Pakistan’s
Energy Crisis
In this vast
universe, or perhaps in the countless other universes, there may be planets
with life beyond Earth—but we don’t know, and for now, relocating there is a
distant dream. Therefore, we must cherish and protect the one planet we
inhabit. We cannot afford to endanger the life-sustaining systems of our own
home, as if puncturing holes in the very ship carrying us forward.
Necessity
is the Mother of Invention
Necessity
has driven every innovation, and each invention has brought humanity more
conveniences. Yet, if that convenience comes at the cost of disrupting our
ecosystem, is it wise to embrace it? Admittedly, humans are often
short-sighted, but we also possess the capacity for foresight. Can our
intelligence not distinguish between short-term gain and long-term
sustainability?
Rising
Human Needs
Since
humanity's early migrations out of Africa, populations have spread across
diverse regions, developing trade and transportation networks that linked
distant lands. The invention of the wheel (circa 3500 BCE in Iraq) initially
relied on horses, donkeys, or mules for mobility. But with time, growing trade
and heavier loads demanded faster, more efficient transport. Humanity began
looking beyond animal power and started to pursue other energy sources.
The Human
Demand for Energy
Early
innovations harnessed steam engines, and later, the discovery of fossil fuels
paved the way for petroleum-powered engines. Initially, fossil fuels were
abundant, affordable, and highly efficient, leading humanity to embrace them as
the primary source of energy, pushing fossil fuels’ share in energy use to over
85%. However, with time, the side effects of fossil fuel dependency became
increasingly apparent, among which *environmental pollution* was paramount.
Environmental
Pollution
Burning fossil fuels—oil, kerosene, natural gas, and coal—releases carbon dioxide, which, once in the atmosphere, accelerates global warming. As indicated by climate data, global temperatures have already risen by 1.5 to 2 degrees Celsius due to carbon emissions.
Humanity’s
Reckless Short-Sightedness
Humanity’s
inherently self-centered nature initially led to a disregard for mounting
pollution. But now, with the skyrocketing prices of fossil fuels, attention is
shifting to cheaper, cleaner alternatives. This increase in fuel costs may
represent a valuable opportunity for environmental progress. Rising prices are
likely to push consumers toward alternative energy sources, while shifting
market trends will encourage investment in solar and wind power. This shift
could help keep global warming within the 1.5-degree Celsius limit, sustaining
ecosystems.
According to
the World Health Organization (WHO), air pollution claims approximately three
million lives globally each year.
Pakistan
Among the Most Vulnerable Countries to Climate Change
Pakistan
ranks among the top ten most vulnerable countries to climate change. Research
indicates that environmental degradation, coupled with drought-induced
agricultural losses, reduced water supply, escalating health issues,
deforestation, floods, and other natural disasters, costs the Pakistani economy
around 500 billion rupees annually. By 2025, Pakistan’s population is expected
to reach approximately 234 million, with an increase of around three million
more vehicles, including motorcycles and rickshaws. Furthermore, by 2100,
Pakistan’s average temperature could rise by 7.2 degrees Celsius, making
fertile lands barren and some regions uninhabitable.
It is
crucial that Pakistan acts swiftly to address these issues.
Renewable
Energy Sources
Among
environmentally-friendly energy sources, hydropower is regarded as one of the
most sustainable options, and Pakistan has vast potential for hydropower
generation. According to Pakistan’s Economic Survey, the country has the
capacity to produce up to 60,000 megawatts of electricity from water alone. In
Pakistan, around 65-75% of water resources are fed by glaciers, while 25-35%
come from rainfall. Pakistan ranks fourth in global water consumption and is
one of fifteen nations facing a severe water scarcity in the near future. The
country receives about 145 million acre-feet of river water each year, yet only
manages to store about 10% of it, allowing the rest to flow into the sea.
Statistics from the Indus River System Authority indicate that Pakistan loses
approximately $22 billion worth of water annually.
