Energy sector challenges

February 11, 2024

There is a need to transition away from dirty and expensive fossil fuels-based power to cleaner and cheaper resources

Energy sector  challenges


he soaring prices of electricity have become too heavy a burden for many Pakistanis. In August last year, the unexpectedly high electricity bills had triggered street protests across the country that went on for almost a week. The intensity of the protests – some of those violent – notwithstanding, the caretaker government provided no relief to the consumers, saying it was helpless. Instead, a few months later, the electricity prices rose further.

It was in this backdrop that Pakistan Peoples Party and Pakistan Muslim League-Nawaz promised relief in their manifestoes. The PPP said the poorest of the domestic consumers would be provided up to 300 free electricity units a month. The PML-N said the power bills would come down by 20-30 percent.

As it takes charge, the new government will have to choose either an ad hoc or a long-term approach to providing the promised relief. The former may help the government find a quick fix but is likely to further complicate the energy sector issues in the long term. The latter may not provide any immediate relief to the consumers but might render sustainable benefits.

If it is serious about finding climate-friendly sustainable solutions, the government will have to address the multifarious challenges of accessibility, affordability and sustainability. Almost a fourth of the country’s population (56 million people) lacks access to electricity.

Despite having an installed generation capacity (43.77 GW) exceeding the peak demand (29.05 GW), the country still faces frequent power outages. Its increasing reliance on fossil fuels, including imported coal, RLNG and RFOs, is undermining the economic and environmental sustainability of the power sector.

Thermal power currently accounts for almost two thirds of Pakistan’s installed generation capacity. Apart from surging prices of imported fuels, the high prices of electricity are due to unutilised ‘take or pay’ generation capacity, circular debt, inefficient transmission and distribution system, poor planning, poor governance and taxes.

In addition to its economic cost, thermal power has a high environmental cost. The greenhouse gases emitted in fossil fuel combustion contribute to biodiversity losses as well as global warming and climate change.

To overcome the economic and environmental costs of thermal power, the government needs to transition away from dirty and expensive fossil fuels-based power to cleaner, greener and cheaper sources of renewable energy like solar and wind energy.

Renewably energy’s share in the national energy mix should be increased by initiating competitive bidding, incentivising local industry for manufacturing and assembling renewable technology products and accelerating renewable installations through least cost existing substations.

To catalyse the energy transition, the government needs to encourage private investment for an upgrade of the grid infrastructure. Enhanced integration of renewable energy through an upgraded grid infrastructure will help its successful transmission across the country.

The country needs to have a comprehensive coal-retirement plan. Piloting under-utilised coal power plants for early retirement will help the government deal with installed generation capacity exceeding the peak demand as well as the challenges of climate change.

The government needs to explore collaboration with the Chinese stakeholders and multilateral development banks for concessional and innovative financing instruments like refinancing tools, debt swaps and carbon financing. These instruments can help alleviate the country’s debt burden in exchange for climate mitigation activities like retirement of coal power plants.

To reduce the circular debt, the government should reduce the electricity subsidies, institute public private partnership in the governance of distribution companies and enable competitive electricity markets.

The principle of least cost option adopted by National Transmission and Dispatch Company in its indicative generation capacity enhancement plan should not be limited to financial costs. It should also cover the social and environmental costs of energy sector projects.

The writer is an anthropologist and a development professional

Energy sector challenges