Energy Economics and Planning

ENERGY ECONOMICS AND PLANNING
UET
DEPARTMENT OF MECHANICAL, MECHATRONICES AND
MANUFACTURING ENGINEERING (NEW CAMPUS)
SUBMITTED TO:
DR. SHAHID IMRAN
SUBMITTED BY:
Sr. No. Name Registration Number

1. Kawish Farooq 2019-ME-349
2. Talha Tauqir 2019-ME-355
3. Zaid Ali 2019-ME-358
4. Sherjan Iqbal 2019-ME-375
5. H. Abubaker Umar Khan 2019-ME-387

Table of Contents
Introduction: .................................................................................................................................... 3
Summary: ........................................................................................................................................ 3
Main Body (Critique):..................................................................................................................... 4
Conclusion: ..................................................................................................................................... 5
References: ...................................................................................................................................... 5
Introduction:
Electricity constitutes one of the most important components of infrastructure and plays a key role
in national growth and development. In the “Policy for Power Generation Projects Year 2002’’
due to the lack of electricity for domestic as well as industrial demand there are many suggestions
and alternatives provided to overcome this need of electricity. Reform of the power sector through
restructuring and deregulation is high on the agenda of the Government of Pakistan. Pakistan has
two vertically integrated public sector power utilities --- the Pakistan Water and Power
Development Authority (WAPDA) and the Karachi Electric Supply Corporation (KESC).
WAPDA supplies power to all of Pakistan, except the metropolitan city of Karachi, which is
supplied by KESC. WAPDA was established in 1958 and entrusted with a massive agenda, which
included generation, transmission and distribution of power along with irrigation, water supply,
drainage, flood control, etc. It owns about 54 percent of the country's total power generation
capacity, serves 88 percent of all electricity customers in Pakistan and has been, until of late, the
principal power generation, transmission and supply system in the country. WAPDA's distribution
network has been divided into eight electric supply companies, which are successors of former
Area Electricity Boards (AEBs). The AEBs were departments within WAPDA to administer the
supply and distribution, construction, expansion, maintenance and operation of the distribution
system.
The main objectives of the Policy are
• To provide sufficient capacity for power generation at the least cost, and to avoid capacity
shortfalls
• To encourage and ensure exploitation of indigenous resources, which include renewable
energy resources, human resources, participation of local engineering and manufacturing
capabilities
• To ensure that all stakeholders are looked after in the process, i.e., a win-win situation for
all
• To be attuned to safeguarding the environment.
Summary:
The main purpose of the power policy was to overcome the shortfall of electricity by increasing
the production as the demand was increasing day by day. Some significant steps taken by the
government included that WAPDA has prepared a ‘Hydropower Development Plan --- Vision
2025’ (Vision 2025). Vision 2025 suggests a plan to meet the upcoming deficits through additional
power generation and the transformation of the power sector into a privatized, competitive
electricity industry will be an evolutionary process over a period of time. The basis for selection
of the successful bidder in each case will be the minimum levelized tariff, either through
International Competitive Bidding (ICB) for solicited proposals or through negotiations/ICB for
proposals on raw sites. It was recognized that without a proper feasibility study for a particular
site-specific hydel or indigenous fuel-based/renewable resource-based project, it will not be
possible to invite competitive bids and receive firm offers. Hydel projects in the private sector will
be implemented on Build-Own-Operate Transfer (BOOT) basis. Thermal projects in the private
sector, however, will be established either on BOOT or Build-Own-Operate (BOO) basis.
Competitive tariffs will comprise an Energy Purchase Price (EPP) and a Capacity Purchase Price
(CPP) with adequate provision for escalation. The GOP will guarantee that the terms and
conditions of executed agreements (i.e., the Implementation Agreement (IA), Power Purchase
Agreement (PPA), Fuel Supply Agreement (FSA)/Gas Supply Agreement (GSA), Coal Supply
Agreement (CSA) and Water Use Licence (WUL), including payment terms, are maintained
during the term of the agreements for projects above 50 MW. Power companies will be allowed to
import plant and equipment not manufactured locally (for hydel and thermal projects including
projects based upon renewable resources) at concessionary rates. To promote indigenization, the
local engineering industry will be encouraged to form joint ventures with foreign companies in
order to develop power projects with a cumulative capacity of at least 2000 MW by the year 2015.
The board governing PPIB, which includes representation from each of the four (4) provinces of
Pakistan and AJK, will provide one-window support to IPPs.
Main Body (Critique):

After critically analysing the ‘‘Power Policy for Year 2002’’ we founded some good points and
negative points about the policy which are discussed below:
1. Hydropower development Vision 2025 was a good approach used by the GOP to meet the
energy crisis but with the passage of time it was noticed that this step was only to be taken
in papers with zero implementation as there was energy crisis faced by the country.
2. GOP motivated investor to invest in the power generation by offering them different
agreements which included IA, PPA, FSA, GSA, CSA, WUL for plants above 50 MW
which turned out to be very successful as a number of investors invested in this project.
3. GOP further assisted the investors in manufacturing the plants by no tax on import of
machinery not manufactured in Pakistan
4. GOP planned to privatized the already manufactured plants and public sector power
utilities i.e., WAPDA and KESC which turned out to be a disaster as there was no check
and balance of the sectors which further created energy crisis i.e., K electric.
5. GOP stated that Hydel projects in the private sector will be implemented on Build-Own-
Operate Transfer (BOOT) basis which was not so profitable for the investors as the project
time increased and they had to invest more money for the completion when they could have
completed it with less investment and time with the help of GOP.
6. The bid with the lowest evaluated levelized tariff will be ranked at Number 1. PPIB will
reserve the right to reject any or all bids without assigning any reason thereof, and will not
assume any liabilities or claims of compensation in connection therewith which was a good
initiative.
7. GOP planned to move towards renewable energy sources for the energy production but
failed to achieve its claim as there was less plants manufactured working on the base of
renewable energy.
Conclusion:
The idea of motivating the investors to invest in private sector was good but the BOOT system
was not so good as there should be some facilities provided by the GOP. The privatization of
already working government sectors was a bad decision as there will be no check and balance.
GOP enacted the NEPRA act for establishing the regulation of electric power generation and
transmission which was a good approach.
GOP should move towards renewable energy resources as they are environment friendly. They
require initial high cost but are very beneficial for long term use plus the energy production will
also be cheap.
References:
Wyse, D. (2001). Grammar for writing? A critical review of empirical evidence. British Journal of
Educational Studies, 49(4), 411-427

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ENERGY ECONOMICS AND PLANNING

DR. SHAHID IMRAN

Sr. No. Name Registration Number

2. Talha Tauqir 2019-ME-355

3. Zaid Ali 2019-ME-358

4. Sherjan Iqbal 2019-ME-375

5. H. Abubaker Umar Khan 2019-ME-387

Main Body (Critique):

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