Ban on alternative energy

Of the many, many problems that plague Pakistan’s energy sector is the government’s extreme myopia when it comes to energy pricing: Islamabad has a very bad habit of making long-term policy decisions based on today’s energy prices. This dangerous lack of foresight was on full display when the government announced a ban on new alternative energy projects, instead stating that it will be encouraging energy companies to focus on generating electricity from liquefied natural gas (LNG). On the surface, this decision appears to make sense. LNG prices, after all, are at record lows right now and Pakistan has recently built up the capacity to import LNG and may be on the verge of a long-term deal with Qatar for the supply of a substantial amount of LNG. Were this fuel used to generate electricity, it would indeed be far cheaper than wind or solar power and, while not as clean as those two fuel sources, is significantly better for the environment than coal-fired power plants, which is also a fuel source the government is actively encouraging.



The problem with this policy, however, is that it only makes sense given today’s energy prices. It is true that Pakistan’s first LNG imports were for around $7 per million British thermal units (mmbtu), but it was only a year ago that those prices were closer to $18 per mmbtu. The prices of hydrocarbons are highly volatile and LNG prices are linked to global oil prices, the most volatile of all energy prices. Meanwhile, the cost of photovoltaic cells and wind turbines has had only one direction for the last four decades: downward. Yes, it is true that solar and wind energy are costly today, but they will not always remain so. The government needs to prepare the country’s infrastructure to ensure that it can sustain an eventual conversion towards energy sources that are today considered alternatives. In places in the world where governments have invested in trying to promote clean energy, they have found considerable success. In California, for instance, it is now feasible to install solar panels for homes without any subsidies at all. Pakistan gets just as much sunlight, if not more, than the southern part of the United States. What we lack is the infrastructure that would make solar energy more feasible. The government, however, appears uninterested in ever allowing that to happen.

Published in The Express Tribune, April 24^th,  2015.

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