20081107 Dalberg Pakistan

8/8/2019 20081107 Dalberg Pakistan

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ISNUCLEARPOWERPAKISTANSBESTENERGYINVESTMENT?ASSESSINGPAKISTANSELECTRICITYSITUATION

A Paper for the Nonproliferation Policy Education Center

John StephensonPeter Tynan

Dalberg Global Development Advisors

Note: The authors would like to thank Opal Taylor, Olivia Elee, and Maren Trochmann

for their assistance with research and editing.


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TABLE OF CONTENTS

INTRODUCTION................................................................................................................... 3

BACKGROUND: CURRENT AND FUTURE NEEDS................................................................ 4TOTAL POTENTIAL CAPACITY........................................................................................... 6PACE OF DEVELOPMENT .................................................................................................. 11RELATIVE COSTS.............................................................................................................. 15ENVIRONMENTAL ISSUES ................................................................................................. 18CONCLUSIONS................................................................................................................... 20BIBLIOGRAPHY ................................................................................................................. 21ABOUT DALBERG.............................................................................................................. 23ABOUT THE AUTHORS ...................................................................................................... 24


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INTRODUCTION

The drive for civil nuclear power has restarted around the globe, often under thebanner of finding a clean energy alternative to meet growth objectives. Countries

like India, Saudi Arabia, United Arab Emirates, Turkey, Egypt, and Jordan, amongothers, have all proclaimed a desire for nuclear power generation. Proponents argue thatnuclear energy promotes economic development and reduces reliance on foreign sourcesof energy in a manner that is climate-change friendly due to the lack of carbon emissions.

Similarly, Pakistan has pushed for nuclear power generation using many of thesame arguments. Advocates for this push have now underscored the recentCongressional approval of the U.S.-India Civil Nuclear Cooperation agreement whichprovides India with access to nuclear equipment and components from Western suppliers.As Pakistans Prime Minister Yousaf Raza Gilani has stated: Now Pakistan also has theright to demand a civilian nuclear agreement with America. We want there to be no

discrimination. Pakistan will also strive for a nuclear deal, and we think they will have toaccommodate us.1 A critical question, however, is whether nuclear power is necessaryand vital to economic development in a climate-change friendly manner.

This analysis looks at the economic and resource arguments for nuclear powerthrough 2030, to evaluate whether nuclear power is necessary to meet theexpectations laid out. First, the analysis will evaluate the assertion that nuclear energyis vital to meet economic development goals. Second, it will evaluate the likely impacton reducing carbon emissions in the global context to push for carbon reductions.Finally, it will evaluate whether development of nuclear energy would significantlyreduce Pakistans reliance on foreign energy sources. The framework used to evaluateresource options for electricity development (see Figure 1) includes looking at the totalpotential capacity, the likely pace of development of different technologies, the relativecosts of those options, and the environmental issues and trade-offs inherent with eachoption.

In summary, nuclear power does not meet the expectations laid out by advocates forits development in Pakistan through 2030. Even under Pakistans most ambitiousgrowth plans, nuclear energy will continue to contribute a marginal amount of electricityto meet the countrys economic goals. Furthermore, with Pakistans considerablepotential of untapped renewable resources, the country has numerous options aside fromnuclear to meet its development needs. In terms of reductions of carbon emissions, itshould be noted that Pakistan currently represents only about 0.4% of global emissions.Certainly, while all emissions reductions are necessary, such reductions need to bepursued within the context of other risks, whether from deferred economic developmentor proliferation of sensitive technologies. Finally, given the energy mix supplyingPakistans electricity generation, with a significant proportion based on natural gas,

1 McElroy, Damien and Rahul Bedi, Pakistan demands rights to nuclear power after India deal is sealed,Telegraph, October 2, 2008. Available at: http://www.telegraph.co.uk/news/3122690/Pakistan-demands-rights-to-nuclear-power-after-India-deal-is-sealed.html.


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Pakistan could reduce its reliance on foreign sources of energy by developing nuclear.However, nuclear in the best case scenarios will provide a limited amount of electricityand the predominant foreign sources of energy still emit carbon. As such, the route todeveloping Pakistans considerable renewable resources can achieve the dual goals oncarbon reduction and enhanced self-reliance.

Figure 1. Analytical framework.

Development

o f nat iona l

energyresources

Total potentialcapacity

1 Relative costs

2 Pace of development

3

4 Environmental issues

What capacity is neededto meet growth targets?

What resources areavailable?

How do the optionscompare in terms of cost?

In w hat ways do costsdiffer?

What is the likely paceof development ofresources?

What constraints couldslow development?

What environmentalissues are associatedw ith each option?

Development

o f nat iona l

energyresources

Total potentialcapacity

1 Relative costs

2 Pace of development

3

4 Environmental issues

What capacity is neededto meet growth targets?

What resources areavailable?

How do the optionscompare in terms of cost?

In w hat ways do costsdiffer?

What is the likely paceof development ofresources?

What constraints couldslow development?

What environmentalissues are associatedw ith each option?

BACKGROUND: CURRENT AND FUTURE NEEDS

Pakistans current electricity mix is dominated by natural gas, hydro, and oil/dieselgeneration (see Figure 2). The total generation capacity of Pakistan in 2005 was 19.5GW and consisted of approximately 50% from natural gas, 30% from hydro power, and16% from oil/diesel. Nuclear powers current contribution to the mix of electricitygeneration is 3% while the contribution from coal is only 0.2%. Notably, renewableenergy resources did not contribute to Pakistans generation capacity in any meaningfulway in 2005.

