Pakistan’s energy mix and export competitiveness

The growing population and economy of Pakistan are pushing up energy demand. Unfortunately, the country’s energy mix heavily depends on imported fossil fuels, leading to rising energy prices and posing a substantial challenge to the competitiveness of Pakistani products in the global market.

According to the Pakistan Bureau of Statistics (PBS) report, ‘Trends in Electricity Generation 2006-07 to 2020-21’, Pakistan’s energy mix has evolved over time.

Due to increasing electricity demand, the share of thermal power gradually rose. In the early 1980s, a nuclear power plant was installed, and by 2008, the overall generation comprised 65 percent thermal, 33 percent hydel, and 2 percent nuclear power.

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Currently, according to the Economic Survey of Pakistan 2022-23, the energy mix consists of 58.8 percent thermal, 25.8 percent hydel, and 8.6 percent nuclear power. Additionally, alternative power sources contribute 6.8 percent to the overall mix.

This nearly sixty percent reliance on thermal sources means depending on finite and increasingly costly fossil fuels. Pakistan is underutilising domestic renewable sources like solar, wind, hydro, and biomass which are comparatively cheaper and cleaner alternatives.

Consequently, Pakistan confronts a severe energy crisis that affects millions, detrimentally impacting the economic security.

The heavy reliance on imported oil, coal, and LNG makes the country vulnerable to price shocks, supply interruptions, and geopolitical risks. As a result, energy prices in Pakistan surpass those of regional economies like China and other neighbouring countries, hindering competitiveness, and impeding the growth of export-oriented industries in the country.

As the world transitions to a clean energy future, Pakistan will be at a disadvantage if it does not diversify its energy mix. This could make it more difficult for Pakistani export-oriented industry to compete globally with international rivals, who are already moving towards cleaner energy sources.

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Chronic power shortages, losses, outdated infrastructure, weak governance, and regulation further exacerbate the situation, affecting not only the industrial performance but also increasing costs, reducing output, and contributing to poverty, unemployment, and political unrest.

Inefficient infrastructure suffers from losses, theft, vandalism, and sabotage, with transmission and distribution losses above 15% is another major issue. Moreover, outdated systems cause frequent outages, voltage fluctuations, and load-shedding. The gap between capacity and actual generation also persists due to fuel supply issues, poor maintenance, and operational faults.

Growing energy demand due to population growth, rapid urbanisation, and industrialisation always outpace supply. Governance and regulation shortcomings are further challenges which hinder performance, accountability, and transparency. Conflicting institutions, policies, and corruption impair efficiency. Lack of competition, innovation, and investment also worsens the situation.

Pakistan needs to adopt a comprehensive and holistic approach to address its energy insecurity challenge. This requires a combination of short-term measures to alleviate the immediate crisis and long-term strategies to ensure a sustainable energy future. Most importantly, Pakistan should reduce its dependence on imported fossil fuels by increasing the share of domestic renewable energy sources in its primary energy supply and electricity generation. This will enhance its energy self-reliance, resilience, and affordability.

Pakistan has abundant potential for solar, wind, hydro, and biomass resources that could be harnessed through various technologies such as distributed solar systems, wind farms, micro-hydro plants, and biogas digesters. Pakistan should also explore other indigenous options such as nuclear power, coal gasification, and shale gas development with proper safeguards for safety and environmental protection.

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Pakistan should invest in improving the efficiency, quality, and reliability of its energy infrastructure by reducing T&D losses, upgrading existing plants and networks, and expanding access to underserved areas and consumers. Pakistan should also leverage digital technologies such as smart meters, grid automation, and data analytics to optimise the operation and management of the energy system.

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Energy demand should be reduced through conservation and efficiency measures. Standards and regulations for energy efficiency should be implemented. Affordable and accessible energy services must be provided, with targeted subsidies and social protection for the poor and vulnerable.

Pakistan’s energy insecurity is a serious threat to its economic and national security. The country needs to take urgent and decisive actions to overcome this challenge and achieve a secure, sustainable, and prosperous energy future.

A policy is necessary to impose a ceiling on gas and electricity tariffs for the export industry. The frequent rate fluctuations of utilities negatively impact the estimated cash flows, resulting in reduced competitiveness compared to competing economies.

Pakistan has the potential and the resources to achieve energy security, but it needs the political will and the public support to make it happen.

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