Bulk energy storage: diamonds in our backyard awaiting discovery

“Your diamonds are not in far distant mountains or in yonder seas; they are in your own backyard, if you but dig for them.” (Russell H. Conwell in his “Acres of Diamonds”)

Dr. Shahid Rahim

Among the major evils that plague our country, power sector’s circular-debt clearly stands out. It has crossed PKR 2.54 trillion already and is defying every effort of the government to tame it. To save this sector from financial ruin, the government must explore every option that can provide a sigh of relief to the country’s economy and people as both are suffocating under the endless streak of tariff hikes.
According to NEPRA’s State of Industry Report 2023, poor governance of the power sector is leading to huge financial losses which exceeded PKR 530 billion last year. The main causes behind these (almost 75%) were excessive losses in the systems controlled by DISCOs and lack of full revenue recovery by them. Out of merit-order generation due to system constraints and penalties paid to IPPs for some contractual violations made up the rest.

NEPRA, in the Foreword of its above report, sums up this sector’s performance in these words:

“The power sector grappled with persistent issues, ranging from increasing capacity payments to over-reliance on imported fuel, under-utilization of power plants, circular debt, transmission constraints, operational inefficiencies, underutilization of HVDC line etc. However, the primary driver of the power sector’s stress is poor governance, spanning from planning to execution and subsequent operation, coupled with lack of accountability.”
“While closely looking at the individual factors which contributed for high electricity cost, it becomes evident that most of them are controllable. For instance, the cost of fuel can be managed by diversifying the generation mix towards renewable energy sources. Similarly, the impact of increased capacity payments can be mitigated by boosting electricity sales. Issues like circular debt and others can be addressed through timely reforms, better planning and improved governance.”

No business can even think of surviving with such humungous losses, let alone remaining profitable. Our inability to address the above issues head-on and reluctance to carry out systemic overhaul of this sector have not only contributed to these evils but have allowed them to gain a firm foothold. Quick-fixes, band-aids, and ad hoc actions such as early closing of markets, media campaigns to motivate conserving electricity, and raising tariffs frequently to bridge the gap between costs and revenues have failed to cure the cancer that inflicts this sector.

Notwithstanding that these are no substitute for the “improved governance” that NEPRA may have in mind, this article suggests a difficult but workable solution to pull the power sector out of its present mess. It’s the development of pumped hydroelectric storage (PHES) and compressed-air energy storage (CAES) schemes in the country, especially in its southern parts. As we discuss later, these facilities will alleviate the serious issues of spiraling up capacity payments and the penalties being paid to IPPs. Both will also contribute substantially to cover the uncertainty and variability of
the high shares of renewable generation the government plans to add in the power grid by 2030. But Let’s first have a quick look at the philosophy that governs the power supply business to appreciate
how the suggested development will help.

Most of the cost in the power grid is due to consumer demand that varies randomly. Everyday, it rises from a minimum to a crest and then falls back. The value of the minimum demand, maximum demand, and the way it rises and falls can vary from day to day, season to season, and system to
system, but the pattern remains largely similar. The demand is often classified into three categories: base load that remains on the system round the clock, peak load that comes on for few hours in the year only, and intermediate load that falls in between.

Electricity has some unique constraints. A critical one is that it must be produced and delivered the moment it’s demanded as its storage has been both difficult and expensive. Recent developments in battery storage technologies are beginning to ease this constraint a bit, but we aren’t there yet.

A variety of technologies have evolved to enable utilities to serve consumer demand reliably and at minimum cost. We have high upfront but low fuel cost plants like coal and nuclear used primarily to serve base load. On the other extreme, we have low upfront but high fuel cost plants like oil and gas
combustion turbines and diesel generators to serve the peak load. There’re also a host of other technologies in between to serve intermediate loads.

Cost is not the only consideration in picking up a generator portfolio as many other factors also influence this decision. These include a technology’s service, its operational flexibility, its construction time and lifespan, its dependability, its environmental footprint, its support to industrial
development and jobs creation, and its contribution to self-reliance, to name but just a few.

For much of its history, power grids have had generators operate in synchronism with each other. at a nominal frequency (50 Hertz in Pakistan) that is maintained across the system. Different grid sections however are allowed to operate at different voltages to suit the end-use application. In addition to capacity and energy, generators are also required to provide additional services to maintain stability and security of the grid in normal and contingency situations—collectively termed support or ancillary services.

Renewable plants are non-synchronous and connect with the grid via electronic interfaces. Their capacity and production both depend on the availability and variability of the primary resource on the plant site. Without storage, they can’t provide capacity, energy, and the ancillary services like those by conventional generators. On-site storage can help but adds substantially to their costs, often doubling it. Other techniques can also serve this purpose, but not to the extent of the storage.

