South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com
Soaring Prices of Imported LNG Threaten Pakistan's Economic Recovery
Soaring LNG prices are adversely affecting Pakistan's balance of payments and threatening the nation's post-COVID economic recovery. Pakistan's trade deficit has widened to nearly $12 billion in July-September 2021 quarter, up more than 100% from the same period last year. The nation's heavy reliance on expensive imported energy has been the main cause of prior balance of payments crises that have forced it to seek IMF bailouts more than a dozen times in the last 70 years.
The average LNG price for November delivery into Northeast Asia was estimated at about $32 per metric million British thermal units (mmBtu), up nearly 20 percent from the previous week, according to the Peninsula Qatar publication. Price agency S&P Global Platts said on Thursday that its Japan-Korea-Marker, which is widely used as a benchmark for spot LNG contracts, rose to $34.47 per mmBtu.
Rising LNG prices have forced power generating companies in Pakistan, Bangladesh and the Middle East to start switching fuels pushing oil prices higher. About 60% of Pakistan's current LNG needs are covered by long-term contracts at significantly lower prices than the current spot prices. US crude closed above $80 for the first time since late in 2014, bringing its climb since the end of last October to 125%, according to the Wall Street Journal.
The key to Pakistan managing its current accounts lies in reducing reliance on imported energy and dramatically increasing its exports. Pakistan already faces climate change pressures forcing it to change its energy mix to reduce the use of fossil fuels.
Pakistan's Malik Amin Aslam with CNN's Becky Anderson
Malik Amin Aslam, Pakistan Prime Minister Imran Khan's special assistant on climate change, said recently in an interview with CNN that his country is seeking to change its energy mix to favor green. He said Pakistan's 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbon and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded. Here are the key points Aslam made to Becky Anderson of CNN:
1. Pakistan wants to be a part of the solution even though it accounts for less than 1% of global carbon emissions.
2. Extreme weather events are costing Pakistan significant losses of lives and property. Pakistan is among the countries most vulnerable to the effects of climate change.
3. Pakistan is moving towards renewable energy by converting 60% of its energy mix to renewable by 2030. Electric vehicle (EV) transition is also beginning in his country.
4. Aslam said: “We are one of the world leaders on nature based solutions. However, the World Bank (WB) in its Report yesterday came up with really good numbers in a comparison done of countries who are shifting their mainstream development towards environment friendly policies and Pakistan came atop among them,” the SAPM explained.
To a question on Pakistan’s capacity to make investments in nature based solutions, he said, “We cannot afford not to do it….that’s a cliche in our country and we are living that cliche in Pakistan. We are not just talking the climate talk rather doing climate action in Pakistan.”
To a question on the 26th Conference of Parties (COP-26) under the United Nations Framework Convention on Climate Change, Amin said his country’s revised "national determined contributions" (NDCs) are going to be released next week. “….that’s going to clearly tell the world that this (money) we had spent in nature and could do further and that was also our direction,” he added. The SAPM informed that Pakistan was going to COP 26 with a very clear message that the country has been affected by climate change, climate injustice, adding, “but we are one of the countries that are leading the way to nature based solutions.”
He cited the WB Report and said 44% of the country’s mainstream development was climate friendly investment and it had doubled in the past one year. He said 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbons and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded.
It's noteworthy that Pakistan's neighbor India currently generates 70% of its electricity from coal extracted from Indian coal mine. It is aiming for renewables and nuclear energy to account for 40% of its installed electricity capacity by 2030.
While Fareed Zakaria, Nick Kristoff and other talking heads are still stuck on the old stereotypes of Muslim women, the status of women in Muslim societies is rapidly changing, and there is a silent social revolution taking place with rising number of women joining the workforce and moving up the corporate ladder in Pakistan. "More of them(women) than ever are finding employment, doing everything from pumping gasoline and serving burgers at McDonald’s to running major corporations", says a report in the latest edition of Businessweek magazine . Beyond company or government employment, there are a number of NGOs focused on encouraging self-employment and entrepreneurship among Pakistani women by offering skills training and microfinancing . Kashf Foundation led by a woman CEO and BRAC are among such NGOs. They all report that the success and repayment rate among female borrowers is significantly higher than among male borrowers. In rural Sindh, the PPP-led govern
Pakistan's Ten Billion Tree Tsunami project launched in 2014 by the PTI government has sparked a silent olive revolution in the country. Pakistan, now the 19th member of the International Olive Council , is producing about 1,500 tons of olive oil per year and 830 tons of table olives, according to Juan Vilar Strategic Consultants . It is also helping tackle some of the effects of climate change such as soil erosion and desertification and bringing new opportunities to farmers. Olive cultivation was started as a pilot project in Potohar region by Punjab Chief Minister Shahbaz Sharif's government in 2014. The PTI government promoted it nationwide as a part of Prime Minister Imran Khan's Ten Billion Tree Tsunami initiative to bring about the olive revolution in the country. Olive Valley, Pakistan Pakistan is the world's third largest importer of cooking oil . In 2020, Pakistan imported $2.1 billion worth of palm oil, behind only India's $5.1 billion and China&
Our Next Energy (ONE), a two-year-old Michigan startup founded by Pakistani-American Mujeeb Ijaz, has received $25 million in initial investment from Bill Gates' Breakthrough Energy Ventures and German automaker BMW. Storage battery technology is a key area of innovation to bring about clean energy revolution . Mujeeb Ijaz has engineered a way to achieve longer ranges for electric vehicles from lithium-iron-phosphate (LFP) batteries, a more stable but less powerful chemistry than the nickel-based batteries currently used by most automakers. Mujeeb's brother Mansoor Ijaz made headlines in 2011 when he wrote a Financial Times Op Ed regarding his conversations with Husain Haqqani who was serving as Pakistan's ambassador in Washington. Mujeeb's father Mujaddid Ahmed Ijaz was a Pakistani experimental physicist and a professor of physics at Virginia Tech. Mujeeb Ijaz, Founder CEO of Our Next Energy (ONE) Mujeeb Ijaz, Pakistani-American founder and CEO of ONE, is a 30
To be fair, the following prices are not in PTI's control:
Oil from $37 to $84
Palm Oil up 36%
Coal from $60 to $250
LNG from $10 to $50
In a debt-for-environment swap (DFE), a creditor government reduces a debtor country’s debt in return for commitments by the indebted nation to invest domestically in environmental conservation initiatives. DFEs aim to allow a country burdened with debt to simultaneously address its financial issues while remedying environmental degradation and social inequality.
Any proposed DFE schemes should align with Pakistan’s existing sustainability policies to avoid issues of social inequality and inefficient implementation. For example, in April 2021 Pakistan’s government proposed a DFE scheme to propel its existing Ten Billion Tree Tsunami afforestation programme. But implementing a DFE swap in this context could worsen social issues associated with the plan, such as forced displacement and the loss of community herding traditions.
