Can Pakistan make its energy sector greener, cheaper and more reliable? The government thinks so

energy sector.jpeg

(Federico Beccari, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Ayla Majid, Managing Director, Financial Advisory Services, Khalid Majid Rehman


Over the past few years, Pakistan has added extra generation to counter blackouts – but not much attention has been given to energy infrastructure, efficiency, and improving the recovery of electricity dues – one of the key reasons for Pakistan’s huge circular debt pile-up. At the same time, the new added generation has been primarily fossil fuel-based.

Having come a long way, Pakistan now needs to achieve equilibrium in its energy triangle for a sustainable energy equation with the right balance of security and access, environmental sustainability, and economic development and growth.

The government now is committed to improving the country’s World Economic Forum Energy Transition Index (ETI) score of 46% – and one initial step is the development of an Indicative Generation Capacity Expansion Plan (IGCEP) that runs until 2040.

Emerging Pakistan’s demand for power

To plug the generation gap caused by growing demand for energy in Pakistan, installed generation capacity was increased from 23,000 MW in 2014 to 33,744 MW by 2019. However, overall energy planning remained fragmented across the energy value chain, with little focus on improving the energy mix and upgrading transmission and distribution capacity.

Power sector planning

It is supremely important that an integrated power sector planning approach is adopted to adequately achieve balance in the energy triangle. This approach must include accurately forecasting demand, adding generation capacity, improving transmission and distribution systems, bringing costs down and ensuring sustainability.

These important factors do one very important thing for economic growth and improving investor confidence: they provide predictability around the availability of affordable energy. For the first time, comprehensive planning has been conducted in Pakistan in the form of the IGCEP, which includes expansion planning studies that will be updated annually in order to retain accuracy in the wake of changing dynamics.

The aim of the IGCEP is to optimize energy generation costs in order to ensure that adequate generation is added at a least-cost basis to meet future energy demands.
At present, Pakistan’s expensive power generation mix consists mostly of imported coal (8%) and re-gasified liquefied natural gas (R-LNG – 23%).

Electricity generation mix

Local resources, although abundant, are not utilized to their full capacity. Local coal, for example, makes up just 0.1% of the power generation mix. The threat of climate change has led to a drive toward de-carbonization; IGCEP takes this into consideration and therefore includes a planned increased in capacity from renewables and hydro sources. While this plan indicates a desire by the government to improve the overall energy mix and reduce costs for its citizens, it is also an area of opportunity for investors who can benefit from investment-friendly policies, and invest in the provision of sustainable, affordable energy as well as earning respectable returns.

As per the IGCEP, Pakistan’s energy mix will become more sustainable and more reliant on local production than imported energy. By the year 2040, hydro-generation will have a 40% share, while renewables and local coal will have 16% and 25% respectively. The dependency of imported fuel including imported coal and R-LNG will be reduced from the present figures of 7% and 23% respectively to 5% and 6%.

Renewables, hydro and locally sourced fossil fuels are Pakistan's aim for 2040

Renewables, hydro and locally sourced fossil fuels are Pakistan’s aim for 2040
Image: IGCEP, (Power Division) Ministry of Energy, Government of Pakistan

Reduction in electricity losses

In addition to enhancing the optimal energy mix and planning, it is fundamental to reduce electricity losses, which currently stand at 18.3% for distribution losses and 2.4% for transmission losses.

These losses contribute to Pakistan’s much-talked-about circular debt, which stood at PKR1.6 trillion ($7.2 billion) by the end of June 2019. Technical and governance interventions are required to reduce the losses – and, as a consequence, the circular debt. The government is also making out-of-the-box financing solutions by working with key energy stakeholders (including independent power producers) to reduce the fiscal burden.

 

Policy-level intervention

In addition to the IGCEP’s planning and reducing losses, there is a great need to improve transmission and distribution systems, reduce subsidies, improve governance and create an open energy market platform for long-term competitiveness, sustainability and transparency in the electricity business. This improvement of ecosystem and system performance will be a sure-shot formula for fuelling economic growth led by domestic and export-led businesses.

Future of energy

At the heart of energy planning and the future of energy are the interests of the people and the planet. This is why the long-term future of energy in Pakistan is based on the principles of availability, reliability, sustainability, less burden on finite resources, low cost and efficiency.