A single
project, such as the proposed Katzara Dam, has the potential to generate up to
15,000 megawatts of electricity. In 1968, responding to a request from General
Ayub, a World Bank team identified Katzara Dam’s location, situated about 18
kilometers from Skardu at the confluence of the Shigar and Indus rivers. This
dam has a projected lifespan of 1,000 years, which is one of its most
remarkable features. Unfortunately, short-term, election-focused policies in
Pakistan have delayed such crucial projects. If strategic dams had been built,
Pakistan’s water management and environmental situation could have been
significantly improved.
 |
| Reference may be made to Dr Pieter Lieftnick's report — pages 283 and 296 |
Challenges in Hydropower Distribution
However,
hydropower generation requires large-scale projects, and one of the main
challenges is transmitting this electricity to consumers. This demands
extensive networks of poles and wires, which are susceptible to weather
conditions, accidents, and wear. Maintenance and repairs can be costly, and
with increased transmission distances, line losses also increase, adding to the
challenges of using hydro-power efficiently.
A New
Chapter in Pakistan’s Energy History: The Rise of IPPs
When
Pakistan’s leadership failed to meet the nation's growing electricity demand,
they sought a quick solution to the worsening energy shortage and load shedding
crisis. In 1994, under Prime Minister Benazir Bhutto’s administration,
agreements were signed with 17 independent power producers (IPPs), which
temporarily alleviated the electricity shortfall. However, these contracts soon
turned into ticking time bombs, as they were linked to foreign fuel imports and
the US dollar, making Pakistan's energy costs vulnerable to global currency
fluctuations and fuel prices. This strategy locked Pakistan into a vicious
cycle where rising fuel prices would drive up costs, and the need for dollars
would escalate. Instead of addressing these issues, successive governments
deepened Pakistan’s dependence on costly imported energy, especially with a new
wave of contracts in 2015, which locked in additional high-cost energy deals,
particularly with Chinese companies.
Emergency
IPP Projects to Address Power Shortages
By June
2013, Pakistan’s electricity demand had reached 16,400 MW, while production was
only 12,150 MW, resulting in a 4,000 MW shortfall. However, power generation
agreements were signed that exceeded even this demand.
Are IPPs
Responsible for Rising Electricity Costs?
Countries
around the world rely on private energy projects, but Pakistan’s IPP contracts
were fraught with unusual clauses that have left consumers struggling with high
energy costs.
1. The first
issue is that these projects are fueled by imported fossil fuels, which not
only increases Pakistan’s fossil fuel import bill but also makes energy prices
vulnerable to global fuel price fluctuations. Higher fuel prices invariably
lead to higher electricity costs.
2. The
government committed to purchasing electricity from IPPs in US dollars, meaning
that any depreciation in the Pakistani rupee would directly inflate energy
costs domestically.
3. WAPDA
(Water and Power Development Authority) was obligated to buy the electricity
produced by IPPs. If WAPDA declined, the government of Pakistan would still be
required to pay for the electricity under the agreement.
4.
Regardless of actual electricity consumption, the government is required to pay
IPPs based on their generation capacity, not just the electricity utilised,
further straining financial resources.
These
clauses effectively bound Pakistan’s energy policy to a high-cost private
energy model, stripping the state of its ability to prioritise or develop
cheaper energy alternatives. Additionally, with energy prices tied to rising
global fuel costs, political leaders, in a bid to maintain public approval,
began subsidising electricity. This policy of purchasing high-cost energy from
IPPs and providing it to consumers at subsidised rates has led to an
unsustainable build-up of circular debt over time.
The
situation was allowed to persist until the International Monetary Fund (IMF)
demanded a halt to these unsustainable practices. If electricity prices had
gradually increased over time, this sudden hike might not have triggered such
widespread public discontent, but electoral politics ultimately took precedence
over energy sector reforms.
Today,
electricity supply is available but often beyond the purchasing power of the
average consumer.
History of IPP Agreements
|
Leadership | Year | Number of Agreements | Generation Capacity
(MW) |
|-------------------|--------|----------------------|--------------------------|
| Benazir
Bhutto | 1994 | 17 | 6,031 |
| Pervez
Musharraf | 2002 | 15 | 3,183 |
| Nawaz
Sharif | 2015 | 7 | 8,253 |
Outcomes and Implications of the Private Power Policy
A dynamic model of Pakistan's energy system reveals several key implications of the IPP-driven policy:
1. It is not
environmentally sustainable.