For foreign financial aid to work on the ground, Pakistan needs to address inconsistencies within its existing domestic policies. It should consult local communities, NGOs and local government agencies when designing interventions, and ensure that their implementation is transparent. This would enable Pakistan to effectively address criticisms of ‘greenwashing’ in its economic recovery programme.
Adapting Pakistan’s Special Economic Zones
Special Economic Zones (SEZs) are free-trade areas in a country, where the commercial laws are tailored to attract both foreign and domestic investors, such as allowing certain tax exemptions. SEZs, which represent an integral component of CPEC’s second phase provide a significant opportunity for employment generation and business growth in Pakistan. It was announced in February, for instance, that the jewel in the CPEC crown, Gwadar SEZ (home to Gwadar Port), would become a tax-free zone. Addressing unemployment is a key aspect of the country’s recovery plan, considering that half of Pakistan’s working-age population experienced either income or job losses during the pandemic and GDP contracted by an estimated 1.5% in the 2020 financial year.
In China, for instance, SEZs attract around 50% of total foreign investment, something that if replicated would be hugely beneficial to Pakistan’s economy. However, in order for foreign investors not to crowd out smaller businesses from supply chains in SEZs, the Pakistani government should encourage joint ventures between local businesses and foreign investors.
The UN’s Intergovernmental Panel on Climate Change (IPCC) published its latest report in August 2021, on the heels of one of the hottest and most devastating summers on record: floods in northern Europe and China, wildfires in the US, and heatwaves everywhere.
The report tells us that the consequences of the current global warming crisis are largely irreversible. The most we can do is to prevent all-out ecological collapse.
One of the more sobering findings of the report is that polar and mountain glaciers are likely going to continue to melt, irreversibly, for decades or centuries to come.
Pakistan has more glaciers outside of the polar icecaps than anywhere on earth. The glaciers feed one of the oldest and most fertile valleys on the planet – that of the Indus Basin, split between India and Pakistan. Roughly 75 percent of Pakistan’s 216 million population is settled on the banks of the Indus River. Its five largest urban centres are entirely dependent on the river for industrial and domestic water.
Pakistan has been blessed with regular agricultural cycles that have sustained its economy through successive crises. However, if the IPCC Report is correct – which it almost certainly is – by 2050, the country will be out of water.
Pakistan is not the only low-income country facing the impacts of climate change. It is not alone in looking on helplessly as industrialised nations – China and the US being the foremost – drag their heels on lowering emissions. Pakistan, like the Maldives and many other island nations, will suffer from the consequences of global warming disproportionately. However, unlike many countries that have taken up the issue of global emissions at the UN, Pakistan is not doing even the bare minimum to try and secure its future.
To say that this is the largest security issue the country will face in the next few decades would be putting it mildly. No other country is as dependent on non-polar ice for freshwater as Pakistan. No other country stands to lose as much. Yet, Pakistan’s government seems singularly unaware of the looming crisis. It has not even made much effort to meet its target of producing 60 percent of its electrical power from renewable sources by 2030. At the moment, the country still gets well over 60 percent of its electricity from fossil fuels.
Pakistan is already facing mounting environmental challenges. Heatwaves are killing scores of people and impacting crop cycles and yields on a regular basis. This year, both its largest city Karachi and its capital city Islamabad experienced devastating floods. Furthermore, the 806-kilometre (500-mile) Karakoram Highway, which is a critical part of Pakistan’s economic corridor with China, was shut down multiple times, for multiple days, due to landslides. These devastating landslides were a direct result of large-scale deforestation in the area north of Kohistan and south of Jaglot. Further north towards Shimshal and east towards the Skardu Valley, timber mafias are rapidly stripping old-growth forests, all but guaranteeing future environmental catastrophes.
Today, Pakistan is facing an existential crisis. The effects of climate change are not threatening a single sector or region of the country, but the lives and livelihoods of its entire population. As this year’s IPCC report underlined, we are, sadly, already too late to reverse the damage caused by the rampant consumption of fossil fuels. The choice we are facing now – in Pakistan and around the world – is to continue on a path to certain destruction, or start fighting for our collective survival.
Advance Release of Foreign Trade Statistics:
Textile exports continue to grow, up 25% YoY. Rising petroleum imports remain a concern as they are up 87% YoY
Overseas Pakistanis sent the highest-ever $8 billion remittances during the first quarter of the current fiscal year, registering a growth of 12.5 per cent over the same period last year.
The State Bank of Pakistan (SBP) on Friday reported that with inflows of $2.7bn in September, workers’ remittances continued their strong momentum and remaining above $2bn since June 2020.
“This is the 7th consecutive month when inflows recorded around $2.7bn on average,” said the SBP. In terms of growth, remittances increased by 17pc in September compared to the same month last year, while comparing with August inflows it was 0.5pc higher.
The surging imports in 1QFY22 widened the trade deficit putting immense pressure on the rupee-dollar exchange rate which ultimately reflected in higher current account deficit. The situation for the economic managers is not comfortable except the higher remittance supported the economy beyond imagination.
The country had received record remittances of $29.4bn in FY21 which helped it curtail the current account deficit.
“The proactive policy measures by the government and SBP to incentivise the use of formal channels, curtailed crossborder travel in the face of Covid19, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions have positively contributed towards the sustained improvement in remittance inflows since last year,” the central bank said in statement.
However, the deterioration of exchange rate has created serious problems for the external trade activities. Recently, the SBP has taken several measures to curtail outflow of dollars and reduce the import bill, but the exchange rate is still against the rupee which has lost about 11.5pc during the last five months.
The highest remittances were received from Saudi Arabia but they were 2.6pc less than the same period of last year. During July-September 2021-22 the remittances from Saudi Arabia were $2.025bn against $2.080bn last year. The contribution of Saudi Arabia in the total remittances during the first quarter of FY22 was almost 25pc. In September, Pakistan received $691m from the kingdom against $694m in the same month of last year.
The remittance from the United Arab Emirates was second highest as it witnessed a growth of 8.7pc while it amounted to $1.545bn during the first quarter of FY22.
The inflows from UK and USA noted a growth of 13.2pc and 32pc amounting to $1.115bn and $836m respectively. The growth in the first quarter of FY21 was 71.5pc for UK and 63pc for USA.
For the first time, the inflows from EU countries surpassed the total inflows from other GCC countries. The inflows from EU countries rose $889m compared to $880.7 from the GCC countries. The remittances from EU countries increased by 47.8pc compared to the same period of last fiscal year.
Syed Arif Rehman
Excellent communication by Finance Ministry. Even during these tough times, it is always great to see government communicating transparently with stakeholders. Well done.
Current Account Deficit in Q1 FY 2021-22 is $3.4 billion'
Imports include nearly $1 billion of COVID vaccines
High prices of energy imports
Exports up 12.5% in Q1
Improved outlook for food imports due better wheat & sugarcane harvest as well higher cotton output
Countries will be asked to commit to slashing greenhouse gas emissions at the COP26 climate summit in November.
