Utilisation of indigenous resources could be game changer to overcome energy crisis

LAHORE   –   Pakistan has a strange trajectory of borrowing money from the IMF and spending it on importing fuel for power generation, as the country has imported the fuel worth 85 billion dollars since 1994.

Our energy mix has a 60 percent share of imported fuel, which has proved very damaging for the country over the years. Experts believe that if local coal and gas resources were timely developed for energy production this $85 billion could have been spent on human development and technology import. Our mix should have around 85% local fuel share but it is just 40%. Our Power Policy is one of the structural issues of the country. The commodity to be consumed here in Pakistan had to import raw material from abroad.

Over the years we have witnessed the development of imported fuel projects in the country due to the power policy that allowed the power plants to have the responsibility of supply only and the government had to pay for the fuel. On the local fuel side, we have a big risk in the shape of supply because supply is patchy due to non-development. So, in this case, the benefit of price stays with the government and the supply risk is taken by the developer. Naturally then the developer opts for imported fuel projects because local projects become difficult due to supply issues.

Today, Pakistan is sitting at the peak of debt to GDP. The key fault line is too much reliance on imported fuel. However, Ammar Habib, an energy economist, provides a solution to come out of this situation amid the current global energy crisis. “The current global energy crisis has disturbed the pricing equilibria for various fuels, whereas energy planners and the government have failed to proactively manage the same.

“Enhanced volatility in energy prices further strengthens the case for increased reliance on indigenous fuels to avoid an energy and balance of payments crisis. Energy security is essentially national security”, said Ammar. He added that “Imported costly resources have contributed heavily to the country’s ever-expanding current account deficit, and with the volatility in oil prices and chances of further devaluation of rupee against dollar, this situation is all set to worsen not just in coming weeks, but for months and years, till the time a shift towards indigenous resources doesn’t happen”. He suggests that “Pakistan should double down on investing in renewable energy and hydel resources, as well particularly in utility-scale renewables, while incentives should be given to further promote off-grid renewable solutions”.

Ammar was of the view that “The current government should learn from the past mistakes and explore the viability of extracting more coal from Thar to run the coal-fired power plants which will become operational in the next few years. There needs to be an effort on war-footing to convert existing imported plants to Thar coal, either through usage of blended coal, or other methods – it is estimated that this will save more than US$ 2 billion in imports for the country, while also ensuring energy security”. He concluded that Thar coal can help Pakistan significantly improve its energy mix with import substitution, therefore the present and future governments should focus on connecting Thar to the rest of Pakistan through the Thar Rail Link project, which is the need of the hour and on which considerable work has already been done. “Once approved and deployed, it will be a step in the right direction for the long-term energy security of the country,” said Ammar.

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