Following global best practices, fossil fuels will play a limited role in the future of energy in Pakistan. New innovations, renewables (wind, solar, geothermal) and nuclear power will dominate. Our goal as an emerging economy should be to attract more investment in the renewable energy sector, both on-grid and off-grid, and to adopt solutions for enhanced efficiency that reduce our dependency on public finances and make the regulatory process friendlier for stakeholders who can bring in new tools and technologies.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Rare diseases are more common than you might think

Eurozone: Uncertain future with unemployment ravaging the South

European Semester Winter Package: assessing Member States’ progress on economic and social priorities

At UN, Middle East countries discuss steps towards regional nuclear-free zone

3 ways business leaders can build digital trust

‘The time for action is now’ senior UN peacekeeping official says, urging support for regional force combating Sahel terrorism

There are more than 1 billion guns in the world and this is who owns them

From rescue animals to electric buses, California is introducing bold new rules

EU countries invested €5 trillion abroad

Young people are not a nameless, faceless mass. So why do we treat them as such?

‘Emulate his example’ urges UN chief as world celebrates Nelson Mandela: a ‘global advocate for dignity and equality’

Agreement reached on new EU Solidarity Corps

Let’s Learn

UNICEF chief hopes 2020 will be ‘a year of peace’ for Syria’s children

Chart of the day: Why marine protected sites matter more than ever

Stable growth momentum in the OECD area

‘Everyone needs to do more’ to help suffering Venezuelans, says UN Emergency Relief Coordinator

World Summit Awards 2016: Sustainable impact through digital innovation

Spanish and Polish voters are crying out for an imminent European change while US urge now Germany to change route

Continuing incarceration of women’s rights activists in Saudi Arabia, ‘reprehensible’: UN experts

EU prepares a banking union amidst financial ruins

EU budget: Stepping up the EU’s role as a security and defence provider

Here are three ways organizations can prepare for tomorrow’s world

A Sting Exclusive: “Global Climate: Our Common Responsibility”, S&P MEP Miriam Dalli underlines from Brussels

Eurozone: Retail sales betray economic frailty

Anti-vaccination movement affecting youth in Europe

3 leaders on creating a pipeline for female talent in business

New UN forestry project bids to help countries meet climate change commitments

Promoting Health in the Brazilian Amazon: one nation but many cultures

Switzerland has the most highly skilled workers in the world. This is why

The IMF sees Brexit’s ‘substantial impact’ while the world’s economy holds its breath

Smart devices must come with trust already installed

This is the environmental catastrophe you’ve probably never heard of

EU-China Light Bridge in Brussels signals the bright coming of the Year of The Dog

Asylum seekers in Sri Lanka fear for their safety, in wake of Easter Sunday terror attacks

Informal meeting of heads of state or government, Sibiu, 09/05/2019

Elections in Europe: No risks for the EU, leaders readying to face Trump-Brexit

MEPs push for high ambitions at the COP25 in Madrid

‘Cataclysmic events’ in Hiroshima, Nagasaki, began ‘global push’ against nuclear weapons says Guterres, honouring victims

How Finland is fighting fake news – in the classroom

How can consumers be effectively protected from insurance sellers?

UN forum to explore use of outer space to improve lives, protect planet

Security Council renews Central African Republic arms embargo

EU plans pan-European network of cybersecurity services

4 reasons cities should embrace Universal Basic Income

The Working Methods of the von der Leyen Commission: Striving for more at home and in the world

Central American migrants must be protected, urge UN experts

World faces ‘climate apartheid’ risk, 120 more million in poverty: UN expert

From UN Assembly podium, Central African Republic leader appeals for lifting arms embargo

Greece and Ukraine main items on EU28 menu; the course is set

Greece returns to markets at a high cost to taxpayers, after four years out in the cold

Nearly $4 billion needed to protect 41 million children from conflict and disaster

DR Congo: Ebola response resumes despite ‘risky environment’

Memoirs from a unique trip to China: “my new old dragon” (Part II)

MEPs propose more transparent legislative drafting and use of allowances

Fuel crisis rapidly draining last ‘coping capacities’ of Palestinians in Gaza

Scientists now think air pollution is fuelling violent crime

Schengen is losing ground fast revealing Europe’s clear inability to deal with migration crisis

On the euro but out of it?

UK economy in dire straits: leading banks now officially plan to Brexit too

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s