Pakistans current electricity generation capacity also does not meet the currentdemand, creating significant shortfalls. The country is presently experiencing supplydeficits during peak demand periods and the variability of water supply contributes todeficits given the large reliance on hydropower.

2Nearly half of the population is also

estimated to lack connection to the electricity grid, and load shedding has also becomenecessary in some areas.3 Some estimates suggest that the grid system requires

2 Vladislav Vucetic and Venkataraman Krishnaswamy, Development of Electricity Trade in Central Asia South Asia Region, available at: http://mea.gov.in/srec/internalpages/drafteti.pdf.3 Energy Information Administration: http://www.eia.doe.gov/cabs/Pakistan/Electricity.html.


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approximately two additional gigawatts to cover peak demand with an adequate degree ofreliability.

Figure 2. Pakistans Current Electricity Generation Capacity, 2005 (GW)4

0

2

4

6

8

10

12

14

16

18

20

2005

Hydro

Oil / diesel

Natural gas

Nuclear

Renewable

Percentage

0.2%

16%

30%

50%

Total =19.5 GWGW

Coal3%

0%

0

2

4

6

8

10

12

14

16

18

20

2005

Hydro

Oil / diesel

Natural gas

Nuclear

Renewable

Percentage

0.2%

16%

30%

50%

Total =19.5 GWGW

Coal3%

0%

Compounding the challenges in meeting current demand, Pakistans generationcapacity requirements are expected to increase significantly through 2030 (seeFigure 3). Forecasts for this growth rate vary and are generally tied to GDP growth,which represents the energy intensity of economic growth. The Government of Pakistanestimates are based on an 8% GDP growth rate and a corresponding 9% generationcapacity growth rate, thereby requiring 163 gigawatts of generation capacity by 2030.However, the historical generation capacity growth rate from 1980-2005 was roughly7.1% and if this trend continues the capacity by 2030 would likely be 108 gigawatts. Theactual generation capacity developed by 2030 will likely be somewhere in between thesetwo ranges. However, even assuming a stronger GDP growth rate of 8.5%, therebyexceeding the Government of Pakistan projections, the need would be roughly 193gigawatts. While the energy intensity varies and tends to decrease as an economydevelops, this range of generation capacity estimates presents a conservative rangeagainst which to test the need for specific supply options. Considering the recent globalfinancial and economic situation, however, Pakistans GDP growth rate could besignificantly constrained, which would result in less generation capacity needed.

4 Government of Pakistan Planning Commission, Vision 2030. HDIP 2005. Pakistan Approves 25-yearEnergy Security Plan, 2005. Pakistan Times, 2005.


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Figure 3. Projections for Pakistans Generation Capacity Requirements, 2006-20305

0

20

40

60

80

100

120

140

160

2005 2010 2015 2020 2025 2030

GWGovernment ofPakistan(8% GDP growth)

1980-2005

1980-2000

7.5% GDP Growth

Capacitygrowth rate

9.0%

8.3%

7.7%

7.1%

Capacityneeded

163 GW

144 GW

125 GW

108 GW

0

20

40

60

80

100

120

140

160

2005 2010 2015 2020 2025 2030

GWGovernment ofPakistan(8% GDP growth)

1980-2005

1980-2000

7.5% GDP Growth

Capacitygrowth rate

9.0%

8.3%

7.7%

7.1%

Capacityneeded

163 GW

144 GW

125 GW

108 GW

TOTAL POTENTIAL CAPACITY

Despite the considerable generation needs by 2030, Pakistan has a considerable

breadth of potential sources to meet this future need. In comparing the potentialsupply of resources with the generation capacity needed by 2030, this analysis uses bothlow- and high-end ranges based on various projections of GDP growth. As discussedabove, the likely generation capacity needed by 2030 will likely be between 108gigawatts and 193 gigawatts (see Figure 3). For each potential supply, the analysis alsouses low and high estimates for the development through 2030.

The key finding is that the potential supply of resources should be capable ofmeeting both low- and high- estimates for generation capacity needs, althoughrequiring a portfolio approach. The available and likely resources consist of a broadrange of supply options involving considerable development of the traditional supply

sources of natural gas, hydro, and coal. While indigenous natural gas supplies areexpected to dwindle, the Government of Pakistan has committed itself to investing inaccessing external sources through pipelines.6 In terms of coal, Pakistan has

5 Medium Term Development Framework & Vision 2030; Pakistan Statistical Yearbook 2007. PakistanTimes, 2005. Pakistan 25-year Energy Security Plan, 2005. Dalberg analysis. Pakistan Times, 2005.6 Energy Information Administration Country Analysis Briefs Pakistan (EIA Pakistan CountryAnalysis Brief) http://www.eia.doe.gov/cabs/Pakistan/Profile.html


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approximately 185 billion tons of reserves, with the government planning on additionaltransmission of approximately 2.2 gigawatts of coal-generated electricity by April 2009.Renewable energy resources, in particular, offer significant potential even in the low- andmedium- scenarios, which do not maximize the utilization of the resources, therebyleaving additional potential for well beyond 2030. Energy efficiency options are also

likely to be a meaningful contributor to the mix of resources by 2030, offering morepotential than nuclear power.

Figure 4. Pakistans Potential Supply Options for Electricity Generation, 2005-20307

0

50

100

150

200

250

300

350

2005 Natural gas Hydro Coal Oil / diesel Renewables Energy

efficiency

Nuclear 2030 Total

Gas

Hydro

Coal

Renew.

