Pakistan’s energy problems are not new but have been exacerbated manifold by the Russia-Ukraine war and the global supply crisis. The country’s high dependence on imported fuels has exposed it to energy insecurity, including price shocks and supply disruptions, and sustained exorbitantly high energy costs.
We are heavily dependent on fossil fuels (residual fuel oil, liquefied natural gas and coal), which make up 86% of Pakistan’s primary commercial energy supply, according to the country’s 2021 energy yearbook. Pakistan’s fuel import bill surged to $23 billion in the 2021-’22 financial year, a 105% increase from the previous financial year.
Pakistan’s energy intensity (the energy required to produce one US dollar of GDP, or Gross Domestic Product) was 4.6 megajoules (MJ) per dollar in 2018, higher than that of other countries in the region or elsewhere. This inefficiency worsens the country’s dependence on imported fuel because it increases the demand for energy.
Data in the State of Industry reports of the National Electric Power Regulatory Authority shows that homes consume 50% of the total electricity delivered. This demand is largely driven by cooling and lighting.
The projected increase in average temperatures in Pakistan, combined with poor levels of building energy efficiency, will continue to put pressure on energy demand, which is estimated to increase from 106 terawatt-hour (TWh) in 2020 to 234 TWh in 2030 – a 121% increase – according to an industrial decarbonisation report that is due to be published by the World Bank.
Energy efficiency neglected
Energy efficiency and conservation have been neglected in Pakistan for decades. All governments have focused on adding generation capacity rather than reducing the demand for energy demand, even though demand-side measures cost far less and can give quick wins.
The first national energy efficiency policy was notified in 2006 but was ineffective in delivering any results. The energy efficiency authority Enercon was established in 1988. Since then, it has been transferred from one ministry to another five times. The situation did not improve after it was renamed the National Energy Efficiency and Conservation Authority after the promulgation of the NEECA Act in 2016.
In the World Bank’s Regulatory Indicators for Sustainable Energy ranking last year, Pakistan scored 28 out of 100 in energy efficiency. Our policies, regulations and financing mechanisms lag far behind other countries.
Huge scope
Energy efficiency and conservation can provide highly impactful and cost-effective ways for the government to quickly respond to the energy crisis. Given the high energy intensity of Pakistan’s economy and the nascent energy efficiency market, there is tremendous scope for demand-side improvement.
The National Energy Efficiency and Conservation Authority should fast-track implementation of minimum energy performance standards for appliances such as motors, lighting, air conditioners, refrigerators, and water and space heaters which could bring substantial cost savings for households.
It should also work with the relevant authorities to amend the bylaws of development authorities, mandating the inclusion of building energy efficiency in new construction. A combination of passive (building orientation, green roofs, insulation) and active measures (energy-efficient heating and cooling systems) can reduce the energy needs of these buildings.
It will be important to show the value proposition of energy efficiency to scale this up and mobilise private sector investment. The government can set up a super-ESCO – a publicly owned but commercially operated energy servicing company, or ESCO.
The super-ESCO can design, implement, finance and manage energy efficiency projects especially in the public sector. It can also play a role in facilitating financing for large commercial and industrial consumers. There are examples of super-ESCOs from other countries, including the Energy Efficiency Services Limited in India, Tarshid in Saudi Arabia, and Etihad in the United Arab Emirates.
It will be important to target quick wins such as replacing lights, fans and streetlights which can give projected energy savings of 4,750 GWh, equivalent to 95 billion Pakistani rupees ($431 million) in reduced electricity bills and 142 billion Pakistani rupees ($647 million) in fuel cost savings annually, according to our calculations.
The power regulator determined a tariff increase of Rs 7.9/kWh for the 2023 financial year, which the government decided to implement in three phases: Rs 3.5/kWh in July, Rs 3.5/kWh in August and Rs 0.91/kWh in October.
Given that the previous benefit for those who use little electricity has been removed for non-protected consumers, several households will have a 150% increase in electricity bills. Non-protected consumers have been defined as those who used over 200 units of electricity in the last six months.
Most low-income households only have lights and fans at home. These are energy inefficient as people are still using incandescent bulbs and inefficient fans. Replacing incandescent light bulbs with LEDs can save 80% energy while a 3-star (Pakistan Energy Label) fan consumes at least 50% less power than an inefficient fan.
The government should roll out a lights and fans replacement programme through the super-ESCO – either at federal or provincial level. This can be done quickly through public procurement. For other household appliances such as electric motors and water heaters an on-bill financing scheme can be used where consumers can pay for these appliances through monthly instalments in the electricity bill. This on-bill financing mechanism can also be used for financing solar energy generation at the consumer level.
The government must launch a national energy conservation campaign encouraging everyone to do their bit in alleviating the energy crisis. The campaign should emphasise no-cost measures such as setting the air-conditioner temperature at 26 degrees Celsius especially in malls, hotels, and offices; using natural lighting; unplugging IT equipment when not in use; and wearing weather-appropriate clothes to reduce the need for cooling or heating. There are examples from countries such as Spain.
The current energy crisis, because of its impact on macroeconomic stability, is a national emergency and everyone has a role to play in defusing the situation. The best way in which millions of consumers can play their role is through energy efficiency.
Saadia Qayyum is an energy specialist at the World Bank with 10 years of experience in Pakistan’s energy sector. She works on power sector reforms, energy efficiency, access and renewable energy at the World Bank. Prior to joining the World Bank, Saadia was chief energy economist in the government of Punjab.
This article was first published on The Third Pole.