Three critical issues that planners face in developing optimal capacity expansion plans with high shares of renewables are: (a) how much firm capacity a candidate renewable plant will contribute to system reliability? (b) how much energy it will provide? and will it provide any of the ancillary
services? These issues do not go away even if planners work out an optimal generation portfolio; they just shift shoulders—from those of planners to those of system operators (SO).

The philosophy that governs the electric supply and delivery business remains largely the same whether the whole system is managed by a single entity or when some functions are outsourced (like “generation” to IPPs). But the utility now must agree on the terms and conditions in a formal
contract with these producers. As huge risks exist upstream and downstream of them, sponsors of IPPs seek firm guarantees to protect their investment (via the much-cursed “take-or-pay” contracts).

The breakthrough in efficiency and cost of battery packs for electric vehicles (EVs), particularly those based on lithium-ion chemistries, spurred R&D in utility-scale storage technologies as well and led to a similar price decline (90% in the last decade by some reports). Battery-packs are superior to other storage technologies for short-term grid support. But for larger and longer-duration requirements,they lose their edge. There are serious issues also about their uninterrupted and economic supplies in the future because the mineral and material resources used in their production are unevenly
distributed in the world. These constraints and the many other superior features of the bulk energy storage schemes, like PHES and CAES, make them a more viable option for our country than the battery storage schemes.

Globally, the power grid operations are governed by a standard set of rules in a “scheduling and dispatch” process which includes: (a) arranging generators in an ascending order of operating costs called “merit order”; (b) selecting a subset from the merit order list the plants to be operated next
day or week called “unit commitment”; (c) scheduling their loading order and production levels; (d)their actual dispatch; and (e) monitoring system operation continuously and intervene, if necessary,to maintain supply-demand balance.

Economic considerations are paramount, but some other factors also influence the SO’s scheduling and dispatch process. For instance: (a) having adequate firm capacity from various sources to maintain system reliability; (b) their ability to cater to momentary fluctuation in demand (called
“regulation”); (c) their ramping up/down capability to follow demand as it rises and falls (called “load-following”); (d) their assistance in handling contingencies (called “operating reserve”); and (e) their capability for restoring the system from blackouts (called “Black Start”).

Bulk energy storage, large (above 50 MW) and long-duration (from weeks to months,) is an example of Conwell’s diamonds in our own backyard awaiting discovery. Two such options, pumped hydroelectric storage (PHES); and compressed-air energy storage (CAES), can help the country not
only in managing the runaway circular-debt but also in covering any adverse impacts of the high shares of renewable power the government plans to add in the power grid by 2030.

Pumped Hydroelectric Storage (PHES): PHES uses earth’s gravity to generate electricity just like a regular hydroelectric plant. They use two separate water reservoirs, one located at a higher elevation from the other. Water is pumped from the lower reservoir to the higher for storage when cheaper and is kept there. When required, it’s allowed to flow back to the lower reservoir to produce electricity. PHES schemes have been around for almost a century and constitute over 97% of the global energy storage. Their round-trip-efficiency is between 75 and 85%. Their storage capacity can
be large (above MW) as well as for longer durations (weeks to months and even longer).

Compressed Air Energy Storage (CAES): In CAES schemes, air is pumped into an underground cavern, mostly a salt cavern or an emptied oil or gas field using electricity when it’s convenient and cheaper. When energy is needed, the air from the cavern or field is released back into the facility, where its expansion turns a generator. The CAES are also large and long-duration energy storage schemes. Their round-trip efficiency is generally between 40 and 60% but can approach 70%.

The charm of battery storage technologies is hard to resist, but a slightly deeper probe will easily reveal that for the time scales and issues we face, bulk energy storage schemes like PHES and CAES will serve Pakistan’s needs much better. Both are mature technologies, use renewable resources, and except their development costs, will rely on local resources for operation. Both also offer multiple features that can be used to serve any unpredictable portion of demand on the grid.

The beauty of PHES and CAES schemes is that they can act as a generator or a load as the grid needs. These storage schemes can cost-effectively and efficiently provide capacity and energy to the system like any other source of supply when needed (in “discharging” mode) and can also increase or
decrease their demand like any other large load (in “charging” mode). These features, coupled with some others, can enable system operators keep a next-to-perfect balance in the grid, and thus can obviate the huge penalties being paid to IPPs at present.