Nuclear

Diesel

2005 to 2030: Potential supply options (GW)

Low estimate for development

Medium estimate for development

2005:

2030 need:

7%

8% -GoP

88-193 GWTotal potentialsupply:

122-291 GW

CoalHydro

Naturalgas

Renew.Nuclear

Diesel

Energyefficiency GDP

growthrates

GW

8.5%

High estimate for development

0

50

100

150

200

250

300

350

2005 Natural gas Hydro Coal Oil / diesel Renewables Energy

efficiency

Nuclear 2030 Total

Gas

Hydro

Coal

Renew.

Nuclear

Diesel

2005 to 2030: Potential supply options (GW)

Low estimate for development

Medium estimate for development

2005:

2030 need:

7%

8% -GoP

88-193 GWTotal potentialsupply:

122-291 GW

CoalHydro

Naturalgas

Renew.Nuclear

Diesel

Energyefficiency GDP

growthrates

GW

8.5%

High estimate for development

Notably, even if the development of nuclear power meets high estimates, it will notbe likely to constitute a significant contribution to the overall mix. Currently,Pakistan has two nuclear power plants with 300 megawatts and 125 megawatts ofcapacity (Chashma-1 and Kanupp). Pakistans third nuclear power plant, Chashma-2, isexpected to be completed by 2009 and comprise 325 megawatts of installed capacity.The Government of Pakistan estimates suggest a 13% growth rate (see Figure 8) whichwould yield approximately 6-8 gigawatts of nuclear power generation.8 This would

comprise only about 3-6% of the electricity generation by 2030. If those high estimatesare not met, but instead nuclear power generation grows at a fast, yet more reasonable,

7 Government of Pakistan Planning Commission, Vision 2030. HDIP 2005. Pakistan Times, 2005.Pakistan 25-year Energy Security Plan, 2005. GTZ, Energy-policy Framework Conditions for ElectricityMarkets and Renewable Energies, September 2007. Notes: Nuclear represents the projected 13% growthrate for the high estimate and an 8% growth rate which is still very high compared with other countrieshistories of nuclear development.8 Pakistan 25-year Energy Security Plan, 2005. Pakistan Times, 2005.


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pace of 8%, the total nuclear power generation would be roughly 2.8 gigawatts. Thiswould constitute only 1-3% of the total generation capacity by 2030.

Pakistan has considerable solar potential that rivals many other regions of the world(see Figure 5). The solarization of the country averages 5.2 kwh/m2 and nearly half of

the country shows economic viability for solar power generation. Few regions, asidefrom the Sahara, offer better solar potential in the world. Both solar photovoltaic andconcentrated solar thermal technologies are becoming increasingly cost effective andcommercialized, offering a considerable opportunity for this untapped resource inPakistan. Although estimates for the total potential generation capacity from solar vary,it is likely around 70 gigawatts.9

Figure 5. Global Solarization Rates10 and Solarization across Pakistan11

9 GTZ, Energy-policy Framework Conditions for Electricity Markets and Renewable Energies, PakistanChapter, Eschborn, September 2007, page 11.10 GTZ, Energy-policy Framework Conditions for Electricity Markets and Renewable Energies,September 2007.11 Pakistans Alternative Energy Development Board, http://www.aedb.org/currentstat_solarpv.php.


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The opportunity for wind power generation is also quite significant in Pakistan, atapproximately 50 gigawatts of potential generation capacity and a target of 9.7gigawatts by 2030. One of the areas of greatest potential lies in the wind corridor ofGharo-Keti Bandar in the Sindh province of southern Pakistan. This region was

identified by the Alternative Energy Development Board (AEDB) as having greatpotential, with average wind speeds of 7-8 meters per second at 65 meters. The AEDB isfacilitating favorable rental terms for developers and numerous letters of intent have beensigned, with the target of installing 9.7 gigawatts by 2030.12 The NTDC is constructingnew transmission lines to bring the power to markets and at least two urban hubs, Karachiand Hyderabad, are nearby.13 The total potential is estimated at nearly 50 gigawatts ofgeneration capacity, suggesting that ample wind potential will still be available after2030.

Figure 6. Location of Pakistans Wind Corridor Near Gharo-Keti Bandar14

12 Alternative Energy Development Board website: http://www.aedb.org/res_potential.php.13 GTZ, Energy-policy Framework Conditions for Electricity Markets and Renewable Energies, PakistanChapter, Eschborn, September 2007, page 9.14 Ibid.


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In addition to solar and wind, other promising renewable energy sources exist forPakistan to develop more fully. For instance, sugar mills in the country use bagasse forcogeneration purposes, and the Government of Pakistan has recently enabled them to sellsurplus electricity back to the grid. Other such biomass, biogas, waste-to-electricity, andbiofuels could also contribute meaningfully to the energy and electricity mix in Pakistan.

The estimate for waste-to-electricity alone is approximately 500 MW per major city.

15

Given the split between rural and urban populations, decentralized generationsources could also make considerable sense for development in Pakistan. By someestimates, roughly 70% of the population lives in rural villages16 with nearly half thepopulation lacking a grid connection. With the costs of transmission and distribution, itis often uneconomical to connect these populations to the grid. As such, a centralizedpower generation source, like nuclear, may not serve to increase electrification ratesacross the country. Instead, decentralized wind and solar generation can often serve thesepopulations better, and many small scale projects have already been developedthroughout the country. The other concern is to have sufficient baseload generation, for

which nuclear is normally used. While some renewable technologies raise concerns ofintermittency, new technologies are being commercially developed to provide storageand enable use for baseload generation, especially as seen with concentrated solarthermal. And given the small share of nuclear power in the overall generation capacitymix by 2030, other options like hydro will provide significant baseload generation.

