The political crisis in Pakistan was also an energy crisis
For decades, heavy reliance on imported energy has limited growth. To break out of its chronic pattern of stagnation, Pakistan needs more electricity for its industrial, domestic and transport sectors. Whenever this has happened in the past, however, a rising bill for imported fossil fuels has caused one of its periodic balance of payments crises. The widely expected International Monetary Fund bailout within months would be Pakistan’s 19th since the early 1970s.
The problem has been recognized for years. Former Prime Minister Nawaz Sharif planned to reduce the electricity sector’s dependence on imported gas and fuel oil with a fleet of nuclear power plants and lignite coal. Khan, on the other hand, canceled some of those coal-fired generators and pledged to more than double hydroelectric generation to bring renewables to 60% of the generation mix.
The failure of both policies to support wind and solar, however, has cut Pakistan off from by far the cheapest indigenous energy source. Until this problem is resolved, it will continue to teeter from one economic disaster to the next.
The challenge of providing electricity to the world’s fifth most populous nation means that Pakistan’s energy plans are not lacking in ambition. Imported LNG which currently provides nearly a fifth of grid generation is expected to drop to near zero by 2030 as gas is diverted to the domestic and industrial sectors, according to the government’s latest power system plan. Hydroelectricity, which currently represents about a third of the mix, would increase to 50%, or 92 gigawatts, over the same period. In theory, this would drop the imported share of grid electricity to 12%, from around 41% of the total.
However, the problem lies in this overreliance on hydroelectricity. Dams in Pakistan are notoriously vulnerable to fickle monsoon rains, with low water levels last summer causing power outages of seven hours a day or more. A major cause of grid shortages in China late last year was a similar light rainy season, which caused hydropower generation to drop 12% in October from a year earlier. , causing a resurgence in coal mining.
Faced with such a situation, Pakistan would have no choice but to increase imports of fossil fuels to fill the gap, forcing the government to choose between power cuts and a currency crisis. In the longer term, climate change itself may have unpredictable impacts on the availability of glacier-fed water in the Himalayas, further decreasing the reliability of dams.
The big loser remains wind and solar. Despite costs that are two-thirds lower than those of local coal and even cheaper than hydroelectricity, they should stubbornly represent around 10% of the energy mix until 2030. Doubling or even tripling this share would make it possible to diversify national production. sources and provide hydropower back-up without reaching levels at which their own variability should be a problem for the grid.
Renewable energy will also ensure that Pakistan – one of the countries most at risk from climate change, with some of the most polluted cities in the world – does not cause long-term damage to its own people and environment.
In negotiations with the IMF, new Prime Minister Shehbaz Sharif is expected to seek to reduce perverse renewable energy taxes that were imposed as part of previous talks, and replace fuel subsidies introduced last month with direct support for low-income households. He is also expected to make proposals to install wind and solar power and sell Pakistan’s fossil fuel generators to the Asian Development Bank’s Energy Transition Facility to fund their early closure.
Beyond that, the government should look to the example of the investments made by Asia’s second richest man, Mukesh Ambani, just across the border in the Indian state of Gujarat. The Jamnagar Oil Refinery of Reliance Industries Ltd. suddenly eased the pain of India’s oil imports on the country’s current account, providing a stream of petroleum product exports to offset its crude imports. It now plans to invest $78 billion in renewable and green hydrogen projects there to take advantage of one of the best wind and solar resources in the world.
Such ambition could ultimately turn energy from an eternal liability for Pakistan into an asset. Politicians who don’t want to see their careers end in one of the country’s perennial economic crises should take this into account.
More from Bloomberg Opinion:
• Imran Khan’s anti-Americanism masks the real problem: Mihir Sharma
• The US-Pakistan relationship needs to be rethought: editorial
• How Four Powerful Brothers Shattered an Island Nation: Ruth Pollard
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David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
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