Sindh minister urges affordable energy, supports fossil fuels over IPPs

KARACHI: Sindh’s Caretaker Revenue and Industry Minister Younus Dagha outlined the need for affordable energy, highlighted how expensive contracts with independent power producers (IPPs) bogged down Pakistan’s energy sector, and spoke in favour of much-criticised fossil-fuel projects.

He was speaking at a dialogue “Energy Sector Reforms in Pakistan’s Poly Crisis”, organised by The Knowledge Forum (TKF) on Tuesday.

Dagha talked in favour of the much-criticised fossil-fuel energy projects. He said that they should not compromise energy security and not abandon the Thar coal project.

The minister also rejected another demand of experts and environmentalists for shifting to renewable energy sources, saying, “Solar and wind is neither an affordable nor sustainable model. You can’t run the country on solar or wind energy.”

Dagha discussed transformation of different types of energy. For example, he pointed out that coal can be turned into a liquid fuel. He gave the example of South Africa, which developed this technology during the apartheid period. This technology allows you to make a substitute for imported oil at a reasonable cost, about $60 per barrel.

The session was organised to push for the inclusion of a social agenda in the demand for energy and power sector reforms. The session also had presentations from Dr Mirza Ikhtiar Baig, industrialist and Chairman of Baig Group; Dr Khalid Waleed, Research Fellow at Sustainable Development Policy Institute (SDPI); and Zeenia Shaukat from The Knowledge Forum.

Environmental experts expressed concern over increasing air pollution in cities and pointed out that Lahore and Karachi were among the top cities in the world when it came to poor air quality index.

Recent astronomical cost is considered to be the single biggest issue besieging Pakistan’s energy and power sector.

However, environmentalists also highlighted the high emissions associated with the fossil fuel-based energy production model of Pakistan, which is mainly reliant on oil, gas and coal.

The energy sector represents 46 percent of Co2 emissions in Pakistan. Pakistan’s deteriorating air quality, poor quality of life index and its climate commitments reflected in revised NDCs demand a move away from the traditional fossil-fuel based mode of energy production, they said.

SDPI’s Dr Khalid Waleed in his presentation explained that after COVID-19 and the Russian war, petrol prices around the world have gone up. He stressed the need for reforms in the country’s energy sector, but he acknowledged it was a difficult and time-consuming task. However, he believes that if the direction is correct, progress can be made.

Dr Waleed also mentioned the concept of Carbon Border Adjustment, which means that Pakistan's export industry, which relies on coal power, could face higher costs when exporting to European Union (EU) countries. To remain competitive, Pakistan should focus on getting rid of coal and investing in alternative energy sources. Otherwise, exports to the EU would also be taxed, further affecting Pakistan's competitiveness in international markets.

There are opportunities to establish carbon marketing and sell carbon credits, which can be sold to EU markets.

He cited the example of the mangrove projects where $200 million worth of carbon credits were sold by the Sindh government.

Representing the business sector, industrialist Dr Miza Ikhtiar Baig highlighted the issues related to the IPPs that have led to an astronomical rise in the cost of energy, rendering the industrial sector uncompetitive. High power costs and high-interest rates are major sources of distress for Pakistan’s industrial sector.

Baig suggested that Pakistan should stop using expensive imported fuels. Criticising the “waste of gas reserves on CNG for vehicles” he called for the government to divert gas for industrial use.

Noting that there is a move to renew contracts with IPPs, Baig highlighted the opportunity to shift contracts from a capacity base to a competition base through bidding, whereby only those IPPs that offer the cheapest power are selected for power generation.

He called for power sector reforms, including an increase in recovery and shutting down of inefficient power plants.

TKF Director Zeenia Shaukat talked about the problems in the industrial sector due to the energy crisis.