Another critical opportunity for meeting Pakistans electricity needs will be inenergy efficiency, or negawatts, which even with conservative estimates willamount to more than nuclear power generation. Energy efficiency efforts can tackle anumber of key areas in electricity production and consumption. They can includeimproving demand or efficiencies, such as switching to improved lights and energyefficiency appliances. Industrial production of goods can similarly be improved togenerate considerable negawatts. Electricity generation itself can also be made moreefficient, particularly with thermal generation, through equipment upgrades. Finally,transmission and distribution losses, traditionally quite high in developing countries dueto technical losses and theft, can be improved upon for significant savings. Currently,Pakistans transmission and distribution losses are estimated at approximately 26.5%-30%17. The Government of Pakistan set the goal of reducing these by 5% by 2010, whichcould create approximately 8 gigawatts of negawatts cumulatively by 2030.18Committing to another 5% reduction in transmission losses would double this to roughly16 gigawatts. In terms of estimating negawatts, this analysis remains quite conservative,having only reflected the potential savings from improving transmission and distributionlosses. If demand efficiencies had been incorporated, these estimates could be

15 GTZ, Energy-policy Framework Conditions for Electricity Markets and Renewable Energies, PakistanChapter, Eschborn, September 2007, page 10.16 Alternative Energy Development Board website: http://www.aedb.org/respotential_pv.php.17 Estimates of 30% by the Energy Information Administration:http://www.eia.doe.gov/cabs/Pakistan/Electricity.html.18 Planning Commission, Government of Pakistan, Mid Term Review of Medium Term DevelopmentFramework Framework, 2005-2010, May 2008, page 84.


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considerably higher. Regardless, however, the potential improvements in transmissionand distribution losses alone would outpace nuclear power generation by 1.5-3 times.

PACE OF DEVELOPMENT

The likely pace of development of various supply options will be especiallyimportant for Pakistan and current projections significantly outpace historicaldevelopment. Government projections often suggest that generation options willdevelop much more rapidly than historical progress suggests, and projections of nucleardevelopment are no exception. In fact, the projections of nuclear development inPakistan are predicated on attaining a development trajectory that very few countries inthe world have been able to attain.

Figure 7. Historical Development of Electricity Generation, 1980-2005 (GW)19

0

5

10

15

20

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Hydro

Thermal& NCES

Nuclear

1980-05

5%

6%

8%

2000-05

28%

6%

0%

GW

Growth rates

0

5

10

15

20

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Hydro

Thermal& NCES

Nuclear

1980-05

5%

6%

8%

2000-05

28%

6%

0%

GW

Growth rates

When projecting likely development of electricity generation sources, it is importantto look first at the historical development of various options (see Figure 7). In the

case of Pakistan, the development of thermal and non-conventional energy sources hasrisen the fastest over a 25-year period, at approximately an 8% growth rate. However,recently (from 2000-2005), installed plant capacity from these sources has stagnated at0% growth while hydro power, at 6%, has maintained a consistent growth rate over theentire 25-year time period.. Nuclear grew the slowest over this period, at 5% from 1980-2005. Recent high growth rates of 28% from 2000-2005 reflect the small number of

19 Energy Information Administration.


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nuclear power plants overall. With two plants online and a third scheduled to go live in2009, each additional plant represents a significant percentage of the total. Overall,generation capacity has grown at 7% from 1980-2005 and only 2% from 2000-2005.

20

The projections for the various supply options are almost uniformly ambitious, but

especially so for nuclear. From 2005 to 2030, it is expected that nuclear generation willincrease at a growth rate of 13%. Other supply options have similarly high estimategrowth rates, such as natural gas at 9%, hydro at 10%, coal at 13%, and renewable energyat 14%. Nearly all of these supply options will undoubtedly face challenges in attainingsuch growth targets, but fewer challenges will likely be met by those options which facelower barriers in the form of capital intensity, political will, and ready availability ofsupplies and technology. Because nuclear faces immense challenges in terms of capitalintensity and accessibility of supplies and technology, the growth rates implied fornuclear development suggest the attainment of targets that very few countries in theworld have been able to achieve. However, as a non-signatory to the Non-ProliferationTreaty, there are international embargoes on the transfer of such technology to Pakistan.

China is currently the only supplier of nuclear power plants and components to Pakistan,but to meet the projections Pakistan would require access to advanced nuclear suppliesand technologies from Western countries.21 Such constraints raise particular questionsaround nuclear development, where governments are especially prone to overestimatetheir ability to develop such resources and install generating capacity.

Figure 8. Projected Development of Installed Plant Capacity, 2005-2030 (GW)22

0

20

40

60

80

100

120

140

160

180

2005 2010 2015 2020 2025 2030

Coal

Natural gas

Nuclear

2005-2030

13%

1%

9%

GW

Hydro

Oil / diesel

10%

13%

Renewables 14%

Growth rates

0

20

40

60

80

100

120

140

160

180

2005 2010 2015 2020 2025 2030

Coal

Natural gas

Nuclear

2005-2030

13%

1%

9%

GW

Hydro

Oil / diesel

10%

13%

Renewables 14%

Growth rates

20 Energy Information Administration.21 Nuclear Power Programme of Pakistan, paper by Zia H Siddiqui, Tariq Mahmud & Ghulam R. Athar,presented to World Nuclear Association Symposium 200622 Pakistan 25-year Energy Security Plan, 2005. Pakistan Times, 2005.


