Thursday 23 May 2013

How to get 5-10 billion dollars to invest in power generation and solve the load shedding problem in Pakistan.
 
Two days ago, after listening to Nawaz Sharif's press conference, I started thinking about the challenge of addressing circular debt and at the same time have money invested in addressing power shortage in Pakistan. Mr. Shahbaz Sharif has provided some good ideas to deal with the problem in the short-term and here is a plan that I believe could work in the long-term and address many problems, including corruption, while raising money and creating jobs.
 
Please do leave your comments on where your find weak areas and what strengths do you see in this plan. It will help in improving my initial thoughts. Based on your feedback, I will improve this idea further.
 
If you like this plan, please share it with your friends on Facebook, Twitter and other social networks.
 
High-level plan:
  1. Separate electricity production from distribution
  2. Divide the whole country in 1,000 sectors or distribution units of 100GWh each with the freedom to buy their electricity from any power generation company
  3. Invite companies from all over the world to bid for leasing different sectors and getting exclusive distribution rights. Expected average bidding of $10 million per sector, generating $10 billion in total
  4. Announce the privatization of all government-owned thermal power stations in three year. Set efficiency and productivity improvement targets for existing thermal power stations owned by the government and offer job protection after privatization if they achieved those targets.
  5. Dissolve WAPDA completely and form a new publicly-owned corporation to run the hydro-electric and nuclear power generation units and sell their production to all the distribution companies
  6. Auction all WAPDA-owned thermal power generation units to highest bidders in a transparent manner
  7. Make one large grid management company that would only manage electricity transmission between power generation units and sectors
  8. Switch to private distribution and private power production within four years
 
Some critical success factors that I think are important to consider:
  1. Bring some good planning minds together to make a sound plan and realistic timeline. Incentivize these minds based on the overall success of this plan instead of high consulting rates.
  2. Make every potential bidder to pay $5,000 to $10,000 as a tender fee. This will raise enough money to fund the whole process
  3. Identify consumption growth potential per sector to make sure the government gets a better deal on high-growth sectors
  4. Make sure that local partnerships are encouraged
  5. Pre-select 25-50 technology consulting companies to offer billing and consumption monitoring systems and make distribution companies use any of these companies for their technology needs
  6. Keep the entire process transparent
  7. Baseline current distribution cost per KWh and cap the profits for distribution companies with incentives on efficiency improvements
  8. Publish average production cost per KWh on an ongoing basis and offer subsidies on generating electricity through renewable sources so that they can compete with fossil fuel power production
  9. Guarantee a healthy return on investment with 7-15 years of operations
  10. Make electricity theft a serious crime
  11. Slowly increase the selling price of hydro-electric power and invest surplus money in subsidizing generation through other renewable sources
 
Benefits of this plan:
  1. No money needed to implement this plan because all management cost will be covered by the $10-$20 million of expected income from tendering process
  2. Short-term incentives to thermal power generation units to improve their productivity
  3. Reduction in bureaucracy
  4. Competition between power generation companies to reduce the cost per KWh
  5. Ongoing income to the government by selling hydro-electric power
  6. Reduced dependence on fossil fuels
  7. The whole process can be implemented in five years so the current government can fully implement it and take credit
 
About me:
I led the development of a computer simulation model for ABS Power Generation, which was the second Independent Power Generation project proposal in Pakistan after Hubco. Power Generation, especially through renewable sources, is a topic of personal interest but I don't consider myself an expert in this field.
 

6 comments:

  1. There are some good areas in your research based proposal. I think so when Pakistan will go for privatization of WAPDA, it's a big deal and ultimately most of the incompatible staff
    not stay there because of non merit hiring. If we talk about the current short fall the very simple solution, if fuel provided by PSO to Thermal power generation plants, than the problem may be solved with immediate effect, your model is good and workable but without dissolving WAPDA.
    I think so you reconsider your proposal with reference to non-Privatization of WAPDA and how to improvise the old giant like WADPA. Pakistan is a developing country and hour proposal is again repeat HUBCO type where Pakistan Govt feel it's out of our control and rates and production not in the control of Pakistan. How to improvise the Government management on modern and loyal terms and conditions.
    America always interfere in Pakistan internal matters but not technically or technologically upgrade Pakistan (Hassan you try to convince Americans to provide civil technology or any other best management model to Pakistan for the sake to benefit to Pakistan).
    America is just to play like an online remote game with Pakistan and never wants to improve Pakistan's economical health and condition.

    Khushnood Ali (Lahore)

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  2. You are right Khushnood about short-term solution by ensuring fuel supply. Problem with HUBCO and other IPP units is that they have only one buyer and that is WAPDA. Pakistani government signed a bond with all the IPP units that all their production will be bought by WAPDA at a certain profit. This left no incentive for the IPP units to be efficient.

    On the American side, it is our leadership that was never interested in getting this kind of technology. They are interested in deals where they can get money to spend on whatever they like.

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  3. Residential user must produce its own energy from SUN (Solar Energ). then there will no linelosses and electric theft. The problem is that the users are reluctant to invest in this sector, the best way to resolve this issue the Govt encourage by letting interest free loan, returnable in easy monthly installments. No loadshedding, no linelosses and no theft and NO expolitation. Please comment

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  4. You are absolutely right Iqbal. Please look at the point number 11 under critical success factors. Hydro power is the cheapest to generate and it should generate at least $3.5 billion per year (if government makes only 1 cent profit per KWh). This $3.5 B can be given as subsidies to people who generate electricity through renewable sources like solar and sun.

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  5. very appleaing proposal Hassan Syed sb, but it is not implementable because it needs sincere leadership which we unfortunately lack. To Privatize WAPDA is a big Deal.

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    Replies
    1. Thank you! It is not only WAPDA but all the distribution companies and establish even more private distribution and power generation companies.

      It does require sincere leadership and a good team.

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