India is the world's third-largest carbon emitter, after China and the US.
India aims for renewables and nuclear energy to account for 40% of its installed electricity capacity by 2030 - a goal it could achieve ahead of time, according to the Climate Action Tracker (CAT).
But it remains the world's second-largest consumer of coal, which still powers more than 70% of its grid. But coal will be difficult to give up, India has told the team of scientists compiling the UN report ahead of the summit in Glasgow.
The reports - which bring together evidence on how best to slow down global warming - are by the Intergovernmental Panel on Climate Change (IPCC), the UN body studying climate change.
"In spite of substantial growth in renewable energy sector in India, coal is likely to remain the mainstay of energy production in the next few decades for sustainable economic growth of the country," said a senior scientist from India's Central Institute of Mining and Fuel Research, according to the leaked documents.
CAT estimates that by 2030, India's emissions intensity will fall to 50% below 2005 levels, going past its avowed target, 35%. But India has yet to explain how it will reach net zero emissions - nor has it said by when it plans to do so.
China, the world's biggest carbon emitter and coal consumer, has pledged to go carbon neutral by 2060. And demand for coal in the country has also flattened, possibly leaving the future of the fossil fuel in the hands of Indian policy makers.
Countries are planning to produce more than twice as much oil, gas and coal through 2030 as would be needed if governments want to limit global warming to Paris Agreement goals.
The report looked at future mining and drilling plans in 15 major fossil fuel producing countries, including the United States, Saudi Arabia, Russia, Canada, China, India and Norway. Taken together, those countries are currently planning to produce more than twice as much oil, gas and coal through 2030 as would be needed if governments want to limit warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels.
Scientists and world leaders increasingly say that holding global warming to 1.5 degrees Celsius is crucial if humanity wants to avoid the most catastrophic consequences of climate change, such as ever-deadlier heat waves, large scale flooding and widespread extinctions. The world has already heated up roughly 1.1 degrees since the Industrial Revolution.
Making the task even tougher, the world is currently experiencing a severe energy crunch, with Europe, Asia and Latin America all facing shortages of natural gas this fall to supplant their renewable power operations. The International Energy Agency recently warned that nations need to significantly increase their investment in clean energy to overcome these problems, but the disruptions could also bolster calls for more fossil fuel production. China’s government, for example, recently ordered coal companies to increase their mining output to manage an electricity shortage that has led to rolling blackouts nationwide.
To address these challenges, the new report calls for closer international coordination “to ensure that declines in fossil fuel production are distributed as equitably as possible, while minimizing the risks of disruption.”
The State Bank of Pakistan (SBP) has allowed all Renewable Energy Investment Entities (RE-IEs) to avail financing on easy conditions to remove growing electricity shortage in the country.
The SBP on Monday said that to promote investment in RE solutions by companies, the central bank has eased the conditions for renewable energy solution providers under its Refinance Scheme for Renewable Energy.
With the aim of helping address the challenges of energy shortages and climate change, the central bank revised its Financing Scheme for Renewable Energy in July 2019. Since the inception of the scheme, 717 projects having potential of adding 1,082MW of energy supply through renewable sources have been financed. As of June 30, 2021, total outstanding financing under the scheme is Rs53 billion.
RE, often referred to as clean energy, comes from natural sources — sunlight, water and wind — or processes that are constantly replenished.
Since 2019, projects promising 1,082MW of energy supply have been financed
“Now, all RE-IEs interested in installing renewable energy projects and solutions are allowed to avail refinance under Category-III of the scheme,” said the SBP.
An RE-IE is a business entity (including vendors and suppliers) whose business is to establish renewable energy projects for onward leasing, renting out or selling on deferred payment basis or selling of electricity generated from these projects to end users.
The SBP also launched a Sharia-complaint version of the scheme in August 2019. The scheme now comprises of three categories. Under Category-I, financing is allowed for setting up of RE power projects with capacity ranging from 1-50 MW for own use or selling of electricity to the national grid or a combination of both.
Under Category-II, financing is allowed to domestic, agriculture, commercial and industrial borrowers for installation of renewable energy based projects of up-to 1 MW to generate electricity for own use or selling to the grid or distribution company under net metering.
Under Category-III, financing is allowed to vendors, suppliers and energy sale companies for installation of wind and solar systems of up to 5 MW.
While there is substantial take up under Category-I and II, solution suppliers under Category-III faced problems, said the SBP.
Accordingly, in light of the feedback received from stakeholders including RE solution suppliers, Alternate Energy Development Board (AEDB) and banks, the requirement of AEDB certification has been relaxed for RE-IEs who do not undertake installations on their own but hire services of installers or vendors for installation of RE projects.
“However, vendors, suppliers, engineering procurement and construction (EPC) contractors of these RE-IEs will still be required to be certified under the AEDB certification regulations,” said the SBP.
The SBP expects that this revision in Category-III will further facilitate production of clean energy in the country.
in a bid to support one of the fastest growing buyers of the super-chilled fuel. Energas’ terminal will be Pak’s largest with a capacity to import 1 billion cubic feet of #gas a year.- Bloomberg
Qatar, the world’s top supplier of liquefied natural gas, will invest in Pakistan’s next import terminal in a bid to support one of the fastest growing buyers of the super-chilled fuel.
Qasim Terminal Holding Co., a subsidiary of Qatar Energy, has applied for clearance with Pakistan’s government to take a stake in Energas Terminal Pvt., according to people familiar with the matter. Qatar Energy and Energas did not respond to requests for comments while Pakistan’s competition commission declined to comment.
The deal comes as Qatar plans to dramatically increase production over the next decade, which will require the Middle Eastern nation to find more buyers for its fuel. Qatar is already Pakistan’s largest gas supplier with its latest long-term deal slated to start this year.
Energas’ terminal will be the nation’s largest with a capacity to import 1 billion cubic feet of gas a year. Pakistan currently operates two LNG terminals, while Energas and Japan’s Mitsubishi Corp. are vying to build the nation’s first twoprivate projects.
Pakistan is going to dominate LNG growth in emerging Asia along with Bangladesh and Thailand over the next five years. The three nations will almost double LNG imports over 2021-25, according to BloombergNEF.
University of California, Davis
Muhammad Bilal Sajid
Ghulam Ishaq Khan Institute of Engineering Sciences and Technology
Energy consuming buildings account for 30-40% of the overall energy consumption in the world and are responsible for more than one third of greenhouse gases emissions. In Pakistan Residential building sector has around 47% share in total energy consumption. Study is conducted to identify the energy consumption pattern and the areas of energy wastage in residential sector of Islamabad. From the analysis of its annual energy usage it can be clearly seen that electricity consumption dominates in term of cost but natural gas has major share in annual energy consumption. Recommendations are provided which include required energy retrofit measures for improving building performance and financial assistance from Government officials. Through these energy efficiency measure significant reduction in carbon footprint can be achieved.