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Globally, the historical data of nuclear power development suggests that fewcountries have been able to achieve and maintain a consistently high growth rate fornuclear development as per Pakistans estimates. South Korea comes the closest toreaching the trajectory and sustainability of nuclear power generation with a 14.3%

growth rate over the 15 years from 1980 to 2005. The U.S. and France both had muchfaster growth from 1980 until approximately the early 1990s (at 7% and 14%respectively), but their nuclear development programs have since leveled off.23 Bycontrast, India has only attained a 4.9% growth rate for its nuclear development.24 Inorder for Pakistan to meet its own nuclear power development estimates over the next 30years, it would have to emulate or surpass the efforts of countries like South Korea,France, or the United States.

Figure 9. Historical Development of Nuclear Power in the U.S., France, SouthKorea, and India, 1980-2005 (GW)25

0

20

40

60

80

100

1980 1985 1990 1995 2000 2005

GW

India

U.S.

France

1980

52

14

0.9

2005

100

63

2.8

Installed GW 1980-2005CAGR

2.7%

6.1%

4.9%

SouthKorea

0.59 17 14.3%

0

20

40

60

80

100

1980 1985 1990 1995 2000 2005

GW

India

U.S.

France

1980

52

14

0.9

2005

100

63

2.8

Installed GW 1980-2005CAGR

2.7%

6.1%

4.9%

SouthKorea

0.59 17 14.3%

Nuclear development also requires considerable coordination between the privateand public sectors, requiring rather strong government effectiveness, regulatoryquality, and control of corruption since nuclear projects require large capitalexpenditures. Relative to countries such as the U.S., France, and South Korea that havesuccessfully developed nuclear power generation at impressive growth rates, Pakistansmeasure on these governance indicators is significantly lower. Although these metricsare general governance indicators, the successful implementation of a nuclear power

23 Energy Information Administration.24 Ibid.25 Energy Information Administration. Note: The fastest growing installed nuclear capacity are in SouthKorea (14.3%), Spain (8.1%), and France (6.1%).


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development policy would presumably require even greater government effectiveness,regulatory skills, and control of corruption than ordinary large-scale infrastructureprojects. While a lower rating in government effectiveness may suggest a country is lessable to orchestrate the necessary level of coordination to get a project initiated andcomplete, a lower rating in regulatory quality would suggest potential lapses in security

and safety, and less control of corruption would suggest that sensitive materials may bemore prone to illicit sale and trade. Corruption also matters considerably in terms of thefinancing of large-scale infrastructure projects. The corruption tax on a large projectcan significantly balloon costs and delay completion. These discrepancies in governanceindicators would suggest that the nuclear generation growth rates targeted by theGovernment of Pakistan may not be achievable.

Figure 10. Governance Indicator Comparison, 200726

0 20 40 60 80 100

Government effectiveness Regulatory quality Control of corruption

0 20 40 60 80 100 0 20 40 60 80 100

France

U.S.

S. Korea

India

Pakistan

0 20 40 60 80 100

Government effectiveness Regulatory quality Control of corruption

0 20 40 60 80 100 0 20 40 60 80 100

France

U.S.

S. Korea

India

Pakistan

At the same time, the regulatory and policy environment for renewable energy

development, including wind and solar power, is being increasingly strengthenedand geared towards enhancing and accelerating development. Legislation that hasbeen passed includes sales tax, income tax, and customs duty exemptions for importedplants, machinery, and equipment for renewable energy power generation.

27Further

incentives for private sector development of wind power even includes Wind Risk

26 World Bank Governance Indicators. Available at: http://info.worldbank.org/governance/wgi/index.asp.27 Alternative Energy Development Board website: http://www.aedb.org


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Coverage which covers the risk of wind speed variability, making the power purchaser(the Government of Pakistan) absorb the risk of such variability.28 The AlternativeEnergy Development Board continues to aggressively lobby for investments and, in thecase of wind, roughly 93 letters of intent have already been signed for development.29This push has benefited from foreign assistance, such as support from the U.S. National

Renewable Energy Laboratories under a 2007 U.S. AID assistance program.

30

RELATIVE COSTS

The likely development of various supply options is influenced by a number offactors, including the relative costs of those options (see Figure 9). Estimates of therelative costs of different supply options vary widely. By far the lowest cost options arecoal and hydro, while some of the most expensive options are solar photovoltaic andsolar thermal. Local costs of supply options can vary considerably and Pakistan-specificestimates suggest nuclear energy could be on the high-end of the range, at roughly $0.057

cents per kilowatt-hour.

28 Ibid.29 Alternative Energy Development Board website: http://www.aedb.org/res_potential.php30 Ibid.


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Figure 11. Relative Costs of Various Resource Options31

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50

Solar PV

Solar thermal

Energy from waste

HSFO

Wind

Biomass gasifier

Biomass

LNG

Nuclear

Natural Gas

Bagasse cogen

Small hydroHydro

Coal $0.039-$0.057-$0.060

$0.055High

Low

$0.044-$0.065

$0.046-$0.053-$0.101

$0.038-$0.057-$0.067

$0.065-$0.087

$0.065-$0.087

$0.056-$0.087

$0.087-$0.164

$0.327-$0.436

Medium

$0.051

Pakistan-specificestimates areunderlined

Costs are listed

from lowest tohighest, generallybased on theirranges

$0.067

$0.091

$0.15-$0.17

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50

Solar PV

Solar thermal

Energy from waste

HSFO

Wind

Biomass gasifier

Biomass

LNG

Nuclear

Natural Gas

Bagasse cogen

Small hydroHydro

Coal $0.039-$0.057-$0.060

$0.055High

Low

$0.044-$0.065

$0.046-$0.053-$0.101

$0.038-$0.057-$0.067

$0.065-$0.087

$0.065-$0.087

$0.056-$0.087

$0.087-$0.164

$0.327-$0.436

Medium

$0.051

Pakistan-specificestimates areunderlined

Costs are listed

from lowest tohighest, generallybased on theirranges

$0.067

$0.091

$0.15-$0.17

It is also important to note the trend for the cost curves of renewable energy

technologies (see Figure 10). Wind has led the way in becoming economically viableand solar is expected to follow suit in the medium-term. The price of concentrated solarpower has dropped at a faster rate than solar photovoltaic, but recent advances in solarPV technology also suggest increased commercial viability. Furthermore, for many non-grid connected Pakistanis the trade-off is not necessarily between cheap sources of