2. Long-term
electricity rates are likely to keep rising.
3. The gap
between electricity supply and demand remains unresolved.
4.
Dependence on imported furnace oil continues to grow.
This policy
has driven Pakistan’s energy sector toward a costly, unsustainable model,
highlighting the need for a strategic shift toward affordable and reliable
energy solutions.
 |
| Electricity Organization Chart of Government of Pakistan |
Other
Major Causes Behind Expensive Electricity in Pakistan
One of the
primary reasons for Pakistan’s costly electricity is the inefficiency and high
losses in its transmission network.
Pakistan’s
Electricity Transmission System
Pakistan's electricity grid relies on eight main grid stations, with one each in Peshawar, Sindh, and Balochistan, and five located in Punjab. The system primarily operates at a frequency of 50 Hz. However, when the supply frequency exceeds 50.8 Hz or drops below 49 Hz, the grid trips, resulting in shutdowns. The National Transmission and Dispatch Company (NTDC) is responsible for managing and maintaining Pakistan’s transmission infrastructure, which includes 500 kV, 220 kV, and 120 kV transmission lines and grid stations. NTDC currently oversees 17 grid stations at 500 kV with a transmission line network extending 8,388 kilometers. Additionally, 140 grid stations at 220 kV are connected to an 11,611-kilometer system.
However,
while production capacity has been the focus, the transmission system—ensuring
power delivery from generation sites to distribution companies—has been largely
neglected. Consequently, some areas experience overloading, while others are
under-utilized, leading to additional costs for consumers due to inefficient
distribution.
Persistent
Problem of Electricity Theft
Electricity
theft and line losses also contribute significantly to high electricity costs.
In 2022, losses due to theft and technical inefficiencies amounted to
approximately PKR 589 billion. During this period, the government supplied PKR
3,781 billion worth of electricity, while only PKR 3,192 billion was recovered
through bill payments, resulting in a PKR 589 billion shortfall. The highest
incidents of theft occur in areas like Peshawar, Sukkur, Hyderabad, Quetta, and
tribal regions, where PKR 737 billion worth of electricity was provided, yet
only PKR 489 billion was collected. To cover these losses, the government
passes the burden onto paying customers, further driving up their costs.
Overproduction
of Electricity
An expanding economy requires a 50% increase in electricity generation capacity every decade. Pakistan, following this principle, increased its generation capacity. However, demand has not kept pace with this expansion. Moreover, privatization of electricity generation has inflated production costs. Due to low economic growth and high generation costs, both industrial and commercial electricity use have stagnated, as has domestic consumption, which failed to meet expectations.
Currently,
Pakistan has an installed generation capacity exceeding 41,000 MW. During peak
summer months, demand reaches about 23,000 to 24,000 MW, dropping to around
10,000 to 12,000 MW in winter. However, contractual obligations mean that
Pakistan must pay private power producers based on their generation capacity,
regardless of actual power usage. Private producers alone contribute
approximately 25,000 MW to the grid. Given that Pakistan’s transmission system
is inadequate to handle full capacity, focusing on transmission improvements
before further increasing generation would be more prudent.
Pakistan's
Current Electricity Production Sources
Based on
recent figures, Pakistan produces 40% of its electricity domestically, while
the remaining 60% is imported. This heavy reliance on imported electricity
makes Pakistan vulnerable to fluctuations in foreign exchange and global oil,
gas, and coal prices. Consequently, as the dollar or fuel prices rise, so do
domestic electricity costs, exposing the country's policy shortcomings. Among
all energy sources, nuclear power remains the cheapest, with a cost of PKR 1.16
per unit. However, nuclear power accounts for only 8% of Pakistan’s total
energy mix.
Pakistan’s
electricity sector thus faces a range of challenges, from inefficiencies in
transmission and high line losses to structural over-reliance on imports and
costly private power agreements. A shift in focus towards sustainable energy
sources and a reformed transmission system could address many of these
inefficiencies, leading to more affordable and reliable electricity for the
public.