The drastic decrease in carbon emissions is, surely, the result of steps taken by Pakistan under its Climate Action – the Sustainable Development Goal (SDG) 13. The flagship project, Ten Billion Tree Tsunami (TBTT), is not just a tree plantation movement, but a comprehensive initiative for ecosystem conservation and management. More than a billion new plantations, revised plans for forest management and development across the countries with the engagement of provinces and administrative entities, and capacity of institutions have already been noticed and appreciated by the national and international environment and climate watchdogs.
The Sustainable Development Report 2020, written by a group of authors led by Prof. Jeffrey Sachs, President of the Sustainable Development Solutions Network (SDSN), and published by Cambridge University Press, has declared Pakistan accomplished all targets of the SD-13 ten years ahead of the actual date – 2030. The UNDP SDGs report has also shown Pakistan’s remarkable progress on SDG-13 Climate Action.
COP26 is an opportunity for Pakistan to vigorously showcase its achievements so far as well as its vulnerabilities. Pakistan has been facing the worst impact in the forms of short-span heavy rains, flash floods, unprecedented land-sliding incidents, glacial melting, air pollution and fast diminishing water resources, climate prone crop diseases and low productivity and many others. Overburdened by debt, incapacity and capital shortfall have further increased Pakistan’s vulnerability. Keeping in view the performance on climate action, Pakistan should be slated among the global top priorities for funding, human resource development and institutional strengthening to protect masses living at the edge and their livelihood resources.
The government has approved Pakistan’s Nationally Determined Contribution (NDC) for the UN Climate Conference COP26 where it has aimed for an ambitious 50 per cent reduction on top of the present 1.3 per cent carbon emissions by 2030 subject to the provision of $100 bn climate finance. Special Assistant to Prime Minister Malik Amin Aslam has mentioned that national funding, professional capacity and institutional strengthening will simultaneously take place while mobilising global resources to attain the goal.
Pakistan is all set to have a diverse representation at the 26th Conference of the Parties (COP-26) in Glasgow where the key negotiations would open up with a debate on developing countries’ plight of bearing the brunt of environmental degradation caused by the developed countries, said Dr. Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI).
Dr. Suleri was addressing a pre-COP-26 briefing held here by SDPI.
Dr. Suleri said that this year, the conference is going to have an extraordinary representation of civil society, parliamentarians, think tanks, and the private sector from across the globe.
He went on to say that the developed countries during the moot would focus on emerging economies like China, India, Brazil, and South Africa to reduce their carbon emissions and provide a financing work plan for chipping in global climate change mitigation efforts.
Dr. Shafqat Munir from SDPI, while moderating the briefing highlighted the key features of the SDPI’s study on Green Recovery during COVID-19 in power and energy sectors.
Dr. Hina Aslam and Dr. Sajid Amin, authors of the study, underpinned the outcomes and recommendations of their research that suggested an ambitious opportunity to convincingly reduce emissions and debt burden through investments in renewable energy projects.
Earlier, SDPI held a discussion on ‘Green Financing and Economic Recovery of Pakistan’ in the backdrop of climate goals for COP-26.
Speaking on the occasion, Secretary Power Division, Ministry of Energy, Ali Raza Bhutta, asserted that the energy mix of Pakistan is very healthy as around 29% of electricity is coming through hydropower. Likewise, the contribution of solar, wind, and biogas is projected to increase significantly in the future.
Shah Jahan Mirza, Managing Director, Private Power, and Infrastructure Board (PPIB) informed the participants that the Government of Pakistan has shown a strong commitment towards increasing the share of renewable energy through HRE Policy 2019 which targets to increase the renewable energy share in power generation to 20% by 2025 and 30% by 2030.
Dr. Sardar Moazzam, Managing Director, National Energy Efficiency and Conservation Authority (NEECA) explained the role of energy efficiency and conservation in green recovery and said that it has been missing from the landscape of energy planning.
Faisal Sharif, Director, Project Appraisals, Private Power & Infrastructure Board, suggested that the green stimulus can accelerate the transition towards green and clean energy, simultaneously spurring green economic recovery and growth by creating millions of jobs and putting emissions into structural decline.
M Ali Kemal, Chief, SDGs, Planning Commission of Pakistan, emphasised the debt swaps and green financing mechanisms support green recovery from Covid-19.
Kashmala Kakakhel, the climate finance specialist, was of the view that there is a need to further address all the relevant SDGs of the country such as poverty as green recovery is not only about Net-Zero.
Hartmut Behrend, Coordinator, Pakistan-German Climate and Energy Initiative, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Dr Sajid Amin Javed from SDP and Dr Fareeha Armughan also shared their views with the participants, especially about green financing and climate finance mechanism.
Leaders of some of the world’s biggest financial firms say that the rush to transition to clean energy could have unintended consequences for the global economy.
GLASGOW — Big business finally seems to be taking the climate crisis seriously. After years spent lurking on the sidelines, the chief executives of the world’s largest banks, companies and investment firms this week took a spot at the center of the debate at COP26.
Banks, asset managers and insurers in recent days pledged to use trillions of dollars to achieve net-zero emissions targets as pension funds and other big investors move to divest trillions more from the fossil fuel industry.
Yet some leaders of the world’s biggest financial firms — including some who were part of pledges made at the climate summit in Glasgow — are warning that the rush to rapidly transition away from a carbon-intensive energy system could unleash unintended consequences that would jeopardize the world’s economic recovery in the near term.
While some of their concerns are so far largely speculative, they suggest that less investment in fossil fuel production could send energy prices soaring, and that divestment could make it harder to monitor dirty energy production.
Speaking at a conference in Saudi Arabia last week, Stephen A. Schwarzman, chief executive of the private equity firm Blackstone, said the growing number of institutional investors pledging to divest their holdings from fossil fuel companies was making it harder for oil and gas producers to finance production.
“If you try and raise money to drill holes, it’s almost impossible to get that money,” Mr. Schwarzman said, adding that an energy shortage could lead to “real unrest” around the world. It is a sentiment that has been echoed by other executives in recent weeks, as U.S. oil prices hit $85 a barrel, a seven-year high.
Jamie Dimon, the chief executive of JPMorgan Chase, said in an interview that the world should be transitioning to a decarbonized economy “right now.” But he cautioned that while less money was being invested in fossil fuels, therefore tightening the supply, it was important for banks to keep funding conventional energy production.
China’s buildup continues to this day. Just a few weeks ago, Contemporary Amperex Technology, China’s largest battery manufacturer, said it would invest up to $4.96 billion on a plant to recycle used E.V. batteries. That was on top of the company’s $297 million acquisition of Canada’s Millennial Lithium Corporation, which was announced in September.
Can the United States hope to ever catch up? In recent months, General Motors, Stellantis and Toyota have each announced plans to build massive battery factories in North America. Ford said it and its South Korean partner will build three U.S. battery plants by 2025 with enough capacity to equip one million E.V.s a year. But no one seems to know exactly how the battery supply chain will come together and where they will obtain each of the necessary precursors, like cobalt and manganese.
