A DREAM doesn’t cost money, but not having one will cost you your future. The nation will breathe a sigh of relief if — and it remains a huge ‘if’ — the government is able to fulfil its electoral commitment and end load-shedding before the 2018 election. The real challenge, however, is more complex: what’s our game plan to cope with a projected economic growth rate of over five per cent? A robust energy policy can make Pakistan one of Asia’s fastest-growing economies.
We need to have additional energy installed, produced, transmitted and sold to consumers through reformed and revamped utilities. But the federal and various provincial governments have not, at least as yet, set for themselves any policy, technology or investment targets, nor have they determined the sources of their future energy mix.
Desperate times necessitate desperate measures. Responding to public fury and depressed economic growth, this government (to its credit) fast-tracked a chain of energy projects — but many of these wouldn’t make long-term economic or environmental sense. Nor would they stand up to the test of mitigating Pakistan’s climate risks (such as heat waves and heat spikes witnessed recently) spurring unexpected demand. The circular debt has refused to disappear, and the overall energy mix is imbalanced and expensive for consumers as well as the economy. Further, several ticklish issues remain unaddressed, including investments in transmission lines, smart grids, system losses and electricity theft by domestic, commercial and industrial consumers. The entire system begs for an overhaul.
Even if load-shedding ends, clean and reliable energy will remain a distant dream for many Pakistanis.
To begin with, our energy policy is out of sync with global trends. We have not taken full advantage of the rapidly falling prices of solar and wind energy. Neighbouring countries are using their renewable energy targets to attract domestic and foreign investments, create green jobs, encourage manufacturing and propel the services sector. We need to understand that “building new renewable generation capacity, or investing in greater energy efficiency to avoid the need for new generation, would create more jobs than investing in an equivalent level of fossil fuel-fired generation”. Can the government do this alone? No, it must forge private-sector partnerships.
In China, for example, the growth of renewable electricity generation is stunning. China leads the world in installed renewable energy capacity, and has sustained annual wind additions in excess of 10GW. In fact, solar and biomass-fired electricity in China is expected to grow 10-fold in the next three years (by 2020). The benefits of emissions reductions aside, China sees renewables as a source of energy security. If the supplies of oil, coal and gas are finite and subject to uncertainties of geopolitical developments, renewable energy systems can be built and used wherever there is sufficient sun, wind and water.
Most important amidst all these impressive accomplishments has been the Chinese government’s unwavering financial support for renewable energy generators — a suit that Pakistan can follow. The China-Pakistan Economic Corridor is the promised game-changer for Pakistan, but it need not convert the country into an environmental wasteland. We need not dirty our energy landscape with additional coal-fired power plants. China is phasing out coal. We need to engage with China’s private sector on the higher technology standards and take advantage of their government’s experience. We have similar imperatives of ensuring energy security, technological innovations, domestic market creation and global commitments to low emissions development.
It has become obvious that fossil fuel will not be competitive in the coming years, especially after the G7 commitment to phase out subsidies. In this context, Pakistan needs to put in place two simple policy instruments for future energy investments.
Encourage off-grid solutions: Going off-grid is not only possible, it has become desirable. Increasingly, both domestic users and companies are finding their own energy solutions in order to avoid or minimise reliance on the national grid. A subsidy through commercial banks to redress higher upfront solar installation costs will encourage investments. In fact, reverse metering at lucrative rates, whereby the investors could sell extra electricity to the utility, can help attract small-scale domestic investors and reduce pressure on the grid. Pakistan will look beautiful if it could cover its five million rooftops with solar panels; domestic manufacturing of photovoltaic panels needs be pushed through tax incentives.
Facilitate producer-buyer agreements: Policy instruments need to be developed to facilitate direct agreements between energy producers and purchasers. The present practice is for utilities to have uniform prices for all users. This serves as a disincentive for investment in renewables and for utilities like K-Electric to become efficient. A buyer’s ability to buy directly from producers via service providers will bring the cost of doing business down. This will require some regulatory changes. After all, all buyers deserve the right to decide the source of energy they wish to purchase from, especially if it results in savings for them.
There is a growing trend for companies to set their own energy and emissions standards, resulting in the need to buy energy from renewable sources rather than from a black box of a utility company. In fact, a new market is shaping up for renewables’ trading, whereby companies reduce their emissions by buying offsets from renewables — a trend being set by leading companies like Google and Apple — by striking offsite deals. Business houses in Pakistan need a fair chance to vie for such deals.
Energy distribution continues to be inequitable and inaccessible to a very high percentage of the population. Even if load-shedding ends, clean and reliable energy will remain a distant dream for many Pakistanis. The success of ending load-shedding will be diminished in value if the vision and direction of future investments is not clear. The government needs to take some policy decisions now, and push them through the forthcoming financial budget and provincial annual development programmes.
The writer is CEO, LEAD Pakistan, a think tank focusing on climate and water issues.
Published in Dawn, May 1st, 2017