CHINA PAKISTAN ECONOMIC CORRIDOR (CPEC)

CHINA PAKISTAN ECONOMIC CORRIDOR (CPEC)

Mr. Kashif Mateen Ansari,

CEO Sachal Energy

At the moment CPEC is one of the most significant topics under discussion. It ranges from the drawing rooms to the floors of the National and the Provincial assemblies. Though the CPEC is rightly a game changer in the region and especially, for Pakistan but it has also evoked a lot of positivity mixed with anxiety, unfounded fears, and some rightly-placed apprehensions. As soon as CPEC was announced, there was a visible lobby which lost no opportunity to finding fault with the CPEC, the way it is planned or in the manner it is executed as well as how it moves forward. While we will try to discuss some reservations about CPEC, we will also try to steer our discussion in areas, which are often not yet touched upon in the popular discourse. CPEC has been maligned on various bases ranging from Punjab being the favored beneficiary, to the fears of the Baloch losing their own homeland and becoming a minority. However, if you look at Chinese history for the last thousands of years, China has never engaged with occupational wars, it does not bear any favoritism towards taking over and subjugating other people. The way CPEC Is planned, it is a large infrastructural project having no parallel in the history of Pakistan. It is planned as a network of roads and rail bridges and tunnels and then adding together industrial zones and power generation being the most dominant element of the grand project. Now in the area of power generation we all know that in the early harvest projects, we are looking at almost 10,000 MW of energy ultimately getting to our grids. Already work on grid projects is underway that means the bottleneck created by our old and poorly maintained grid would be solved. New grid lines are being planned and at least a few of the major ones have started coming on ground. Another fear is that the cheap Chinese goods are going to elbow out the Pakistani products. I think this is an unfounded fear because what we are seeing in the core projects of CPEC, they do not relate to any cheap product. First of all we are looking at the power plants. The Pakistani manufacturers and the Pakistani industrial sector have nothing to offer in competition where we can produce the power machinery the turbine generators or the power plants. While we are looking at the roads and the railways most of the raw material in the form of cement and steel will come from the local area economy and once it comes to the construction of these mega projects I believe there is still a division over the underlying sub-contracting between the Chinese and the Pakistani businessmen. However, what we must look at is that, at the moment at many levels Pakistani businesses do not possess the adequate experience and knowledge in high- level engineering and technology. They will be best served by their interaction with the ongoing and the future projects and working in those areas where they have a competitive advantage and yet being exposed to those areas which are traditionally new to us and thus creating new expertise and understanding. The real trade between China and Pakistan will start and as the numbers go we are looking at hundreds of thousands of containers moving over these arteries. Obviously this will give rise to enormous economic activity ranging from the logistics businesses to the services and supplies enroot for the trade convoys going down to Gwadar and I believe that the people living in the far flung areas of the Baluchistan, KP and GB will see unprecedented economic growth which they have never seen before. With the better network of railways and roads they will be connected to the outside world, information knowledge and money will flow-in, opportunities will grow so shall the economy. With the availability of power and increase in the power generation we are sure that the economic activity will grow. There will be remarkable increase in the GDP and the peripheral economic activity will also be stimulated by the availability of the power. There will be a certain cost to it. First of all you must allay the fears about the CPEC being loaded on the weak economic backbone of Pakistan in the form of the costly debt. First of all not all the part of the CPEC is debt, and second, if there is a debt associated with the project that can produce returns in excess of the interest burden of the debt then such a debt can only enhance the economic activity and will not harm the economy in general. Although it is very easy to criticize the CPEC and the Chinese investment marking it as purely debt but if you look back a few years even from my own experience of developing a Wind Power Project, Pakistani projects were struggling to find any financing in the international market. Hence, even the availability of the foreign debt by virtue of CPEC is a positive thing for our economy. However, generally the kind of fear that Mr. Kashif Mateen Ansari CEO Sachal Energy 14 February 2017 is evoked by the perception of the foreign debt actually relates to the debt which is not used for any productive set-up of projects or economically viable project. If a foreign debt is used only to pay off for the largesse or the corruption of the ruling elite then obviously that debt is a trap that would lead any economy to ruin. But in case of CPEC projects, the investments which are coming in the form of debt, will ultimately result in the construction of power plants or the erection of the major grid lines or the network of motorways, rails and roads along with the industrial estates, allied industries and the dry ports, which will have a positive impact on our economy. What we have yet failed to understand is that CPEC requires something more, not only that this is an economic activity creating enormous economic opportunities for the people but also there will be an avenue of the cultural exchange and enhance friendly ties, with not only China but with all the regional players in Central Asia and South Asia. I believe the real long term effect of the CPEC would be the integration of this region in a friendlier economic zone lowering of the restrictions on the movement of trade, goods, and people. It is likely to enhance the cultural exchanges between us, the Central Asian states, China and rest of the South Asia. What we need to look forward to is how we can enhance the technical knowledge and the productivity of our people, how to get ready for the incoming competitions, how to benefit from the enormous opportunities that are going to open in front of us, how not to get carried away by our fears rather to look towards our future with hope and promise. We must also start thinking on the lines that we have to put down the gauntlet and reduce the negativity towards the regional players, though this has to be reciprocated from all sides but nonetheless we have to change the narrative on our side also. We have to bring forth a narrative of peace, a narrative of mutual co-existence and respect for all the players in the region. We have to cultivate and encourage any opportunity to improve ties with India and we must look towards China to help us in settling our dispute over Kashmir and water. We must look towards Afghanistan to help Afghanistan gain stability which in turn would stabilize our tribal areas and foremost we have to equip our young generation with the modern knowledge and tools to be able to take part in economic activity that is now being unleashed from the heights of Himalayas down to the shores of Gwadar.