Vladimir Putin, the president of Russia, last month added his voice to a bullish chorus predicting $100-a-barrel oil — double the price at the start of the year. He may have been showing restraint: Some traders are betting on an unprecedented $200 a barrel by the end of 2022. The return of a frenzied oil market is conjuring up unwelcome memories of a global petroleum goliath with the power to influence Western geostrategy and roil societies everywhere.
Yet this is the old story. We now stand at the precipice of the age of batteries and electric vehicles, technologies likely to steamroll fossil-fuel companies and petro states. From a few thousand fully electric cars sold around the world in the late aughts, consumers are on track to buy four million of them this year.
So far, the United States appears to be little more than a spectator to this revolution. While its battery makers and automakers are poised to produce cutting-edge batteries and popular electric vehicles, they will rely almost entirely on a supply chain controlled by China. Over the past decade, China has built up most of the world’s capacity to process the metals that make lithium-ion batteries — the heart of the electric vehicle revolution — work. It is this capacity that puts China in the catbird seat in the race for the future while America falls farther and farther behind.
Following the financial crash of 2008, the United States and China, along with Japan, South Korea and other countries, began an undeclared race to create and reap the dividends of the E.V. industry, including associated businesses such as battery production. This led the United States and China to inject stout public funding into battery and E.V. start-ups and established companies, in hopes of kick-starting an economic recovery.
In the United States, initially buoyant public and political support for President Barack Obama’s strategy eroded within just a couple of years, following accusations of squandered public funds in a government-backed loan to Solyndra, a California solar panel company that fell victim to cheap Chinese imports.
In China, by contrast, state-backed companies have secured a reliable supply of the raw metals and elements behind E.V. batteries. In the last three and a half years alone, Chinese companies have been the biggest international buyers of additional lithium assets amid soaring prices for the metal.
By 2018, Chinese companies also owned half of the largest cobalt mines in the Democratic Republic of Congo, the source of most of the world’s supply of the metal. Government funding for China’s electric vehicle sector during the past decade amounted to more than $100 billion, according to a study by the Center for Strategic and International Studies.
Natural gas market overview
Natural gas is a major contributor to Pakistan’s primary energy mix, providing almost 50% of the total energy needs (see Figure 1). It is used extensively across a number of sectors—power, residential and commercial, industry, fertilizer, and transport (compressed natural gas [CNG]).
Domestic natural gas production comes primarily from mature nonassociated gas fields in the province of Sindh (see Figure 2). The country’s major gas fields include Sui, Uch, Qadirpur, Sawan, Zamzama, Badin, Bhit, Kandhkot, Mari, and Manzalai. Pakistan’s gas production has been largely flat since 2008, with production peaking at 4.23 Bcf/d in 2012, and eased to 4.01 Bcf/d in 2016 (see Figure 3).
Natural gas reserves have also fallen, from 0.85 Tcm (30.0 Tcf) to 0.50 Tcm (17.6 Tcf), declining by an average of 5% per year since 2005 (see Figure 3). Based on the current rate of production (4 Bcf/d), reserves are expected to last less than 20 years. New investments and exploration have been challenged by regulatory hurdles, insufficient gas prices, and security risks, particularly in the province of Balochistan.
Gas demand in Pakistan is spread across multiple sectors, but high regional imbalances exist. The Punjab region accounts for the most consumption but has the lowest share of production (see Figure 2). The power sector was the largest consumer at 33% of total demand, followed by the residential (21%), industrial (19%), and fertilizer (19%) sectors in fiscal year 2016 (see Figure 4).
The country has a well-developed gas transmission and distribution pipeline network. The network of more than 11,000 km of transmission lines and over 139,000 km of distribution lines belongs solely to two companies: Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC). Owing to the country’s large transmission and distribution gas grid, natural gas will remain a major part of the energy mix (see Figure 1).
Gas demand is Pakistan is highly supply constrained, with an unmet demand potential of 1.5–2.0 Bcf/d (see Figure 5). To supplement the gas shortages in various sectors of the economy, Pakistan has plans to ramp up LNG imports. The country’s first LNG import terminal developed by a JV between Engro Corporation and Royal Vopak of the Netherlands came online in March 2015.
The government awarded three tenders to Eni and Gunvor in 2016, two of which are tied to the second FSRU targeted to start up in 2017. Pakistan has plans for development of transnational gas pipelines— the TAPI and IPI pipelines—but both projects face geopolitical and technical challenges.
IHS Markit anticipates Pakistan’s LPG production from gas processing to remain stagnant owing to sluggish E&P activities and domestic gas shortages. Furthermore, LPG production from refineries is expected to increase modestly over the forecast period, as no significant Greenfield and brownfield capacity expansions are envisaged
Pakistan LNG Ltd has issued a tender for two cargoes to be delivered next month, the international news agency said.
Two suppliers, Eni SpA and Gunvor Group Ltd, recently informed Islamabad about their inability to deliver cargoes scheduled for March, Pakistan LNG Ltd told Bloomberg.
A global energy crunch has resulted in LNG spot prices surging to levels that are too high for cash-strapped nations like Pakistan. The South Asian nation purchased its most expensive LNG cargo ever in November after a similar cancellation, and has avoided additional purchases since then.
Pakistan is “carefully” analysing its gas shortage, and will purchase cargoes depending on the prices they receive, Pakistan LNG Ltd told the news agency. It’s looking for the cargoes to be delivered between March 2 and March 3 and from March 10 to March 11, it said. The offers are due on Feb 22.
Eni’s LNG deliveries to Pakistan were disrupted after its supplier defaulted on obligations for an unspecified reason, the Italian company told Bloomberg in an emailed statement. “Eni is evaluating all contractual remedies, including legal actions,” the company said by email.
Gunvor declined to comment, the Bloomberg report said.
Europe's campaign to quit Russian fuel plunges Pakistan into darkness ����⚡
EU's energy policy is designed to punish Moscow for the war in Ukraine. But it's also wreaking havoc thousands of miles away as Pakistan grapples with a gas shortage
Europe's campaign to quit Russian fuel is designed to punish Moscow for its invasion of Ukraine. It's also wreaking havoc thousands of miles away from the conflict, plunging Pakistan into darkness, undermining one regime and threatening the stability of the country's new leadership.
A decade ago, the world's fifth-most populous country took specific steps to insulate itself from the kinds of violent price spikes that are roiling the market today. It made a massive investment in liquified natural gas and signed long-term contracts with suppliers in Italy and Qatar. Now some of those suppliers have defaulted, though they continue to sell into the more lucrative European market, leaving Pakistan in exactly the position it tried so hard to avoid.
In order to avoid blackouts during the Eid holiday last month, the government paid nearly $100 million to procure a single LNG shipment from the spot market, a record for the cash-strapped nation. In the fiscal year ending July, the country's costs for LNG could top $5 billion, twice what they were a year ago. Even so, the government can't cushion the blow for its citizens: The International Monetary Fund is in talks to bail out the nation with a key condition that it cuts fuel and electricity subsidies.
