Pakistan Power Sector: From Energy Deficient to Energy Inefficient

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Pakistan is a fine example of a country from energy deficient to energy inefficient country. In the 1990s, Pakistan hydel energy was unable to meet Pakistan’s growing energy demands. Resultantly, World Bank and Pakistani governemnt of that time went for the Indepenent Power Producers (IPPs). This is where the problem started for Pakistan.

The purpose of IPPs were to meet the Peak load demands. However, in the early 2000s, as the demand further grew, these Peak plants were used as Base Plants. In the start, these IPPs were oil-fired power plants. So, Pakistan was making its Powre Sector vulnerable to two factors: changing dollar price and changing global oil price. After 2008, both phenomena happened and govt. started subsidizing the consumers. This was the beginning of the Circular debt in Pakistan’s energy sector.

Instead of relying on cheap indigenous resources of Power generation, Pakistan focussed on expensive Thermal IPPs. This made the energy sector inefficient. Alongwith, the addition of Capacity payment, the issue got further worsened. Though after 2014, Pakistan enhanced power generation but agreements with IPPs didn’t allow to bear fruit in the form of capacity payment and circular debt.

So, although we have more generation capacity, we are unable to overcome the inefficiency of production by having relying on IPPS.

Pakistan is also using one of the expensive fuel for Power generation. Resultantly, Pakistan produces one of the expensive electricity in the world. 58% of Energy Mix is based on Thermal energy. These thermal resources are imported. At one end, their price is high globally due to International conficts. On the other end, Rupee devaluation has made these sources even more expensive.

Pakistan’s limiting transmission capacity is makling the water even more turbid. Pakistan focussed only on Generation side in the last decade. However, Generation and Transmission go side by side. This also shows inefficiency in this regard.

Pakistan needs to negotiate with these IPPs and rely more and more on renewable resources it has to overcome these inefficiences and to reduce the prices of enrergy. Furthermore, Pakistan needs to end subsidied to overcome the issue of circular debt. To bring competition and to reduce prices for Industrial sector, Pakistan should go for competetive market CTBCM model given by NTDC in 2020.

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