Pakistan and Energy Crisis
In many parts of the country, there is still load shedding for up to ten hours, and even large cities like Lahore experience weekly electricity shortages.
In many parts of the country, there is still load shedding for up to ten hours, and even large cities like Lahore experience weekly electricity shortages. The electricity that the government provides is also costly, which is a significant concern for the public. Every election cycle, the issue of electricity pricing and how the government plans to address the energy crisis becomes a topic of discussion. Pakistan spends 2.6% of its GDP on energy, which is the highest in South Asia. The country ranks 84th in the World Energy Council's ratings.
The current government also promised cheaper electricity before assuming power. Protests from opposition parties have also been seen, but the promises have not yet been fulfilled.
Is reducing electricity prices impossible?
Currently, the average price per unit of electricity is around 32 Pakistani rupees, which has caused hardship for business owners, shopkeepers, farmers, and even domestic consumers. Since 2021, electricity prices have increased by about 165%. According to Bloomberg, the price of electricity now exceeds the average monthly income of a household.
There are several reasons for this increase:
The IMF: The International Monetary Fund imposes certain conditions before providing loans, and Pakistan's government has agreed to raise electricity prices in order to meet a generation cost of 210 billion rupees. Additionally, Pakistan has an energy sector circular debt of 2.7 trillion rupees. According to a report, the IMF has demanded a 7% increase in electricity prices.
IPPs (Independent Power Producers): The issue of IPPs dates back to 1994 when Pakistan's power sector crisis began. The country's population at that time was 130 million (today it's approximately 250 million), and load shedding was severely affecting industrial production. To attract foreign investment, the government tried to establish new power plants, aiming to reduce the role of the public sector and promote the private sector. The IPP policy was introduced as part of this strategy. However, over time, IPPs have become a burden, and in the fiscal year 2022-23, Pakistan paid $4.6 billion for electricity produced by IPPs. Currently, the government owes a total of 1800 billion rupees to IPPs. Protests against these agreements have been held across the country, and while the government has promised to review these agreements, no solutions have been implemented so far.
Fossil Fuel-Based Electricity: The use of fossil fuels for electricity generation is another major issue contributing to the rise in electricity prices. In 2023, fossil fuels accounted for 59% of the total energy generation in Pakistan, with 18% of it coming from coal. Due to the increase in coal prices, the cost of electricity has risen by 10 to 15 rupees per unit. Currently, the most expensive electricity is generated from fossil fuels.
Electricity Theft: Electricity theft is also a significant factor in the rising costs. The Minister for Power and Energy has stated that about 600 billion rupees' worth of electricity is stolen annually, and power transmission companies suffer a loss of 19.17 billion units, which ultimately affects the general public.
What is the alternative?
Countries worldwide are now shifting towards renewable energy, and Pakistan is also heading in that direction. Pakistan is working on generating electricity from wind, water, and solar energy. According to Bloomberg, Pakistan is generating 60 GW of electricity from water, 40 GW from solar energy, and 346 MW from wind energy. However, Pakistan has failed to meet its target of 60% renewable energy production. According to a report by Bloomberg, Pakistan requires $101 billion for renewable energy, and it will need to participate in various projects to achieve this. The Punjab government has secured a $670 million loan from the Asian Development Bank to support renewable energy projects.
In this transition, the Pakistani government is also offering subsidies for solar systems and buying electricity produced through these systems from consumers. Additionally, a special package of $2.5 billion has been announced to provide free solar panels to households. According to the Pakistan Economic Survey, Pakistan aims to reduce its emissions by 50% by 2030.
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