The energy conundrum: A call for sustainable solutions in Pakistan

Get a better understanding of why Pakistan should embrace clean and innovative energy solutions

In the intricate landscape of Pakistan's energy sector, the assertion that "we can be blind to the obvious and are also blind to our blindness" resonates with a sobering truth. A critical analysis of the power sector reveals a concerning trend: The installed generation capacity of Pakistan has surged to nearly double the utilised capacity. This discrepancy prompts a reflection on the country's decision-making trajectory and policy formulation.

The root cause of this challenge lies in the simultaneous planning of costly, imported fuel-based power plants operating on take-or-pay contracts. This reactive and ad-hoc planning, devoid of long-term foresight, has inflated Pakistan's energy sector circular debt to a staggering PKR 5.5 trillion. A massive portion of this debt arises from capacity payments and take-or-pay obligations for these power plants, which are utilised primarily during high-demand summer months and remain idle for the rest of the year.

The Institute for Energy Economics and Financial Analysis (IEEFA) has suggested the early retirement and phasing out of these power plants, citing economic feasibility. However, power sector planners justify their continued existence by emphasising their role in system security and peak demand management.

Meanwhile, the global focus has shifted towards integrating renewable energy sources and advanced technologies like Battery Energy Storage Systems(BESS), yet Pakistan's power planners remain hesitant to adopt these technologies despite the country's immense potential for solar and wind power generation.

The cost of lithium-ion battery storage systems has seen a significant reduction, reaching a record low of $113 per kWh, and is projected to drop further to USD \80 per kWh by 2030, according to Bloomberg New Energy Finance. The optimal combination of renewable energy sources and BESS offers Pakistan the best opportunity to replace costly thermal power plants, providing uninterrupted power supply at lower rates.

A recent study by Renewables First and PRIED (Policy Research Institute for Equitable Development) on the integration of BESS with renewable energy sources reveals that this combination can reduce electricity tariffs to as low as 6-8 cents per unit.

The study's use cases demonstrate the potential of BESS to manage peak demand by optimising battery charging and discharging cycles, thereby avoiding the need for costly thermal power plants. Additionally, BESS can ensure an uninterrupted and consistent power supply, which is crucial for industrial consumers whose operations depend on stable electricity without voltage fluctuations.

With the implementation of the Carbon Border Adjustment Mechanism (C-BAM) and increased accountability for Scope 2 and Scope 3 emissions in international markets, clean energy has become crucial for Pakistan's export-based industries.

Currently, much of Pakistan's industry generates its power in captive mode using thermal power plants. However, issues such as gas subsidy, gas depletion, and C-BAM implementation render this option unsustainable. Export-oriented industrial consumers now require clean and reliable energy to remain competitive globally.

This necessitates urgent action from the Pakistani government and power system planners to embrace innovative and clean energy solutions like BESS. Encouraging industrial consumers to connect with the national grid can not only address their energy needs but also help reduce the disparity between base and peak demand of Pakistan due to the consistent load factor of industries.

With declining prices for renewable energy sources and BESS, now is the opportune time for Pakistan to capitalize on these technologies. This shift would not only resolve the issue of unutilised capacity but also enhance the competitiveness of Pakistan's export-based industries and lower the overall electricity tariff.

Some industries in Pakistan have already taken proactive steps by establishing their own renewable energy-based captive power plants to reduce dependency on the grid, such as ThattaCement and Unilever Pakistan.

The new policy of gross metering may inadvertently encourage residential consumers who can afford a couple of million PKR solar systems to go completely off-grid by installing battery energy storage systems. This shift could leave lifeline consumers bearing a higher tariff burden due to stranded capacity. Similarly, industrial consumers may follow suit, exacerbating the issue further.

Given these challenges, the government of Pakistan and power system planners must take serious steps and adopt a proactive approach. By embracing renewable energy and battery energy storage systems, Pakistan can reduce its reliance on thermal power plants and ensure a more equitable and sustainable energy future.