Challenges
in Accessing Affordable Electricity
There’s a
severe shortage of affordable energy in Pakistan. Thermal power, which
constitutes a major part of the energy mix, continues to grow costlier as
fossil fuel prices skyrocket. Meanwhile, the power sector’s circular debt has
reached alarming levels.
Circular Debt in Pakistan's Power Sector:
According to
the Pakistan Economic Survey, circular debt has seen a staggering rise:
- In 2008:
PKR 161 billion
- In 2013:
PKR 450 billion
- In 2018:
PKR 1.148 trillion
- By March
2022: PKR 2.467 trillion
Projections
estimate this debt could reach PKR 4 trillion by 2025, making affordable
electricity an unattainable goal for the government. Plans are in place to
further increase electricity prices. However, will this price hike reduce
circular debt or resolve the deeper issues? The answer is likely no; this
increase will simply serve as a revenue collection tactic while leaving
fundamental issues unresolved. The primary reason is the lack of sustainable
planning for power generation beyond the Tarbela and Mangla dams, leading each
administration to adopt short-term policies that only worsen the sector’s
challenges.
The circular
debt isn’t limited to electricity—LNG circular debt has surpassed PKR 650
billion. With gas becoming scarcer on the global market, Pakistan’s energy
problems deepen.
Can Thar
Coal Realize the Dream of Affordable Electricity?
The vast coal reserves in Thar are often presented as a solution for affordable power. However, the reality is more complex. Thar coal power projects began with a 660 MW plant in 2020, which has since expanded to 1,320 MW. Currently, Pakistan generates around 5,280 MW from coal, but 3,960 MW of this depends on imported coal, which has also become more expensive globally.
Analysis
of Failure to Achieve Affordable Energy
The above
data underscores that Pakistan has not succeeded in generating cost-effective
or environmentally friendly power. Hydropower remains affordable and
eco-friendly, but the large funds and extended timelines required for such
projects make them challenging for Pakistan. Fossil fuel-based power is not
only increasingly costly but also environmentally unsustainable. Ultimately,
the best path forward appears to be solar energy.
Alternative
Sources for Affordable Electricity
Solar Energy
The sun has
provided energy for billions of years, and humans have harnessed solar power
for thousands. Solar energy is abundant and can provide more power than we
often realize. Countries worldwide are rapidly shifting toward solar energy.
China leads with 253 GW of solar capacity, followed by the U.S. at 76 GW, Japan
at 67 GW, Germany at 53 GW, and India at 40 GW. Unfortunately, Pakistan is
noticeably absent from this list.
Governments
globally, including the U.S., the EU, Australia, and India, offer subsidies of
up to 50% on solar panel imports. China, recognizing solar power’s importance
as early as 2010, introduced substantial incentives for its citizens. India
aims to reach 450 GW of solar power by 2030, which would allow it to produce
40% of its total energy from solar by 2040. Pakistan, however, lacks a similar
plan or target. While some citizens independently installed solar panels and
began net metering, selling power back to the grid, these efforts have had
limited impact, with the government showing little interest in expanding
environmentally friendly energy solutions.
As
technology advances, solar panel efficiency has increased from 16% a few years
ago to around 26% today, with projections suggesting it could reach 60% in the
coming years. This increase in efficiency may render traditional power
infrastructure, like utility poles and cables, obsolete. Currently, renewable
energy contributes only about 3% to Pakistan’s total energy mix.
Pakistan’s
Energy Mix
According to
the Pakistan Bureau of Statistics, as of 2020, fossil fuels make up about 63%
of the energy mix, hydropower 29%, nuclear energy 5%, and renewable energy
around 3%. The State Bank of Pakistan reports a significant increase in the
country’s installed electricity capacity, reaching about 43,775 MW by fiscal
year 2022. Fossil fuels, including oil, gas, and coal, account for around
26,683 MW. Meanwhile, renewable sources, especially solar and wind, have gained
traction, bringing greater diversity to Pakistan’s energy profile. As of FY22,
solar installations reached over 2,368 MW, reflecting its growing popularity.
Solar
energy’s potential in Pakistan is substantial. A World Bank report states that
Pakistan could generate up to 40 GW from solar. In recent years, substantial
investment, both domestic and international, has gone into solar projects. The
State Bank introduced a financing scheme in February 2022, supporting 1,175
projects with a combined capacity of 1,375 MW, amounting to around USD 400
million, to encourage renewable energy development.