  • Some of the important services PHES and CAES can provide include:
  • Energy Time Shift (buying electricity when cheap and selling it when expensive). Peak Shaving/Clipping (obviating the needs of expensive peaking capacity
  • Cover renewable generation plants’ uncertainty and variability (capacity and output
  • variations using stored energy to mitigate changes in their availability and production)
  • Defer or eliminate capital investment needs in T&D upgrade and new facilities
  • Operating Reserve (providing support to the system when it suffers an abnormal conditions)
  • Black Start Capability (using stored energy to restore the system from blackout, independent
  • of the grid supply) and
  • Seasonal Storage (storing energy for several months)

Bulk energy storage schemes will provide multiple service to the grid (called “value-stacking” in utility lingo). This can increase storage utilization and improve its economics. These features can help not only in obviating the different types of penalties currently being paid to IPPs but also in covering the uncertainties and variabilities of renewable generation plants, and in reducing the wide gaps that exist between the consumer demand in different seasons of the year. In fact, they will facilitate our country in making a smooth and tear-free transition to a sustainable energy future.

Though their potential to resolve many of the present problems in the power sector are high, these schemes are not a panacea for every issue. A lot of groundwork will be necessary to study the prospects of PHES and CAES options in the country and their feasibility. We also don’t have the
expertise and tools required to do that. Existing policy, regulatory, investment, financing, and remuneration frameworks, as well as technical codes and procedures may require modification.

Unfortunately, bulk energy storage is an option little explored in our country. NEPRA Act and the National Electricity Policy are completely silent about it. ARE Policy 2019 only lists it as one of the alternative energy technologies. The National Electricity Plan 2023-27 also makes just a passing
reference to Hydrogen production and local manufacturing of storage batteries. Much more is needed in terms of policy support, legal coverage, regulatory controls, and pricing frameworks to stimulate and encourage development of viable energy storage schemes in the country.

Pakistan’s Balochistan province has a rich potential for developing such schemes. Their development,either as stand-alone or as hybrid with renewables at the same site and linked with other similar nearby plants in this province (present and future) and in the wind corridor of Sindh, will be an ideal combination to have. If subsequently linked with the national grid these will be a source of sustainable energy supplies not just for us but for our next generations also.

A lot of background material on the above aspects is available from prominent global organizations. Ministry of Energy (Power Division), AEDB, and NEPRA should join hands to commission a scoping or pre-feasibility study to further explore the potential and prospects of PHES and CAES schemes in the country. Pakistan may seek technical help and support from our time-tested friend, China, on these schemes as it tops the world in the deployment of PHES schemes adding up to 45.8 GW in 2022 (30% of the world total) and is poised to raise it to 62 GW by 2025.

The IPPs and the agreements signed with them is a reality and no amount of whining will reverse the past decisions. Renewable power generation, whether utility-scale or distributed, is also a new market force that is poised to grow. We must accept our present realities, learn from our past mistakes, and look forward with optimism for a bright future. Pakistan may be short in money but it’s rich in resources, particularly its talented people. Pakistan’s power sector problems are indeed grave but are not beyond the human imagination and capability. One solution is suggested above and there may be many more, as Conwell advises, in our own backyards only if we carefully search for them.

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Don't take our word for it.

Dr. Gulfaraz Ahmed
Dr. Gulfaraz Ahmed
Advisor Mari Petroleum, Former MD OGDCL, Former Secretary Petroleum

Despite historical energy resource exploration Pakistan is still to achieve self-sufficiency. Therefore Pakistan continues to promote its geology to attract the competitive exploration dollar internationally. The members of the vibrant energy industry in the country felt the need for instituting a forum of The Petroleum Club of Pakistan to serve as an open platform for the sharing of professional information. The PCP organizes meetings and seminars for sharing and promoting information of related knowledge and is headed by a President chosen for historical contributions to the industry in the country!

Dr. Syed Iqbal Mohsin
Dr. Syed Iqbal Mohsin
Former VC Wafaqi Urdu University, Former Director Evening program Karachi University

Petroleum Club of Pakistan provides a platform for professionals that was missing and was very much needed. The exchange of ideas and good communication is very healthy.

Syed Firasat Shah
Syed Firasat Shah
Ex Co-DMD Exploration & Business Development at Pakistan Petroleum Limited

Petroleum Club of Pakistan is a much needed, integrated think tank platform for the experienced energy professionals to interact, share thoughts on important energy challenges and to come up with fact-based solutions, by following the principles of mutual respect, collective wisdom, and constructive thinking. The club will also contribute to educating the public on energy-related issues to overcome common misconceptions and prevent its negative impact.

Dr. Saeed Khan Jadoon
Dr. Saeed Khan Jadoon
Ex Executive Director Exploration, Oil & Gas Development Company Ltd. Islamabad, Pakistan

On behalf of the Petroleum Club of Pakistan (PCP), my team and I welcome all our members and visitors to our web platform. PCP is a not-for-profit organization, our efforts are towards making Pakistan a leading country in the energy sector by strengthening the links between professionals of the Energy Sector of Pakistan through the power of networking, technology utilization, local research, human resource development, ancillary skills, and counseling. We provide our members with a professional platform to interactively discuss energy-related issues and to propose fact-based solutions that may be used as energy industry feedback for policy formulation. PCP also arranges workshops and talk shows to increase awareness on energy-related issues and the link between academia and the industry.

