Energy sector: setting the directions right

As the new government assumes power, energy crisis is one of the biggest challenges facing Pakistan. Given the fragile economic conditions, and its numerous implications for the macro- and micro-level socioeconomics, the crisis should be at the top of the priorities list.

The over-a-decade-long energy crisis stands tall to see off yet another government. The last two regimes had eradication of electricity loadshedding in their manifestos but the results are all obvious. Despite the acclaimed installed capacity of over 28,000MW, which is more than the maximum peak demand of around 23,000MW, the gap between demand and supply is still there, resulting in lengthy loadshedding. Furthermore, the circular debt reportedly to be around Rs1,000 billion, and transmission and distribution (T&D) losses of around 25% are more than enough to suggest that it is not all well in the energy sector by any standard.

Leaving the issues of dearth of commitment and rampant corruption aside, the energy sector has greatly suffered from lack of vision and strategy on the part of successive regimes. As a matter of fact since 1990s the energy sector has been run in a haphazard manner. The main focus has been on reckless capacity addition at exuberant cost, largely ignoring other important areas like improvements in generation mix, augmentation of indigenous supplies, up-scaling of T&D system, and institutional development. The current situation — the highlights of which are hefty load-shedding, unbalanced generation mix, gigantic circular debt, incapable T&D network and low-spirited workforce — was thus inevitable.

To rebuild the crippled energy sector a holistic and vibrant energy strategy needs to be developed. Readjustment of the generation mix should be at the heart of any remedial plan. A heavily thermal power-based energy mix is one of the main challenges with almost 65% of the total electricity coming from thermal plants. Thermal power is expensive to produce, also dearly adding to the national import bill as 85%, 35% and 42% of the respective consumption of oil, natural gas and liquefied petroleum gas is being met through imports. Ironically almost all power projects conceived since 1990s are thermal power plants. Thus, expensive power generation, high electricity prices, unavailability of fuel for power plants and circular debt are all interwoven issues. Pakistan needs to quickly and heavily truncate the share of thermal power generation in the supply mix replacing it with indigenous supplies through much cheaper hydropower and modern renewables like solar energy and wind power. Projects coming under CPEC also need a revisit with 76% of them being thermal, mainly on coal. Hydropower, solar and wind projects have respective humble share of 17%, 6% and 1%. The fate of solar projects, if the Quaid-e-Azam Solar Park could be taken as a case study, unfortunately does not look very promising.

Let’s have a quick look at the global dynamics of energy. Over the last couple of decades the global energy scenario has seen an enormous and rapid transformation in terms of trends, policies and technologies. The most important dimension of the energy landscapes across the world has been the exponential growth of renewable energy that has fast outpaced all other forms of energy. From a global installed capacity of 5MW in 2005 solar photovoltaic (PV) has crossed the 300GW mark, with 2017 alone recording a growth of nearly 99GW. Solar PV is now becoming financially competitive with conventional forms of power generation. Dubai, for example, is currently developing an 800MW PV project with the power purchase agreement signed at less than $0.03/kWh. As wind power with global installed capacity of over 550GW is the second-fastest growing energy technology behind solar power, utility scale energy storage and electric mobility are also coming of age. With the combined annual new investment in solar and wind power crossing $260 billion, the former alone is out-beating the combined investment in oil, gas and coal-based power plants. Several countries, including Germany and Portugal, have already had renewables at times meeting their peak demand.

In the wake of such global trends, Pakistan through its hot pursuit of thermal power seems to be taking a step backward. With the severe implications of global warming, being felt in our own backyard in the form of melting glaciers, seasonal disorder, higher temperatures and shrinking water reserves, the country cannot afford to burn a lot of oil, gas and coal for long. The case for excessive thermal power plants seems to be having no justification even when oil-rich countries like Saudi Arabia are switching to renewables. Pakistan exhibits enormous potential for hydropower, solar energy and wind power. These are indigenous resources, meaningful and strategic taping of which can yield numerous benefits, including provision of cheaper energy, security of supplies, environmental friendliness, technological self-sufficiency, creation of new job markets and entrepreneurial streams.

Pakistan’s energy sector has the capacity to bounce back from the current setbacks. All it needs is right directions, and a committed and capable team.

Published in The Express Tribune, August 16^th, 2018.

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