About the Author(s)
Ms Ayesha Zafar is currently pursuing her Bachelor's in International Relations from National Defence University, Islamabad. She has authored multiple academic publications including research articles and book chapters. Her areas of interest include Middle Eastern politics, the geopolitics of Central Asia, and the Indo-Pacific region
The Constant Power Shortages
In this essay, the grave energy crisis in Pakistan will be discussed and analysed with relevant examples and statistics. Several factors have convulsed Pakistan with power shortages, and the most important among them is arguably rooted in deficiencies of governance than pure supply. This complicated crisis which has long been running is not only instigating hiccups for the consumers but also threatening the country’s economy and its precarious security situation.
Thus, the World Bank expressed the need for reforms to increase electricity reliability and ensure cost-effectiveness. According to the report published in 2018, Pakistan’s power sector caused a total of $18 billion or 6.5% of the GDP loss to the economy in 2015. Nonetheless, effective and timely reforms could have saved $8.4 billion in business losses and increased the household incomes by at least $4.5 billion yearly, the report added.
Decisively, Pakistan Economic Survey 2019–20 revealed that in the year 2020, Pakistan increased its installed electricity generation capacity up to 37,402 MW. However, an estimated 73.91% of Pakistan’s population has access to electricity, whereas around 50 million people still lack access to grid electricity, according to the World Bank 2019 report.
The World Bank’s Projects: PACE and SHIFT
Yet, to overcome such issues, the World Bank’s Board of Executive Directors in June 2021 approved a total of $800 million in funding for two projects in Pakistan, namely the Pakistan Program for Affordable and Clean Energy (PACE) and Securing Human Investments to Foster Transformation (SHIFT).
The first project worth $400 million will help Pakistan’s transition to low carbon energy and introduce powerful reforms in the energy sector including subsidies for consumers. In this regard, Rikard Liden, task team leader for the PACE program stated, “Decarbonizing the energy mix will reduce the dependence on fossil fuel imports and vulnerability to price fluctuations because of movement in exchange rates. PACE prioritizes action on such reforms, which must be sustained to address circular debt and set the power sector on a sustainable path.”
On the other hand, the second project SHIFT, which is worth another $400 million, intends to improve health and educational services while bringing the federal and provincial authorities on board. Altogether, these two initiatives by Pakistan in collaboration with the World Bank aim to empower the power sector.
Dispelling the Illusion
Nevertheless, a recent report released by Recourse, a European think tank, has stunned not only the Pakistani officials but has also raised multiple questions in the mind of the general public. According to the European think tank, the World Bank is the major reason behind Pakistan’s decades-long energy sector crisis.
In its report titled “World Bank’s Development Policy Finance (DPF) 2015-21: Stuck in a carbon rut”, the European think tank disclosed that its studies conducted in Indonesia and Pakistan have found the World Bank endorsing the use of natural gas and backing fragile energy sectors that are heavily invested in coal.
Emphasizing the need to have proper checks and balances, the think tank referred to the PACE program (2021-2022) that aims to ensure Pakistan’s transition to low carbon energy; it stated in its report that, as per the agreement with the World Bank, the funding was subject to the condition that Pakistani’s authority would accomplish 66% percent renewable energy target by 2030 by espousing a least-cost generation plan.
However, the targets for the energy sector have been slashed from 30-33 percent to nearly 17 percent, which will result in massive environmental degradation and resource exploitation. Outrageously, the year 2021 marks the second year of foundational reforms since Pakistan showed compliance to the World Bank’s ‘Prior Actions’ under Development Policy Finance (DPF) amounting to $1.4 billion.
The World Bank is the True Culprit?
While questioning the reliability of the plan, the European think tank has blamed the World Bank’s DPF operation for its destabilizing effect on the ability of Pakistan to achieve the transition to a sustainable renewable energy conduit.
Not just this, another shocking news came as the think tank conversed about the pressure on the energy committee of Pakistan to approve the controversial Integrated Generation Capacity Enhancement Plan (IGCEP-2047) that the National Electric Power Regulatory Authority (NEPRA) vice-chairman refused to sign in the first place keeping in view the reverberations it will yield later.
This political pressure to fast-track the IGCEP came back in August when Hartwig Schafer, vice-president of World Bank, made his way to Pakistan and urged the government to take necessary actions to power sector reforms. In this regard, the Institute of Energy Economics and Financial Analysis (IEEFA) together with the Alliance for Climate Justice and Clean Energy undertook a recent study that revealed the flaws and potential consequences of the IGCEP plan.
It stated in its report titled ‘Pakistan risks locking into overcapacity and expensive power’ that the “Power demand growth forecasts made under the Integrated Generation Capacity Enhancement Plan-2047 [IGCEP-2047] are too high and do not take into account the impact of Covid-19.”
The study finds GDP growth to increase from 4% to 5.5% by 2025, yet the plan could make Pakistan stuck in over-capacity in the long run and upend sustainability and affordability as experienced by states like China, India, Indonesia, and Bangladesh since they over-estimated the consumer demands.
Notwithstanding the fact that the 5.3GW coal-fired power plants under IGCEP will be operationalized by 2030 and having a collective utilization of just 14%, they will make Pakistani coal plants stranded since functioning at such a low utilization rate is impossible. Thus, IGCEP’s patronage of expensive coal power plants over the much cheaper renewable energy resources indicates the failure of the plan to live up to the country’s affordability principle.
Prioritizing Action and Evaluation
In light of the fact that the World Bank’s ‘Priority Action’ will make Pakistan suffer the most disparaging energy crisis in the long run, the essay recommends halting the enactment of the program as soon as possible. The energy demand which is expected to quadruple in Pakistan in the coming years will not only make the consumer undergo a grave energy crisis but will also bring massive pressure on the state to conciliate the demands of the people.
Therefore, this essay outlines important steps that have to be taken at the earliest to overcome the energy crisis in Pakistan. Pakistan must introduce power sector reforms that support a transition to renewable energy and look for alternatives that would yield energy efficiency and protect the environment to a greater extent.
The time has come when the government has to work on red-tapism, corruption, and other constraints that are hindering foreign investment in the energy sector and should focus on institutional reforms that are much more desirable than ever.
In this regard, China Pakistan Economic Corridor (CPEC), a flagship project can prove phenomenal for the energy sector as China during a meeting in Islamabad stated that it has so far invested around $12.4 billion in Pakistan’s energy sector and a total of 12 power generation projects having the capacity to generate 7,240 MW of energy are either completed or in the construction phase as per the 2019 report.
Importantly, the installed electricity generation capacity was recorded at 34,282 Megawatts in Jul-Mar 2018-19 which is pretty encouraging for the energy sector. For that reason, CPEC is a golden opportunity for Pakistan to bring the country out of the energy crisis. To conclude this essay, Pakistan should take urgent action and ensure a fair investigation of the World Bank’s projects before the energy crisis becomes irreversible.
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