Now parts of Pakistan are experiencing planned blackouts of more than 12 hours, limiting the effectiveness of air conditioning to offer relief during the ongoing heatwave. The previous prime minister continues to draw large crowds to rallies and protests, amplifying citizens' anger about inflation that's rising at 13.8%. Prime-time talk show hosts regularly discuss how Pakistan will get the fuel it needs, and how much it will have to pay.
Last week, the government announced a new raft of energy-saving measures. Civil servants were released from regular Saturday shifts, and the budget for security personnel was slashed 50%.
"I am acutely aware of the hardships people are facing," Prime Minister Shehbaz Sharif said in a tweet in April ahead of the Eid holiday. He ordered his government to resume purchasing expensive overseas natural gas shipments that same week. And earlier this month he warned that they don't have enough money to continue buying gas from overseas.
The supply crunch will go beyond blackouts. The government has redirected existing natural gas supplies to power plants, short-changing fertilizer makers that depend on the fuel as a feedstock. That move could threaten the next harvest, leading to even higher food costs next year. Cellphone towers are using backup generators to sustain service through the blackouts, but they too are running out of fuel.
There's little reprieve on the horizon. The cost of LNG has surged by more than 1,000% in the last two years, first on post-pandemic demand, then on the Russia invasion of Ukraine. Russia is Europe's biggest supplier of natural gas, and the threat of supply disruptions sent spot rates to a record in March.
"Europe is sucking LNG" from the world, said Steve Hill, executive vice president at Shell Plc, the world's top trader of the fuel. "But that means less LNG will go to developing markets."
Not long ago, Pakistan represented the future for the LNG industry. By the mid-2010s, demand for the fuel, gas cooled to 162 degrees Celsius so it can be shipped around the world via tanker, had plateaued in developed markets. But technological advancements had brought down the costs and construction times for import terminals, and new gas fields cut the prices of the fuel itself.
At the new, lower prices, poorer countries could finally consider the fuel. Suppliers set their sights on these new markets, and when Pakistan issued a tender for long-term LNG supplies, more than a dozen companies bid for its business.
In 2017, Pakistan selected Italy's Eni SpA and trading house Gunvor Group Ltd to supply the country with LNG into the next decade. At the time, the terms were considered good, and the prices were lower than a similar contract signed with Qatar the previous year.
Now, though, the two suppliers have canceled more than a dozen shipments scheduled for delivery from October 2021 through June 2022, coinciding with the surge in European gas prices.
Such defaults are almost unheard of in the LNG industry, said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis. Traders and industry insiders interviewed by Bloomberg couldn't remember the last time so many cargoes were scrapped without being directly related to a major outage at an export facility.
Eni and Gunvor have said they had to cancel because they're facing their own shortages and don't have the LNG to send to Pakistan. Typically when exporters face those kinds of challenges, they replace the deliveries by buying a shipment on the spot market, but Eni and Gunvor haven't done that.
Gunvor declined to comment for this story. Eni's supplier didn't meet their obligation, and was therefore forced to default on shipments to Pakistan, the Italian company said in an emailed statement, also noting that it did not take advantage or benefit from the cancellations and applied all contractual provisions to manage such disruptions.
Suppliers are usually loathe to cancel. It damages the business relationship, and it's often very, very expensive. Developed markets typically demand "failure to deliver" penalties of up to 100%. According to Valery Chow, an analyst at Wood Mackenzie Ltd., "it's very rare for LNG suppliers to renege on long-term contracts beyond force majeure events."
Pakistan's contracts called for a more modest 30% penalty for cancellation, most likely in exchange for lower prices overall. At this point, prices in the European spot market are high enough to more than offset those penalties. An LNG shipment for May delivery to Pakistan via a long-term contract would cost $12 per million British thermal units, according to Bloomberg calculations. For comparison, a May delivery spot cargoes to Europe were being traded at over $30. Eni and Gunvor have continued to meet their commitments to clients there.
The new prime minister, Shehbaz Sharif, has ordered the state-owned importer to procure the fuel at any cost to halt the crippling blackouts. It's also trying to negotiate new long-term LNG purchase agreements, though the terms will certainly be worse than they were six years ago. The government "will go for the most favorable deal," the Ministry of Energy said in a statement to Bloomberg News.
The expense is creating its own knock-on effects. The country is now "at high risk of default," the Institute for Energy Economics and Financial Analysis said in a note published last month. Moody's Investors Service downgraded its outlook on Pakistan to negative from stable, citing financial concerns that includes a delay in an IMF bailout.
Pakistan's reliance on LNG and its suppliers' willingness to default has worsened the energy crisis in the country. And Pakistan isn't alone. Emerging nations around the world are struggling to meet the needs of their citizens within the constraints of their budgets.
It's also driven them to buy energy from Russia, dampening the effects of Europe's efforts to cut them off.
In the face of financial crisis and massive oil shortages, Sri Lanka has turned to Russia to procure fuel. Pakistan is also exploring long-term contracts with Russian LNG suppliers. India has already boosted purchases from Russia, a trend that may accelerate. In response to the blistering summer heat, the government has ordered power plants to buy fuel from overseas.
Pakistan's woes also bode poorly for other cash-strapped importers, including Bangladesh and Myanmar. The state-owned utility in Bangladesh recently procured the nation's most expensive LNG shipments from the spot market to keep the grids running and industries stocked, while Myanmar has halted imports for the last year due to the run-up in prices.
Europe's massive shift may prompt other countries, like India and Ghana, to rethink long-held plans to increase dependence on the super-chilled fuel. Governments would instead double down on dirtier-burning coal or oil, frustrating efforts to reach ambitious pollution-reduction targets this decade.
In a recent note, Fereidun Fesharaki, chairman of industry consultant FGE, sharply criticized European energy policies for creating "higher prices, economic scarcity and economic misery" around the world. "It is ok for Europe to decide what they want within their borders," he wrote. "But it is unfair and unreasonable to export the mess abroad, especially to the developing world."
For the U.S., a stronger dollar means cheaper imports, a tailwind for efforts to contain inflation, and record relative purchasing power for Americans. But the rest of the world is straining under the dollar’s rise.
“I think it’s early days yet,” said Raghuram Rajan, a finance professor at the University of Chicago’s Booth School of Business. When he served as governor of the Reserve Bank of India last decade, he complained loudly about how Fed policy and a strong dollar hit the rest of the world. “We’re going to be in a high-rates regime for some time. The fragilities will build up.”
The U.S. dollar is experiencing a once-in-a-generation rally, a surge that threatens to exacerbate a slowdown in growth and amplify inflation headaches for global central banks.
The dollar’s role as the primary currency used in global trade and finance means its fluctuations have widespread impacts. The currency’s strength is being felt in the fuel and food shortages in Sri Lanka, in Europe’s record inflation and in Japan’s exploding trade deficit.