Ahmed Nawaz
Ahmed Nawaz
Chief Operating Officer (COO) at MOL Pakistan Oil & Gas Co. B.V.

PCP is indeed a prestigious platform that is providing an opportunity to professionals from across the petroleum industry to exchange their views and contribute toward the betterment of our beloved country Pakistan. The thing which I admire the most about PCP, it has made a wealth of knowledge and wisdom accessible to emerging and young industry professionals from those who otherwise would have gone into hibernation post their retirement. Forward-looking, I foresee PCP tremendous role in improved inclusion and structured dissemination of knowledge providing discipline-based expert forums whereby industry and academia can equally benefit and effectively contribute in this volatile, uncertain, complex and ambiguous petroleum business.

Moin Raza Khan
Moin Raza Khan
MD & CEO Pakistan Petroleum Limited

It is heartening to see the Petroleum Club of Pakistan (PCP) flourish in terms of its membership over the past few years. Now we have knowledge powerhouses representing the entire spectrum of the Petroleum and Energy industry in its fold. With an amalgam of young and highly experienced, seasoned professionals of this industry, it carries several thousand years of experience, PCP seems to be well poised to deliver on the very objectives that it was formed for. Being a front runner and a representative from the upstream petroleum sector, now I can say that PCP is getting closer to my vision of providing the best think tank for influencing key decisions by the policymakers, planners, and promulgators across all streams of oil & gas industry of Pakistan.

Masood Siddiqui
Masood Siddiqui

Petroleum Club of Pakistan is a great platform for debating the energy issues of Pakistan. With the thousands of years of experience present at the forum, issues can debated threadbare with across the board perspective incorporated in the outcome.

Muhammad Raziuddin Monem
Muhammad Raziuddin Monem
Member Board Of Directors SSGC , Former Regional Head MI Schlumberger

Petroleum Club is a very good medium to exchange views and ideas about what ails the Petroleum industry and suggestions on some out of the box solutions for the policymakers to see an alternative approach to what they've been doing. This will offer them something to think about. I have always felt that once we have really good Corporate Governance on both sides, in the industry and the regulators or shouldn't we call them facilitators, both ensure that decisions are taken primarily on merit and the Code of Corporate Governance is strictly followed a lot of the issues will be settled, slowly but surely. So here's to a meaningful discussion on this valuable forum.

Muhammad Arif
Muhammad Arif
Member Gas at OGRA

It gives me immense pleasure in penning down to acknowledge that the creation of the Petroleum Club of Pakistan has been the most needed and long-awaited initiative which has united and brought industry professionals at one platform. The Club members’ life long experience and their wisdom reflected in intellectual discourse on most difficult industry issues are invaluable. Issuance of periodic hardcore advisory papers by PCP may provide guiding principles for the government and regulators in the formulation of policies and taking timely corrective measures in addressing the complex industry issues in these testing times and years to come. I am very hopeful and confident that life long experience and wisdom of the very experienced and committed members of PCP would not only strengthen the social and professional network, but it would also be able to truly act as “Think Tank” and provide timely advise or at least “Food for Thought” to the policymakers to address compelling issues faced by the industry with a view to ultimately achieve sustainable security of energy supplies in a competitive market environment. The success of the Petroleum Club of Pakistan is due to the active, timely and painstaking efforts being made by the Club team.

Syed Arif Kamal
Syed Arif Kamal
Former Chief Executive POL & Executive Director OGDCL

Establishment of Petroleum Club of Pakistan became a reality due to vision, inspiration and sincere efforts of members in general but of founder members in particular resulting in a rapid and even an unprecedented growth of membership. Every one has noticed a very enthusiastic participation of members in sharing the technical knowhow and industry information. I hope soon speaker series may also be initiated for dissemination and sharing of knowledge. Finally all the effort of members is focused to help the Country in meeting its energy requirements in an environtally safe, responsible and sustainable manner.

G.A. Sabri
G.A. Sabri
Former Federal Secretary Petroleum / DGPC

Formation of Petroleum Club Of Pakistan is an excellent Initiative and being a member i am thoroughly enjoying it. I would like to compliment Mr. Tahir Alam and Dr. Saeed Khan Jadoon for the wonderful initiative. The Daily news update is again an great idea. PCP is a very good forum for professional interaction and source of learning for the younger generation, as well as keeping the old vintage updated. I would strongly propose that the Government should officially accept it as a think tank group which can make a very useful contribution to policy making. Organisations like PPEPCA and OCAC, which have been there since ages were not able to do what PCP has achieved. It would have a greater impact if the strength of downstream professionals could be increased. PCP’s growth and success will be a source of professional pride. Keep it up Tahir Alam and good luck.


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