Sustainable Energy

 

“Sustainable Energy for all” is an initiative taken by the Secretary General of UN Ban Ki-Moon. He describes energy in these words: ““Energy is the golden thread that connects economic growth, increased social equity, and an environment that allows the world to thrive.”

The objectives of this initiative are three fold and the timeline to achieve these objectives is 2030. The First objective is about universal access to modern energy services. The second is about energy efficiency and the third is about the share of renewable energy in the global energy mix. The last two objectives are about doubling both the levels of efficiency and the utilization of renewable energy by 2030.

Energy is very important in the modern world as it is the gateway to everything modern and progressive. In Pakistan we understand better than anyone else that what it means to be without access to energy and how it would affect the studies of children, the livelihood of the youth and the quality of life of the elderly.

Energy access is a one of the great divides of the modern times and as noted by the website of this initiative “Nearly one person in five on the planet still lacks access to electricity. More than twice that number, almost three billion people, rely on wood, coal, charcoal or animal waste for cooking and heating. This is a major barrier to eradicating poverty and building shared prosperity.”

The situation in Pakistan is no different where, as per some estimates almost more than 40% of the population has no access to the grid. In other words, these people are without access to the modern way of living and the basic amenities of life. Their children are denied any up word mobility by default and their economic plight is set in stone with no sign of any change in the foreseeable future.  As per the World Bank, per capita utilization of electricity in Pakistan is almost 450 Kwh, or in lay man’s language 450 units of electricity. How we compare to others? Indonesia is almost double this value and Malaysia is more than nine times our usage per capita of power. India is more than a billion people of population with much larger geographical distribution; its electric consumption is above 680 units per capita.

The other aspect of problem is that where we are providing power, most of it is generated through Thermal sources. Almost 68% is produced by burning the fossil fuels and out of this 35% is from oil. The share of hydro power in this mix is almost 30% and other renewables, including Wind and Solar is almost nil.  Though the share of other renewables is more than nil, but for percentage please use your calculators to find out what 106 MW of Wind Power would stand for as against approximately 23000 MW.

The energy security of our country can be reflected by the fact that the imported source of energy is almost 30% of the total energy requirements in the form of imported fuels like furnace oil and diesel.

As per the final report of Pakistan Integrated Energy Model by “IRG” sponsored by Asian Development Bank the conclusions based on scenario based projections include that to sustain economic growth corresponding to 5.6% average GDP by 2030, Pakistan would require a fourfold increase in electricity generation, which corresponds to approximately 82,000 MW of new capacity additions. It would require a threefold increase in consumption of high value petroleum products. The report concluded that if the government does not act quickly, it will be difficult to avert a looming Energy Security crisis.

By 2030 the outlook as per the report is that our proven conventional natural gas reserves will be depleted and energy imports would jump from 27% to over 45% of the total supply of energy.

With this outlook obviously the objective of providing energy access to everyone becomes a daunting task. The other two objectives are not easier either.