31 Sources: Pakistan-specific estimates from (others are benchmarks, with some estimates from elsewherein South Asia). Meeting Pakistans Energy Needs, Mukhtar Ahmed, from the Woodrow Wilson Report,Fueling the Future: Meeting Pakistans Energy Needs in the 21st Century. Energy InformationAdministration. Annual Energy Outlook, 2006. DOE/EIA-0383(2006), Washington, DC, February 2006.Government of India, Planning Commission. Integrated Energy Policy: Report of the Expert Committee,New Delhi, August 2006. Victor, David G. The India Nuclear Deal: Implications for Global Climate

Change, Testimony before the U.S. Senate Committee on Energy and Natural Resources, July 18, 2006.Available at: http://www.cfr.org/publication/11123/india_nuclear_deal.html. Notes: For the levelized costcomparison of coal, natural gas (advanced combined cycle), the low estimate for wind, and nuclear, thecost comparison is for U.S. plants that would come online in 2015. For the nuclear generation estimates byDavid Victor, for Light Water Reactors: the lowest at 3.8 US cents comes from Bharadwaj, Anshu; RahulTongia, and V.S. Arunachalam (2006). Whither Nuclear Power? Economic and Political Weekly 41(12):1203-1212. The medium cost of 4.2 cents per kWh and 6.7 cents per kWh come from MassachusettsInstitute of Technology (2003). The Future of Nuclear Power: an Interdisciplinary Study. Using the USDOEs levelized costs and incorporating the fact that Indian fuel is 2-3 times costlier, a cost of 6.6 cents perkWh is estimated. HSFO is heavy fuel oil.


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electricity or renewable options. Rather, it lies in which resources can, or will, bedeveloped in the near-, medium-, and long-term. A more expensive option per kilowatt-hour, like solar or wind, may have lower up-front costs and not rely on the centralgovernment to invest in infrastructure requirements for transmission and distribution.

Figure 12. Cost Curve for Solar Photovoltaic, Concentrating Solar Power, andWind, 1980-202532

The cost components of different energy resources suggest different trade-offs totheir development. Thermal generation, including liquefied natural gas and coal, tend tohave low capital expenditure requirements, which makes building additional capacity afeasible short-term proposition. However, such resources subject electricity generation tothe volatility of the price of fuel. By contrast, hydro, nuclear, and wind have relatively

high capital costs but low fuel costs. One significant benefit of renewable energytechnologies like wind and solar, however, is that they both have predictable (i.e. zero)fuel costs and can also be expanded incrementally. Wind and solar farms can largely bebuilt out in stages, with the first phases of installations becoming immediately productive,while a fractional build-out of a nuclear facility cannot produce electricity. It is alsoimportant to note the potential ramifications of the current global financial crisis. As

32 US National Renewable Energy Laboratory.


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access to capital becomes constrained, it will likely become more difficult to financelarge scale investments like nuclear, especially where the production of electricity andgeneration of cash flows comes much later. Less capital-intensive projects, that can bebuilt out incrementally, are more likely to be favored and will be used to meet electricitydemand that itself is likely to be reduced due to economic growth constraints.

Figure 13. Cost Structure Comparison of Various Supply Options (per kWh, US$)33

$0.00

$0.01

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HSFO LN G Gas Co al,

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In the end, it is important to compare the relative costs of different supply options,but meeting Pakistans electricity needs will require a portfolio strategy. No singleoption, no matter how attractive from a cost perspective, can meet the full need by 2030.Numerous options will need to be pursued, leveraging the strengths and mitigating therisks associated with each.

ENVIRONMENTAL ISSUES

Given the very real risks of climate change, it is vital to consider environmental

issues when looking at electricity supply options in any region of the world. Nuclearis often held up as a clean generation technology due to the lack of carbon emittedduring electricity generation. While this is true, renewable energy technologies areequally climate-change friendly and are not accompanied by the problems associatedwith long-lasting radioactive spent fuel and its transportation, storage, and disposal.

33 Meeting Pakistans Energy Needs, Mukhtar Ahmed, from the Woodrow Wilson Report, Fueling theFuture: Meeting Pakistans Energy Needs in the 21st Century. US DOE levelized cost calculations.


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It is also important to look at the sources of carbon emissions by country in order todetermine the appropriate intervention to reduce those emissions. In Pakistan, asignificant amount of carbon emissions comes from petroleum, to serve transportationneeds, and would not be offset by switching electricity generation resources, at least untilelectric cars are widespread in Pakistan. A promising trend in Pakistans transportation

sector, however, is the increased use of compressed natural gas for transportation.

34

Also, while a significant amount of Pakistans emissions come from natural gas(including for electricity generation), natural gas produces just about half the emissionsof coal.

