FeaturedNationalVOLUME 18 ISSUE # 14

The energy sector calls for structural reform

Pakistan’s energy sector is facing a severe crisis due to rising demand, limited resources, and policy issues. One of the primary causes of the energy crisis is the lack of investment in the sector. Pakistan has not invested enough in the energy sector for many decades, leading to an outdated and inefficient infrastructure. The country’s energy mix is also heavily dependent on fossil fuels, leading to increased dependence on imported energy sources. Pakistan is one of the most energy scarce countries in the world, as it has only 6% of the world’s proven oil reserves but it accounts for 20% of global oil imports.

The Pakistani economy has been severely hit by chronic electricity shortages. As a result, people are suffering greatly and thousands are left in the dark. Pakistan’s energy situation is extremely concerning. According to the Power Division survey 2021-2022, the total electricity generation capacity during July-April 2022 had increased by 11.5 percent and it reached 41,557 MW from 37261 MW. However, that still leaves a shortfall of 7,461 MW. The figure is only rising as generation capacity declines due to poor infrastructural and investment issues, resulting in more load-shedding hours.

There are many complex factors that are responsible for the energy crisis in the country, including a rapidly growing population, an expanding economy, inadequate energy infrastructure, and poor management of energy resources. The situation has been exacerbated by rising global oil prices and a lack of investment in the sector. Though the government of Pakistan has taken several steps to address the energy crisis, such as expanding the generation capacity of power plants, developing renewable energy sources, and improving the energy distribution infrastructure, all these efforts have not been sufficient to meet the country’s growing needs.

Pakistan has seen an unprecedented increase in electricity demand in recent years due to rapid population growth, industrialization, and a growing middle class. Pakistan’s electricity generation capacity is limited, and the country’s current installed capacity does not even meet the current or future demand. In addition to that, poor infrastructure and transmission losses are major issues that have not been adequately addressed. The majority of electricity generated in the country is lost due to the poor state of power lines, inefficient transformers and other equipment. There is poor regulation and lack of enforcement that has led to the misuse of energy resources, over-billing, and corruption in the energy sector.

The government has not built any new dams or reservoirs in the last three decades. Over the years, the emphasis has been on thermal units which are powered by oil and gas. Oil prices continue to rise, with no signs of relief in the near future. On the other hand, gas reserves are fast depleting. Due to rapid population growth, demand is increasing but the supply side has remained sluggish. All of these factors have exacerbated the situation.

The energy crisis in Pakistan has had an adverse impact on its economy. Heavy dependence on imported fuel has increased the cost of production and retarded the growth of industry. The energy shortage has resulted in long hours of power cuts, which has caused disruption in economic activities and has had a negative impact on businesses.

An inefficient distribution system contributes to electricity losses. Many people do not have access to reliable electricity supplies due to inadequate or nonexistent distribution networks. The investment in improving the system has been inadequate due to a lack of political will.

In terms of the macroeconomy, the energy crisis has resulted in a decrease in GDP growth, increased inflation, an increase in the unemployment rate, and a decrease in foreign investment. In addition, it has led to an increase in costs for businesses and households, reduced access to basic services, and an increase in poverty levels.

To get out of this untenable situation, we’ll need to take steps both short-term and long-term. In the short term, we should implement policies that prioritize the operation of our economy. We should also make an effort to conserve energy. To increase the supply of energy, the government should enter into new agreements with Iran and the Central Asian Republics which are rich in energy resources.

The government should take steps to diversify the country’s energy mix. There must be an expansion of its renewable energy sources, including hydropower, solar, and wind power. In the long run, we must shift our reliance from thermal to hydro projects. For this purpose, small dams should be built. We should also plan to utilize Thar’s coal reserves to generate cheap electricity. Now is the time to act. Otherwise, it will be too late.