastion of such industries, resisted any major change, except for some guided competition here and some choice there, but they too could not survive the market’s onslaught.
Multiple factors have acted to shatter the foundation of this century-old business. Smaller generators with cost and performance features that beat those of their large-sized competitors set this trend in motion. Other developments, like electric vehicles (EVs), EV-driven demand for compact battery packs, and smart grid technologies, reinforced this trend further. The advent of small, modular, and competitive generation technologies like distributed solar, however, dealt the death blow to this behemoth.
Consumers could not have been happier. After a century of remaining captive to their local grids, they now had choice. Information and communication technologies (ICT), gains in appliance efficiencies, and a sharp drop in the costs of renewable energy and storage batteries have opened new vistas for them. They can manage their demand, add small rooftop solar to reduce their monthly bills, and even end their dependence on grid supply.
Electric utilities have faced a dilemma. The electricity demand, on which their whole edifice is built, has been eroding rapidly, posing a serious threat to their survival. Some in the field are still reluctant to change their mindsets despite the world around them going topsy-turvy. But change has become inevitable. The question should not be whether to change or not; it should be how to manage it and to what extent.
Power system planning should start at the consumer’s end, by identifying their energy service needs, such as space conditioning, lighting, cooking, food preservation, mobility
Pakistan must also change its approach to governing, regulating, and managing its power sector. Treading the same path in the future will be financially suicidal, as it will lock the country into capital-intensive, long-lived, import-dependent, and environmentally hostile infrastructure, which, once deployed, will be difficult to change or roll back.
A critical step to make a seamless transition to the new world will be the system planning function, which needs to be turned on its heels—from its present top-down approach that relies exclusively on central-station power generation to a new bottom-up framework that considers distributed solar and other distributed energy technologies, not as appendages to the grid, but as viable options to reorganise the power supply system on a secure, economic, and sustainable footing.
The traditional approach to power sector planning consists of aggregating forecast demand within the utility’s control area and serving it via a least-cost sequence of generation and transmission, and distribution (T&D) capacity additions.
Take, for instance, the power sector’s flagship product, the “Indicative Generation Capacity Expansion Plan (IGCEP) 2025–35,” prepared by the Independent System and Market Operator (ISMO). It envisages 16,680 MW of new capacity in the next decade, raising the total to 62,657 MW to serve the forecast demand of 35,521 MW (and 2,577 MW of to-be-retired capacity) with a price tag of over USD 47 billion.
As typically 60 to 65% of the investment in the grid goes to generation, 10 to 15% to transmission, and 20 to 25% to distribution, the total cost could easily top USD 80 billion. This is a horrible burden for the nation.
Serving one MW of demand at or near its source can help avoid 1.5 to 2 MW of capacity upstream if we count all the costs incurred from generation to consumer. For a few megawatts of demand, it may not matter much, but if seen in the context of USD 80 billion needed to serve the demand by 2035, the potential to avoid it acquires a serious new meaning, which must not be left to traditional planning.
The Power Division and NEPRA must revisit their present approach to governing, regulating, and managing the power sector. Their principal focus in the next 5 to 10 years should be on augmenting and strengthening the T&D systems and building institutional capabilities instead of expanding large central-station generation.
Ten to 15% investment in transmission may appear insignificant, but it is critical because a solid, robust, and resilient grid serves as the backbone of the whole system. Modernising the grid by deploying intelligent and smart ICTs can substantially offset the investment required otherwise. It will also help to optimise generation and enable operation of the grid in more efficient, reliable, and economic ways.
Power system planning should start at the consumer’s end, by identifying their energy service needs, such as space conditioning, lighting, cooking, food preservation, mobility, etc. After identifying these at the individual and community levels, planners should consider the scope of electricity in serving these requirements—at source, through a nearby distributed generation facility, or from the main grid—whichever proves to be the most techno-economically feasible solution.
Reaping the huge potential that shifting the planning and development focus to the distribution level, however, will not be easy. It will require strong political will and commitment by the government, as well as some systemic overhaul in the existing institutional structure.
Most planning tools, institutional capacity, and financing frameworks in the power sector have evolved around large and centralised supply schemes based on conventional technologies. The deeply entrenched mindsets and old practices will be difficult to banish and harder to replace with the new approach.
Enabling regulations, visionary leadership, dynamic and savvy management, intelligent and smart networks, and imaginative, creative, and innovative service packages will be required to offer consumers and “prosumers” (as NEPRA termed them recently) options to keep them tied to the grid.
The system planning function will need to move from its current central location under the ISMO to DISCOs. Being closer to the end-user of electricity, they can better plan for their demand and required supplies. In a sense, DISCOs will need to plan for mini-grids that are designed to function autonomously most of the time but remain tied to the national grid to enhance operation and minimise disruptions.
Planning capacity within DISCOs will require considerable upgrading and retooling to enable them to perform their new and enhanced roles. Planning at ISMO may continue, but its role must change. Instead of being the sole planner for the power sector, it will need to act as a coordinator and facilitator in linking distribution systems together.
“There is no right way to do the wrong thing,” they say. Our leaders must also realise the risks and perils of pursuing the traditional path. They must make the suggested transformation because it has become inevitable and cannot be delayed. The suggested changes will be difficult to implement and manage, no doubt, but their payoffs to the nation will be huge in terms of avoiding capital-intensive and import-dependent generation and T&D assets.