Figure 14. Pakistans CO2 Emission by Source, 1980-2005 (million metric tons).35

0

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Finally, while all emissions reductions contribute to addressing the issue of climatechange, Pakistans emissions should be considered in context when weighing theattractiveness of other options involving different types of risks. In 2005, Pakistanproduced just 0.4% of total global carbon emissions. By comparison, Pakistan producesonly 0.77 metric tons per capita versus 20.14 metric tons per capita in the United States.As such, the degree of the carbon emissions problem in Pakistan may not outweigh other

the risks associated with nuclear power generation. This is especially true whenconsidering the ample renewable energy potential in Pakistan, the benefits ofdecentralized power generation in the country, the decreasing costs of renewable energysources, and the lack of fuel risks attaching to renewable energy sources (both in terms ofprice volatility and spent-fuel risks).

34 Energy Information Administration.35 Ibid.


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CONCLUSIONS

Numerous countries are pushing to develop nuclear power generation capacity, with

Pakistan among them. These countries often highlight the requirements of economicdevelopment to increase their electricity generation. In a carbon constrained world, withincreasing global awareness of the risks of climate change, nuclear power is held up as aclean and efficient way to meet economic development objectives while limiting carbonemissions. Furthermore, nuclear power is often seen as a means of ensuring greater self-reliance and independence from petroleum imports from unstable neighbors or regions.With the recent approval of the U.S.-India Civil Nuclear Cooperation agreement,Pakistan is also calling for access to nuclear equipment and supplies from Westernsources, as a measure of fairness and support for its economic development.

However, in the case of Pakistan, the promises of nuclear power generation are

largely exaggerated through 2030. While it remains true that Pakistan currently has anelectricity generation capacity shortage and will need considerably more capacity by2030, there is ample potential supply from numerous sources. Traditional sources suchas natural gas and hydro will continue to be important for Pakistan, but increasingly, thepotential of renewable energy will be harnessed. Pakistan is extremely well endowed notonly with large-scale hydro, but also world-leading solar and wind resources. Thegovernment has recognized this, by establishing the Alternative Energy DevelopmentBoard, and has increased the amount of investments in this sector.

With a portfolio approach encompassing traditional and renewable energy sources,along with energy efficiency measures, Pakistan can meet its electricity needsthrough 2030 if it chooses to forego nuclear power development. The role of nuclearin the mix of electricity generation by 2030 is not vital. First, the estimates for nucleardevelopment are quite ambitious and rest on the assumption that Pakistan could replicatethe development trajectory of the U.S., France, and South Korea. Second, nucleardevelopment requires significant private and public sector coordination, resting on a solidfoundation of government effectiveness, regulatory quality, and control over corruption.Compared with those countries that have successfully developed nuclear power in thepast, Pakistan falls short of these metrics. Finally, even if the high estimates are achievedby Pakistan, the resulting contribution would represent only 3-6% of total electricitygeneration. Furthermore, Pakistans overall contribution to global carbon emissionsremains miniscule at 0.4%, so substitution through an aggressive nuclear energy programdoes not suggest meaningful progress on the climate change agenda.


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BIBLIOGRAPHY

Government/ Institutional Reports

Asian Development Bank, Global Environment Facility & United Nations DevelopmentProgram. Asia Least-cost Greenhouse Gas Abatement Strategy: Pakistan; Manila,Philippines: October 1998.

Energy Information Administration, Country Analysis Brief: Pakistan.(http://www.eia.doe.gov/cabs/Pakistan/Profile.html)

Government of Pakistan Ministry for Water & Power Policy for Development ofRenewable Energy for Power Generation: Employing Small Hydro, Wind, and SolarTechnologies; 10 November 2006.

Government of Pakistan Ministry of Finance Pakistan Economic Survey 2007-2008.

Government of Pakistan Federal Bureau of Statistics Census of ElectricityEstablishments (CEE) 2005-06; September 2007.

Government of Pakistan- Federal Bureau of Statistics Pakistan Statistical Yearbook 2007.

Government of Pakistan- Planning Commission Pakistan in the 21st Century: Vision2030, Islamabad; August 2007.

Government of Pakistan- Planning Commission Medium Term Development Framework2005-2010; Islamabad, 20 May, 2005.

Government of Pakistan- Planning Commission MTDF Mid-Term Review, Islamabad,May 30 2008.

Government of Pakistan- Statistics Division Federal Bureau of Statistics Pakistan Socialand Living Standards Measurement Survey (2006-2007) Islamabad, December 2007.

GTZ Division Environment & Infrastructure TERNA Wind Energy Program EnergyFramework Conditions for Electricity Markets and Renewable Energies: 23 CountryAnalyses Chapter Pakistan, Eschborn: September 2007.

Hydrocarbon Development Institute of Pakistan, Pakistan Energy Yearbook 2007.

International Atomic Energy Agency Pakistan Report 2003.

World Bank Report No: 41328-PK; Project Appraisal Document- Electricity Distributionand Transmission Improvement Project.


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Articles & Presentations

Ahmad, Mohammad, Jalal, A.I., Mumtaz, A. and Latif, M., Applied Systems AnalysisGroup, Pakistan Energy Commission Case Study Pakistan: Nuclear Power for GHG

Mitigation and Sustainable Energy Development. International Atomic Energy AgencyNuclear Power for Greenhouse Gas Mitigation under the Kyoto Protocol: The CleanDevelopment Mechanism (CDM), IAEA: Austria, November 2000

Ahmed, Mukhtar. Pakistans Energy Strategy and its Role in South Asia; Presentationon 19 February 2007.

