NATIONAL7Spotlight Weekly)]

Power And Productivity

South Asian energy experts discuss ways of restructuring the region’s energy sector

By KESHAB POUDEL, in New Delhi

The electricity suddenly went off as a seminar on energy regulatory issues in South Asia commenced at the one of the five-star hotels in New Delhi. Because of automatic power supply, within a fraction of a second the hotel’s own system started to generate electricity. Nobody knew what the rest of the people in the Indian capital were enduring.

The situation in Nepal is much worse. The country under the grip of a severe load shedding of six hours a day, with Nepal Electricity Authority citing inadequate rainfall and fluctuating temperatures. Regular interruption of electricity supply is a common problem in most South Asian capitals. The problem in the countries of the region is that they don’t have strong regulatory bodies and regulations regarding the generation, distribution and transmission of power.

A strong current river : Lying untapped

Load shedding and power interruption in South Asian countries is likely to continue for many years as governments have yet to take bold initiatives on introducing more effective regulatory mechanisms.

Frequent political intervention and policy shifts have the disturbed the policy to establish regulatory agencies, finally pushing the energy reform process in back burner. India, Sri Lanka and Bangladesh have already established regulatory commissions to reform the energy sector.

"If South Asian countries want the energy they require for development, they must build regulatory bodies. In a situation when the regulations and regulatory mechanism are virtually non-existent, no one will come to invest," said Mary Webster, presenting a paper titled "Energy Regulatory Issues in South Asia: Why It Matters".

Because of unscientific tariffs structures, transmission and distribution losses, nobody considers investment in the power sector in South Asia as profitable. If private foreign investment does not come, it will be impossible to generate the power required to maintain the economic pace.

Although South Asian nations have the potential and resources to produce adequate energy, frequent interruption of power supply is a common phenomenon. Their power systems simply cannot keep up with the rise in demand.

Restructuring is the transformation of the power industry from a government-owned vertical monopoly to a privately owned, regulated competitive market with distinct parts for generation, transmission and distribution.

In almost all countries, the power sector is still virtually monopolized by the government, including generation, transmission and distribution. Because of the government control, the electricity is subsidized heavily in South Asian countries and nobody talks about price structure reforms.

"South Asian countries need to have a regulatory body to maintain energy supply," said Don Priestman, chief of South Asian Regional Initiative on Energy. "As long as the energy sector does not reform, one cannot see investment for its reform."

As the power sector in South Asia needs more investment from the private sector, it cannot lure such investment as long as the tariffs are not set in accordance with the cost of production. In most South Asian countries, the tariffs do not reflect the cost.

Restructuring of the electric power industry is taking place all over the world and is especially important for the South Asia. If South Asian policy makers and planners do not realize this reality in time, the region cannot hope to avoid more sudden and prolonged blackouts in the days ahead.