This week, investors are closely watching the outcome of the Federal Reserve’s policy meeting for clues about the dollar’s trajectory. The U.S. central bank is expected Wednesday to raise interest rates by at least 0.75 percentage point as it fights inflation—likely fueling further gains in the greenback.
In a worrying sign, attempts from policy makers in China, Japan and Europe to defend their currencies are largely failing in the face of the dollar’s unrelenting rise.
Last week, the dollar steamrolled through a key level against the Chinese yuan, with one dollar buying more than 7 yuan for the first time since 2020. Japanese officials, who had previously stood aside as the yen lost one-fifth of its value this year, began to fret publicly that markets were going too far.
The ICE U.S. Dollar Index, which measures the currency against a basket of its biggest trading partners, has risen more than 14% in 2022, on track for its best year since the index’s launch in 1985. The euro, Japanese yen and British pound have fallen to multidecade lows against the greenback. Emerging-market currencies have been battered: The Egyptian pound has fallen 18%, the Hungarian forint is down 20% and the South African rand has lost 9.4%.
The dollar’s rise this year is being fueled by the Fed’s aggressive interest-rate increases, which have encouraged global investors to pull money out of other markets to invest in higher-yielding U.S. assets. Recent economic data suggest that U.S. inflation remains stubbornly high, strengthening the case for more Fed rate increases and an even stronger dollar.
Dismal economic prospects for the rest of the world are also boosting the greenback. Europe is on the front lines of an economic war with Russia. China is facing its biggest slowdown in years as a multidecade property boom unravels.
For the U.S., a stronger dollar means cheaper imports, a tailwind for efforts to contain inflation, and record relative purchasing power for Americans. But the rest of the world is straining under the dollar’s rise.
“I think it’s early days yet,” said Raghuram Rajan, a finance professor at the University of Chicago’s Booth School of Business. When he served as governor of the Reserve Bank of India last decade, he complained loudly about how Fed policy and a strong dollar hit the rest of the world. “We’re going to be in a high-rates regime for some time. The fragilities will build up.”
On Thursday, the World Bank warned that the global economy was heading toward recession and “a string of financial crises in emerging market and developing economies that would do them lasting harm.”
The stark message adds to concerns that financial pressures are widening for emerging markets outside of well-known weak links such as Sri Lanka and Pakistan that have already sought help from the International Monetary Fund. Serbia became the latest to open talks with the IMF last week.
“Many countries have not been through a cycle of much higher interest rates since the 1990s. There’s a lot of debt out there augmented by the borrowing in the pandemic,” said Mr. Rajan. Stress in emerging markets will widen, he added. “It’s not going to be contained.”
A stronger dollar makes the debts that emerging-market governments and companies have taken out in U.S. dollars more expensive to pay back. Emerging-market governments have $83 billion in U.S. dollar debt coming due by the end of next year, according to data from the Institute of International Finance that covers 32 countries.
Europe needs "immediate action" to avoid a natural gas shortage in 2023, says the
⚠️ Europe faces a 30bcm shortfall next summer in gas needed to fuel its economy AND sufficiently refill storage
🇷🇺 Next year's challenge: lower Russian supply, higher Chinese LNG demand
Will enhance overall hydroelectric power capacity to 20,684MW
The Water and Power Development Authority (Wapda) is pursuing six hydroelectric power projects that will add 11,241 megawatts of environment-friendly electricity to the existing hydel generation capacity of 9,443MW in the coming years.
Talking to APP, Wapda officials said that at present total installed capacity of 24 hydel power stations of Wapda stood at 9,443MW and the addition of 11,241MW would enhance it to 20,684MW.
The existing hydel power stations included Tarbela, Mangla, Ghazi Barotha, Neelum-Jhelum and Warsak, which contributed about 25% to the total system capacity of 36,166MW from all sources.
The net electricity output of those power stations was about 32,000 gigawatt-hours (GWh) per annum.
Sharing details of the upcoming hydel power projects, the officials said that the Dasu Hydropower Project would contribute 4,320MW, Tarbela 5th Extension 1,510MW, Mohmand Dam 800MW, Diamer-Bhasha Dam 4,500MW, Keyal Khwar Power Project 128MW and Kurram Tangi 83.4MW to the national grid system.
Meanwhile, Pakistan Atomic Energy Commission has developed several nuclear power projects to support economic uplift in Pakistan.
Total installed capacity of the nuclear power plants connected with the national grid was 3,530MW, which included 1,330MW Chashma nuclear power project and 2,200MW Karachi nuclear power project.
Around 90 kilometres from Karachi, Jhimpir is the heartland of the country’s largest ‘wind corridor’, which has the potential to produce 11,000 megawatts (MW) of clean energy.
Among early investors was the China Three Gorges Corporation, a Chinese state-owned power company, operating under an investment holding company, China Three Gorges South Asia Investment Limited.
The company has funded and built three wind projects with a combined capacity of nearly 150 MW. The first of these began construction in 2012.
The latter two projects, completed in 2018, were funded under the China Pakistan Economic Corridor (CPEC), an integral part of Beijing’s flagship multibillion-dollar Belt and Road Initiative (BRI).
In an official statement following Prime Minister Shehbaz Sharif’s visit to China on Nov 1-2, the premier reaffirmed the importance of CPEC to Pakistan’s development.
For the time being, renewables represent only a small portion of Pakistan’s power generation mix. Of a total of 43,775 MW, installed capacity for wind and solar represent around 4.2 per cent (1,831 MW) and 1.4pc (630 MW) respectively, according to the National Electric Power Regulatory Authority’s State of Industry 2022 report.
In terms of CPEC, the November 2022 joint statement from China and Pakistan listed oil and gas as among the “priority areas of CPEC cooperation”.
But a recent shift in the direction of Chinese investment may be hugely significant for the country’s energy future, and the climate.
The shift from coal?
In the years before the launch of CPEC in 2015, Pakistan was desperate to end its long, crippling power shortages.
The country was keen to develop its untapped indigenous coal in Thar desert, but multilateral financial institutions were not interested. Along came China in 2013, with an offer to lend massive amounts for infrastructure development and coal mining.
Details of the financing deals are a closely guarded secret, but multiple Chinese-funded coal projects followed. Eight completed or under-construction coal projects are listed as part of CPEC, totalling 6,900 MW, which include four on Thar coal.
Then in 2021, after growing pressure on China — currently the world’s biggest polluter — to curb its greenhouse gas emissions, Beijing announced it would not build new coal-fired power plants overseas, and would increase support for low-carbon energy.
In December 2020, Pakistan announced that it would not build any new power projects that depend on imported coal, and pledged that by 2030, 60pc of its energy will come from clean and renewable sources.
The government has since scrapped a number of potential coal projects, including a 300 MW plant at the Chinese-controlled Gwadar sea port in Balochistan. Reportedly, it is to be replaced by a solar plant.
