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Energy crisis of Pakistan and ways to counter it

19-06-2025 Pakistan Affairs pakistan issues

Energy is the lifeblood of any economy. Pakistan, despite its vast natural resources and potential for renewable energy, continues to face a chronic energy crisis that hinders its economic growth, industrial productivity, and public welfare. This crisis is due to power shortages, circular debt, and inefficient infrastructure. Tackling this multifaceted crisis requires a combination of structural reforms, investments in renewable energy, and strengthening institutions.

Causes of Energy Crises in Pakistan

Over-reliance on Imported Fossil Fuels

• About 60-65% of Pakistan's total electrical energy is generated from fossil fuels like oil and gas.
• This leads to Pakistan importing huge amounts of fossil fuels, which strains foreign reserves (e.g., LNG imports from Qatar).
• Volatility in global oil prices leads to unpredictable electricity costs.

Circular Debt in the Energy Sector

• Pakistan faces a crippling circular debt issue in its energy sector where the government owes money to power DISCOs (Distribution Companies, LESCO, K-Electric, etc.), and the DISCOs owe money to CPPA-G (Central Power Purchasing Agency - Guaranteed), which itself owes money to the IPPs (Independent Power Producers) and WAPDA.
• This is due to the government's inability to recover billing and stop electricity theft, which then leads to frequent power outages and load shedding.

Poor Power Distribution Infrastructure

• Outdated grid infrastructure causes losses and frequent breakdowns.
• Total transmission and distribution loss stands at approximately 17% (against international standard of 6-8%).
• Load shedding itself disproportionately affects rural areas where there isn't adequate distribution of power.

Lack of Investment in Renewable Energy

• While there is a vast potential for solar energy production (2.9 million MW), wind energy production (50,000 MW), and hydel (60,000 MW), only 3% of the energy comes from solar and wind.
• Bureaucratic hurdles and a lack of proper policies deter investors.

Inefficient Usage and Wastage

• Energy inefficiency in domestic and industrial applications.
• Lack of an energy conservation culture.
• Buildings and transport remain poorly optimized for conservative energy use.

Climate Change Challenges

• The second biggest source of energy in Pakistan is through hydel projects.
• But hydropower generation is threatened due to climate change effects such as glacier melting and erratic rainfall patterns.

Geopolitical and Environmental Challenges

• Security concerns affect energy projects, such as the situation in Balochistan affecting CPEC sites.

Consequences of the Energy Crisis

Industrial Output Loss

• Factories operate at below capacity due to frequent outages.
• Factories also have to pay heavy bills, which severely impacts their ability to make a profit, which in turn hinders their growth.

Unemployment

• Due to low growth of industrial and agricultural sectors, and their low productivity, unemployment remains high, especially in rural areas.

Inflation

• High costs of electricity also lead to higher costs in production, which leads to price hikes in all consumer products.

Solution to Counter Energy Crisis

Diversifying Energy Mix

• Increasing the share of renewable energy production to at least 30% by 2030 could alleviate many of the problems Pakistan faces due to energy.
• Encouraging hybrid models like solar-wind, solar-gas in off-grid areas.

Reducing Circular Debt

• Eliminate subsidies and shift to direct cash transfers.
• Improve recovery rates through smart metering and prepaid billing.
• Restructuring of DISCOs and performance-based privatization.

Upgrade Transmission and Distribution Infrastructure

• Invest in smart grids and reduce losses via advanced metering infrastructure (AMI).
• Use GIS mapping and data analysis to detect high loss areas and automate energy response.

Encourage Private Sector and Foreign Direct Investment (FDI)

• Create a One-Stop operation for energy investors.
• Streamline regulatory approval so the process of getting a permit is easy for foreign investors.

Promote Energy Efficiency and Energy Conservation

• Enforce energy conservation regulations in industries and buildings.
• Launch mass awareness campaigns for the general public.
• Encourage the adoption of LED and Direct Current motors to conserve energy in urban and residential areas.

Regional Energy Cooperation

• Participate in regional projects like CASA-1000 to import 1000MW from Central Asia.

• Leverage CPEC energy corridor to diversify power projects..

     Diversification    →    Renewable Energy, Nuclear, Hydel
          ↓
   Efficiency Reform    →    T&D Losses, Smart Grids, Subsidies
          ↓
   Governance Reform    →    Policy Continuity, Institutional Coordination
          ↓
  Regional Integration  →    CASA-1000, CPEC, LNG Imports
  

"Energy security is not a technical problem; it is a political choice." — Daniel Yergin, Energy Historian

References

https://www.economist.com/asia/2017/11/09/pakistans-government-is-fixing-a-power-shortage https://www.economist.com/finance-and-economics/2025/02/13/cheap-solar-power-is-sending-electrical-grids-into-a-death-spiral https://www.economist.com/banyan/2012/05/21/power-politics https://www.youtube.com/watch?v=EzvTHmGJBZ4