Pakistan’s power sector faces significant challenges. The country produces 94,121 GWh of electricity annually, with a theoretical per capita consumption of 392 kWh/year for its 240 million people, but the reality is alarming. The National Electricity Regulatory Authority (NEPRA) reports that the actual per capita consumption is much higher at 644 kWh/year. However, despite this high figure, it is still below the global average, at only 18% of the global average, 7% of the developed world, and 12% of the Chinese average.
This low consumption is hindering economic growth and social welfare. Recent progress in adopting renewable energy, particularly through net metering policies, shows a promising path forward. However, the proposed move to gross metering threatens to undo this progress. A comprehensive strategy is essential to ensure a sustainable and affordable energy future for Pakistan.
The Rise of Net Metering and Its Benefits
The introduction of net metering regulations in 2015 marked a major step towards promoting renewable energy in Pakistan. The policy empowered consumers to become small-scale power producers and encouraged them to install solar panels and other renewable energy systems. Consumers could not only use the electricity they generated, but also sell the surplus back to the grid. The system, tracked by special meters, provided significant economic benefits to consumers by reducing their electricity bills and increasing their energy independence.
Net metering enables consumers to achieve greater energy independence and reduce dependency on the national grid. According to the Private Power Infrastructure Board (PPIB) website, by June 2023, Pakistan will see a significant increase in solar installations under net metering, with over 63,700 systems installed, reaching a cumulative capacity of 1,055 MW.
The Challenges of Gross Metering
The proposed change from net metering to gross metering would put Pakistanis’ dreams of energy independence in jeopardy. In a gross metering system, all electricity generated by rooftop solar panels would be fed into the national grid. Consumers would then be forced to buy back the power they need from their utility companies, often at significantly higher retail prices.
The disparity is stark: consumers are forced to sell electricity at a paltry price of about $0.070 per kWh (Rs. 19.32 per unit), while buying it back at a much higher price of about $0.22 per kWh (Rs. 62 per unit) during peak hours, factoring in surcharges. This huge price difference makes investments in solar panels economically unattractive, potentially leading to a sharp decline in rooftop solar adoption and hindering progress towards energy independence.
Problems of Pakistan’s Existing Power Sector
Pakistan’s power sector faces deeper issues than just the net vs gross metering debate. A recent NEPRA report has revealed an alarming picture of huge financial losses due to inefficiencies. The report points out a major discrepancy: DISCO (Distribution Companies) losses are only allowed up to 13.41%, while the actual losses are a staggering 17.13%. This huge gap is almost four times higher than the global average of 6% to 8% for technical and distribution losses, pointing to serious problems in the system.
Moreover, exorbitant electricity tariffs and persistent load shedding, especially in areas with low tariff collection, are a double whammy for the system. This vicious cycle not only burdens consumers, who are forced to choose between paying high tariffs for unreliable electricity or turning to costly alternatives such as captive generating units, but also creates challenges for DISCOs in collecting vital sources of revenue.
Indeed, the unreliable power supply has forced Pakistani consumers to seek alternative solutions during blackouts, with households in apartments and housing complexes installing emergency generators and those with rooftop space opting for solar panels.
Another significant issue exacerbating Pakistan’s power sector woes is the country’s continued reliance on outdated and fuel-inefficient power plants. These ageing facilities are costly to maintain, have low energy conversion efficiency, and contribute significantly to air pollution. The lack of policies aimed at phasing out these outdated power plants perpetuates a cycle of financial burden and impedes progress towards a more modern and efficient energy sector.
The looming threat of circular debt
A major challenge plaguing the power sector is the issue of circular debt. This complex phenomenon stems from a variety of factors including unpaid consumer bills, inefficiencies within DISCOs, and inadequately funded government power subsidies. This creates a financial bottleneck as DISCOs struggle to pay power producers and are therefore unable to invest in infrastructure upgrades and fuel purchases. This vicious cycle not only discourages investment in the industry, but also discourages new entrants, hindering overall growth.
The role of transmission constraints
Pakistan’s electricity transmission infrastructure also poses a major obstacle. The current network struggles to efficiently distribute electricity across the country, resulting in power losses and hindering efforts to integrate renewable energy sources. Upgrading and expanding the transmission network is crucial to ensuring all citizens have access to reliable, affordable electricity.
The Need for Technological Innovation
Technological advances offer incredible opportunities to modernize Pakistan’s power sector. For example, smart grid technologies can help optimize energy distribution, reduce losses, and improve overall efficiency. Additionally, advances in energy storage solutions can make it easier to integrate intermittent renewable energy sources, such as solar and wind, into the country’s grid. Investing in research and development, and creating regulatory frameworks that encourage the adoption of these technologies, is essential for a sustainable energy future.
Human Factors: Capacity Building and Public Awareness-Raising
A successful transition to a sustainable and efficient energy sector requires not only infrastructure development and policy changes, but also investments in human capital. Capacity building programs for engineers, technicians and policymakers are essential to ensure the skilled workforce needed to manage modern energy systems. In addition, public awareness campaigns play a key role in promoting responsible energy consumption and encouraging public participation in renewable energy initiatives.
The way forward: a comprehensive strategy
Pakistan’s power sector needs a bold and comprehensive strategy to move forward. Reliable, affordable electricity supply is the foundation for economic prosperity and social well-being.
For Pakistan to realize its full potential, it must free itself from the shackles of high costs and short-sighted policies. The solution lies in a multi-pronged approach. Innovative financing mechanisms such as public-private partnerships and green bonds can attract much-needed investment into renewable energy projects. Moreover, establishing stable and predictable regulation is essential to foster private sector confidence. But a sustainable future requires more than just the economy.
Pakistan’s energy strategy must seamlessly integrate economic, environmental and social considerations. By taking these decisive steps, Pakistan can finally break free from the shackles of an outdated power sector and pave the way for a brighter future driven by clean, affordable and reliable energy.
