Pakistan’s energy security and economy may be threatened by a policy shift that backs out of solar and wind projects. The nation’s energy plans instead commit to a continued reliance on fossil fuels and capital-intensive hydro megaprojects—notably the long-planned Diamer-Basha dam—that have a notorious record of delays and massive cost overruns, reports the Institute for Energy Economics and Financial Analysis (IEEFA).
The policies “don’t just threaten the financial sustainability of the power system, they also put the whole Pakistan economy at risk,” IEEFA warns, citing a hard-hitting report by Pakistan’s National Electric Power Regulatory Authority (NEPRA).
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NEPRA’s 2021 report said no new solar and wind projects were commissioned in the past year. Instead, Pakistan is relying on imports of liquefied natural gas (LNG), IEEFA characterizes as an “unaffordable” energy source, despite record high international prices. And though Pakistan no longer plans to expand coal generation, which is also subject to price hikes, the government is still considering a variety of domestic coal-based projects.
The country’s latest climate plan shrinks previous 2030 solar and wind targets by 17,000 megawatts. It does aim for 60% renewable energy generation by 2030, with hydropower reclassified as a renewable source. But IEEFA says the centrepiece of the plan, the 4,800-MW Diamer-Basha dam, has been “on the drawing board for decades.” Completion by 2030 is questionable given past experience with delays, and the project is also unlikely to be completed within the US$14 billion budget currently estimated.
By contrast, wind and solar are “agile” projects that can be completed and commissioned in much less time than conventional fossil and hydro stations, IEEFA says. In 2018, for example, Vietnam added four gigawatts of solar in 12 months, with an average commissioning time of 275 days.
Pakistan risks intensifying its serious energy problem with “circular debt,” defined as “a public debt which is a cascade of unpaid government subsidies, which results in accumulation of debt on distribution companies. When this happens, the distribution companies can’t pay independent power producers who in turn, are unable to pay fuel providing companies thus creating the debt effect as prevalent in the country.”
Compounding the debt problem, Pakistan’s reliance on high-cost energy is driving up the price of electricity and harming the economy.
The nation’s energy security is also threatened by a reliance on imported fossil fuels, and hydro megaprojects which are increasingly vulnerable to fluctuating water levels. Instead, the IEEA recommends a return to solar and wind, which can be deployed quickly in smaller, modular projects and distributed locally rather than centralized, creating a more resilient and secure energy system.
“It is a strange time for a nation to be reducing focus on wind and solar,” IEEFA concludes. “In addition to the significant implementation risks of hydropower, Pakistan risks looking increasingly like a global outlier on power development.”