As Beijing tries to rebrand the BRI as an eco-friendly initiative, Chinese officials have promoted the idea of a ‘green’ CPEC. But Hina Aslam, research fellow at the Sustainable Development Policy Institute (SDPI), a think tank in Islamabad, points out that “in the energy sector, it has meant a greater focus on hydro rather than wind and solar”.
Besides wind energy in Jhimpir, China Three Gorges Corporation is investing heavily in what it is globally known for: hydropower (the company is behind the Three Gorges Dam in China, the world’s biggest power station).
In June 2022, it completed a 720 MW project in Karot in northern side of the country.
Work is advancing on a 1,124 MW hydropower plant near Muzaffarabad, and a third 640 MW project has recently been approved in Mahl. The same company is behind both projects.
But there are huge challenges facing Pakistan’s shift to renewable energy. “A lack of consistency in policy has been the biggest issue,” says Noman Sohail, senior business manager at China Three Gorges South Asia Investment Ltd.
“Arranging lenders and finance for renewable projects is not a problem. But it’s disorienting when policies are reversed, tariffs renegotiated and unpaid capacity payments allowed to pile up.”
Growing popularity of solar
There is one form of renewable energy in particular that presents immense potential for Pakistan, but which has seen little investment to date: solar. A World Bank study in 2020 urged Pakistan to urgently expand solar and wind “to at least 30 per cent of electricity generation capacity by 2030, equivalent to around 24,000 MW”.
As of 2022, the proportion is 5.6pc according to the National Electric Power Regulatory Authority’s State of Industry 2022 report.
Pakistan’s slow take-up of solar energy is evident from the fact that of the 21 energy projects completed or in development under CPEC, only one is solar: the 1,000 MW Quaid-i-Azam Solar Park in Cholistan Desert, Punjab, built by Chinese company Zonergy.
This project, promoted as one of the world’s biggest solar parks, was meant to be completed by 2017. But only 40pc of this capacity has been implemented so far.
Suleman Rehman, chief executive of Burj Capital, a Dubai-based investment company focused on renewable energy in Pakistan, says that regardless of the government’s apparent lack of focus, the demand for affordable solar power is growing exponentially.
“The competition is getting intense. More and more local players are coming up every month. Installing a 4MW solar project is no longer a big deal for us,” says Rehman.
According to Rehman, the private sector is not waiting for policymakers to facilitate the energy transition. Those who can are turning to the solar option. That explains the recent proliferation of rooftop photovoltaic panels in big cities, as well as in off-grid villages across the country.
The solar future
Costly fuel imports have already had a crippling effect on Pakistan’s economy. This year, the volatility of global energy prices, exacerbated by Russia’s invasion of Ukraine, took a damaging toll on Pakistan’s foreign exchange reserves. The country was on the verge of a default before the International Monetary Fund agreed to step in to help it stay afloat.
In an attempt to reduce dependence on imported fuel, on 1 September 2022 Prime Minister Shahbaz Sharif announced the rapid deployment of 10,000 MW of solar power in the country. But details of how this will be achieved, and by when, are sketchy.
The plan reportedly involves transitioning all public sector buildings to solar power. The proposal also encourages power plants running on coal, oil and gas to partially shift to solar power.
China will have a crucial role to play if this shift to solar is to happen, says Rehman, though it may come in a different form than the mega-projects seen under CPEC.
“China will still have a big role because they are producing the cheapest [solar] equipment worldwide. But I really hope the government won’t put this under CPEC because that would put local players at a disadvantage,” says Rehman.
Until now, renewable energy sources make up a very minor fraction of Pakistan’s overall power generation mix. According to a recent report of the National Electric Power Regulatovry Authority, the installed capacity for wind and solar accounts for roughly 4.2% (1,831 MW) and 1.4% (630 MW) of a total of 43,775 MW, respectively.
China is already the biggest investor in green energy in Pakistan. Currently, out of the $144 million in foreign investment in solar PV plants in Pakistan, $125 million is from China, accounting for nearly 87% of the total.
Thanks to Chinese investments, a few weeks ago Federal Power Minister Khurram Dastgir Khan inaugurated two new wind energy projects in Jhimpir, Thatta District, Sindh, with an aim to produce cheaper and clean electricity through indigenous energy sources. Wind projects in this region have been one of several renewable energy projects to have received Chinese investment in recent years. Around 90 kilometers from Karachi, Jhimpir is the heartland of the country’s largest ‘Wind corridor’, which has the potential to produce 11,000 megawatts (MW) of energy from green resources.
A shortage of natural gas, which accounts for over a third of the country's power output, plunged large areas into hours of darkness last year. A surge in global prices of liquefied natural gas (LNG) after Russia's invasion of Ukraine and an onerous economic crisis had made LNG unaffordable for Pakistan.
"LNG is no longer part of the long-term plan," Pakistan Energy Minister Khurram Dastgir Khan told Reuters, adding that the country plans to increase domestic coal-fired power capacity to 10 gigawatts (GW) in the medium-term, from 2.31 GW currently.
Pakistan's plan to switch to coal to provide its citizens reliable electricity underscores challenges in drafting effective decarbonisation strategies, at a time when some developing countries are struggling to keep lights on.
Despite power demand increasing in 2022, Pakistan's annual LNG imports fell to the lowest levels in five years as European buyers elbowed out price-sensitive consumers.
"We have some of the world's most efficient regasified LNG-based power plants. But we don't have the gas to run them," Dastgir said in an interview.
The South Asian nation, which is battling a wrenching economic crisis and is in dire need of funds, is seeking to reduce the value of its fuel imports and protect itself from geopolitical shocks, he said.
Pakistan's foreign exchange reserves held by the central bank have fallen to $2.9 billion, barely enough to cover three weeks of imports.
"It's this question of not just being able to generate energy cheaply, but also with domestic sources, that is very important," Dastgir said.
The Shanghai Electric (601727.SS) Thar plant, a 1.32 GW capacity plant that runs on domestic coal and is funded under the China-Pakistan Economic Corridor (CPEC), started producing power last week. The CPEC is a part of Beijing's global Belt and Road Initiative.
In addition to the coal-fired plants, Pakistan also plans to boost its solar, hydro and nuclear power fleet, Dastgir said, without elaborating.
If the proposed plants are constructed, it could also widen the gap between Pakistan's power demand and installed power generation capacity, potentially forcing the country to idle plants.
The maximum power demand met by Pakistan during the year ended June 2022 was 28.25 GW, more than 35% lower than power generation capacity of 43.77 GW.
It was not immediately clear how Pakistan will finance the proposed coal fleet, but Dastgir said setting up new plants will depend on "investor interest," which he expects to increase when newly commissioned coal-fired plants are proved viable.
Financial institutions in China and Japan, which are among the biggest financiers of coal units in developing countries, have been backing out of funding fossil-fuel projects in recent years amid pressure from activists and Western governments.