Ahmed, Mukhtar. Meeting Pakistans Energy Needs. Woodrow Wilson InternationalCenter for Scholars Report; Fueling the Future: Meeting Pakistans Energy Needs in the21st Century.

Braun, Chaim. The Pakistan Nuclear Power Program Security & Safety Issues,presentation to the NPEC Workshop on Pakistans Nuclear Futures: Reigning in theRisks, Washington DC; April 27-28, 2006.

Khan, Dr Shaukat Hameed (Planning Commission, Government of Pakistan), SomeAspects of Vision 2030. Presentation to Conference on Security and Cooperation inSouth Asia: A Global Perspective. October 8-10, 2007; Berlin, Germany.

McElroy, Damien and Rahul Bedi, Pakistan demands rights to nuclear power after Indiadeal is sealed, Telegraph, October 2, 2008. Available at:http://www.telegraph.co.uk/news/3122690/Pakistan-demands-rights-to-nuclear-power-after-India-deal-is-sealed.html.

Siddiqui, Zia H., Mahmud, Tariq, and Athar, Ghulam R., Pakistan Atomic EnergyCommission, Nuclear Power Programme of Pakistan. 2006.

Stephenson, John and Tynan, Peter. Identifying the Prospects for Electricity Trade fromPakistan and India. Dalberg Report, November 1, 2007.

Nuclear Association Annual Symposium 2006; Building the Nuclear Future: Challenges& Opportunities.

Pakistan Times Business & Commerce Desk: Pakistan approves 25-year Energy Plan.

Pakistan Times, 23 March 2005.


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ABOUT DALBERG

Dalberg is the leading strategy consulting firm focused on international development and

emerging markets close to 100 dedicated professionals advising top leaders andentrepreneurs in the private and public sectors. Operating from eight offices in keyinternational hubs and developing regions around the world, we have served 100 clientson more than 400 projects since 2001.

We work with our clients and partners on projects that create lasting value for theirorganization. Our key services are problem-solving, driving innovation, and creatingpartnerships for action. We have a global network of funders, corporations, multilaterals,investors, non-profits and foundations to create opportunities. We have particularexpertise in the areas of energy and environment, access to finance, global health,economic policy, and organizational strategy & performance.

We are a mission-driven organization with a commitment to excellence and out-of-the-box thinking. Our team consists of a diverse group of professionals trained at topeducational institutions and first-tier advisory firms. An extensive network of thoughtleaders, decision-makers, entrepreneurs, investors and advocates is key to our success.

For more information, please visit: www.dalberg.com.


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ABOUT THE AUTHORS

Peter Tynan is a Partner in Dalbergs Washington DC office. Peters focus has beenadvising international development institutions, corporations and investors on emergingmarkets issues and investments. At Dalberg, Peter leads the Access to Finance Practice

and co-leads the Energy Practice. Peter most recently advised the U.S. Overseas PrivateInvestment Corporation on their investment of $500 million in global energy funds,which catalyzed over $1.5 billion in total investments. Peter also advised the AsianDevelopment Bank on their $100 million investment in energy funds in Asia, performingdue diligence on some of Asias leading energy fund managers. He has worked with USprivate equity firms to devise emerging market entry strategies to enter India and Africa,and led the development of the fund raising plan for a medical tourism investment projectin the Bahamas. He co-led the World Bank/Gates Foundation initiative to create a globalsubsidy for anti-malarial drugs, by using innovative global financing mechanisms toreduce the price of anti-malarial drugs for patients.

Prior to joining Dalberg, Peter worked for J.P. Morgan in Hong Kong, and as anInvestment Executive in a boutique private equity firm in Australia, where he sourcedand evaluated middle-market private equity investments.

Peter holds an MBA from Harvard Business School, a Masters in Public Policy from theKennedy School of Government at Harvard University. He is the co-author of Will theUS-India Civil Nuclear Cooperation Light India? in Gauging US-Indian StrategicCooperation (Strategic Studies Institute, 2006) and Imagining Australia: Ideas For OurFuture (Allen & Unwin, 2004), and regularly speaks on renewable energy issues.

John Stephenson is a Project Manager in Dalbergs Washington DC office and hasexpertise in energy issues related to South Asia, East Asia, and Africa. John jointlymanaged Dalbergs support to the U.S. Overseas Private Investment Corporation for theirinvestment of $500 million in global energy funds. John also provided analytical supportto Dalbergs effort with the Asian Development Bank to select fund proposals for $100million in energy investments in Central Asia and East Asia. John coauthored with PeterTynan Will the US-India Civil Nuclear Cooperation Light India? in Gauging US-IndianStrategic Cooperation (Strategic Studies Institute, 2006), which looked specifically atrenewable energy opportunities within the context of Indias energy needs and othersupply options through 2032. On this topic, John has presented at the CarnegieEndowment for International Peace and the report was cited in the Economist.Previously, John evaluated sustainable business models for energy technologies as part ofthe energy access scale up strategy for the East African Community. This entailedworking closely with the UNDP, UNEP, and East African Community officials toidentify sustainable, largely renewable energy based business models in Uganda,Tanzania, and Kenya. The strategy included detailed investment programs, action plans,policy harmonization, capacity building, program management, and financing strategieswhich were subsequently endorsed by energy ministers and launched in 2006. John has


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also worked extensively with the World Bank on governance issues in the extractiveindustries as well as with private equity fund managers on their investment strategies inemerging markets.

John holds a Masters degree in International Security from Georgetown Universitys

School of Foreign Service and a Bachelors degree magna cum laude in Government andEast Asian Studies from Harvard University.

20081107 Dalberg Pakistan

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