As they say, if there is a will there is a way. Renewable energy can come to our rescue and increasing the share of renewables can help us achieve the goal of energy access to all. The potential of renewable energy in Pakistan is enormous. According to a study, Pakistan has identified cumulative potential to generate 3.2 million MW of renewable energy from resources including: 340,000 MW from wind, 2.9 million MW from solar, 50,000 MW from hydro (large), 3,100 MW from hydro (small),1,800 MW from biogases cogeneration and 500 MW from waste.

There has been a view from some quarters that the renewable resources like Wind and Solar are expensive and thus they are not good enough to be utilized in poor countries like Pakistan. However, without going into the technicalities of the issue, this is not a correct idea. The cost of power produced from many thermal power plants is more expensive than the renewable resources like Wind and Solar. Globally these technologies are becoming pervasive and currently global installed wind capacity has exceeded 300,000MW and Solar has exceeded 100,000MW. According to a report since the year 2000, more than 70% of the growth in the electricity generation from renewable resources came from non-OECD countries.

Hydropower is cheaper than all these resources and enhancing the Hydropower capacity is an important aspect of the future energy mix of our country, however excessively relying on the run of the river generation is not without its risks. Most important of these is the risk of availability of water, or the hydro risk.  At the government level the Hydropower projects that come with a reservoir base must be given a priority. But the utilization of Wind and Solar for cleaner energy at an affordable price cannot be ruled out. These renewable resources have capital costs, but almost no hidden costs like the environmental costs associated with thermal plants in the form of pollution and displacement costs in the case of Dams.   

Power produced by any IPP or Genco, may those be thermal or renewable will go as far as the grid. However vast expanse of our people is not served by the grid. To improve the accessibility for such areas solar appears to be the priority number one. Solar as a resource is widely available all across the country and must be tapped with the help of “off-grid” and “grid tied” power generation for residential household, basic amenities like dispensaries, schools and hospitals.  We will talk a bit more about these boring terms “off-grid” and “grid tied” later in this article.

If we have to prioritize our work we need to look at the picture as it would emerge with respect to the requirement of energy in the future. Currently residential load is almost 46% of the total power consumption in our country. As we look into the future, it is predicted that the residential energy use will double, and it will continue to be the second largest component of final energy use in 2030.

Without going into the nitty gritty of the usage of energy in the future, it can be pointed out that by 2030 the growth in the residential sector energy consumption will be driven by utilization of air conditioning, cooking  and water heating. On the other hand rural household energy will grow by only 30% and is dominated by the demand for cooking.

In this scenario a less thrilling and till now a much less glamorous way to harness the energy of the Sun can be utilized; the Solar Thermal panels.  These are basically collectors of the Solar energy in the form of heat. These are successfully used when we require capturing heat. There are 4 major types and inquisitive readers can easily google the types.  Any of these thermal panels are more efficient (60 to 80%) and cheaper than the famous and more known Solar panels, which are technically called PV panels and collect the solar energy in the form of light. Efficiency is also gained by not having to transform the light energy to electrical energy. Many of these collectors even work on cloudy days and in cold wind and weather. These systems cost less and their return is far better thus the payback is more favorable. Utilizing these thermal panels can help us reduce the load in the areas where our residential consumers utilize the energy the most, i.e water heating, home cooling and heating, etc. we have already discussed above that the largest requirement of energy in residential sector which is our second largest energy consuming sector pertains to these aspects.

To help achieve the objectives of “Sustainable Energy for All”, another important area is “grid-tied” solar system, which is the most common method of installing a residential solar power system. Grid-tied systems are connected to the main power grid and are designed to sell power back to the utility company. In an arrangement known as “net metering”, residential consumers get paid for the electricity they generate in excess of what they use. Residential consumers often not only completely eliminate their electric utility bill, but they may actually realize a net profit.

The third area of importance is the off-grid power systems. These are useful in providing access to power to those who are not connected to the grid. These are small solar based systems that generate power for lighting and some other essential requirements.

At a national level we need to discuss the detailed aspects of the above mentioned solutions in a framework suitable to Pakistan’s context. We will deal with these in more detail in some other time. However it is clear that providing sustainable energy to everyone is a huge undertaking and will only be achievable if all the stakeholders, i.e government, consumers and businesses join hand together. Only then we can see better economic equality and growth for everyone. With concerted efforts in the right direction we will be able to achieve a bright future (without power outages).

 

 

(The writer is the CEO of a power project and can be reached at kashifmateenansari@post.harvard.edu)