However, the
government needs to consider lessons from past policy failures. For instance,
projects launched in 2015 with high production costs became financial burdens.
As a result, the current approach of importing solar panels with tax incentives
risks benefiting only a select few while draining foreign reserves. To mitigate
this, Pakistan should prioritize establishing local solar manufacturing
facilities. Not only would this reduce the need for dollar outflows, but it
would also make Pakistan self-sufficient in solar technology.
Some Chinese
companies have also shown interest in installing solar plants and recouping
their investments through customer billing, a model that could further reduce
import dependency. Additionally, the global market is seeing a rise in
solar-powered products, from home systems to electric vehicles, adding new
dimensions to the solar economy.
Is
Storing Power Without Batteries Possible?
Yes, storing
electricity without batteries is feasible. New storage technologies are
emerging that offer safe, cost-effective, and locally sourced solutions.
By
addressing these challenges through innovative policies and sustainable
investments, Pakistan can transform its energy landscape, providing affordable,
eco-friendly power to its people.
Solar
Energy: The Alternative to Fossil Fuels
Every day,
Pakistan consumes about 56 million liters of fossil fuel, costing the nation
approximately PKR 3.3 billion, placing it 33rd globally in fossil fuel
consumption. Here’s a breakdown of usage:
- Motorcycles:
23 million
- Cars: 5
million
Consumption
by sector:
- Transport:
79%
- Power
Sector: 11.84%
- Industries:
7.38%
- Government:
1.54%
- Households:
0.15%
Countries
worldwide are rapidly transitioning from fossil fuels to solar energy. Europe,
for instance, has set a ban on fossil-fuel vehicles effective from 2035.
Meanwhile, Pakistan has a policy to convert 30% of vehicles to electric by
2030. Rising fossil fuel prices have made operating costs for fuel-based
vehicles unsustainable, and if Russia further restricts oil and gas exports,
oil prices could soar to USD 400 per barrel.
For a
country like Pakistan that imports fossil fuels, price increases are especially
impactful. On one hand, the ongoing Russia-Ukraine conflict continues to push
global fuel prices higher. On the other, Pakistan’s trade deficit has also
driven up the dollar’s value, making oil and gas nearly double in cost over the
past month. Further price hikes of PKR 60 to 70 per liter are anticipated in
the coming days.
Conclusion
for Common Man
Just two
months ago, I was considering removing my home UPS system, but with prolonged
power outages, switching to solar has become increasingly necessary. With
frequent blackouts, UPS batteries rarely have enough time to charge before the
next outage hits. I’m also tempted to cover my petrol car and set it aside
until the war between Russia and Ukraine ends.
What
Should Pakistan Do?
Pakistan
faces severe environmental challenges. A long-term electric vehicle (EV) policy
is crucial to finding sustainable solutions to these interconnected problems.
Yet, given the current political and economic instability, a consistent policy
seems unlikely in the near future. However, one thing is certain: if the
Russia-Ukraine conflict extends for another six months (or if sanctions on
Russia aren’t lifted through diplomatic channels), this period could catalyze a
global shift away from fossil fuels toward solar energy.
The global
market is unlikely to tolerate excessive profiteering for long. While fossil
fuel-exporting countries enjoy high profits now, they should remember that if
the world had planned to fully transition to alternative energy by 2040, it may
now happen by 2030 instead.
References:
Essay on Energy Crisis in Pakistan
The History of Private Power in Pakistan
Two decades of flawed policies: Power producers make billions in Pakistan
Independent power producers & economic growth of Pakistan | By Muhammad Nadeem Bhatti
Private Power and Infrastructure Board ANNUAL REPORT 2020
Circular debt payment: here is the list of IPPs and their respective amounts
The History and Problems Faced by Independent Power Producers in Pakistan (1990-2015)
Independent power (or pollution) producers? Electricity reforms and IPPs in Pakistan
How to Store Solar Energy Without Batteries
Solar Panel Connection with UPS: A Comprehensive Guide
Financial globalisation and WAPDA
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