Meeting growing energy demand, moving to a cleaner energy mix

As a large developing country, Pakistan faces a wide range of problems, especially related to overcoming poverty and improving the health, education, and employment opportunities for low-income groups. The energy sector is critical to progress in addressing these problems, but inadequate investment, unreliable energy supplies, weak governance, and poor fiscal management of the sector have been major constraints. The problem of creating a viable energy sector that can mobilize the needed investments and support sustainable economic growth is a fundamental challenge. This section examines the position of Pakistan with respect to five common challenges affecting power-sector transformation, as identified in the initial strategy report, namely: (1) meeting growing energy demands and moving to a cleaner energy mix; (2) improving governance and transparency; (3) increasing affordability and access; (4) addressing environmental degradation and climate change; and (5) achieving power-sector financial viability.
Meeting growing energy demand and moving to a cleaner energy mix
Pakistan’s economy over the past five years has been growing at more than 4 percent and reached 5.2 percent in 2018. Although primary energy consumption in 2018 grew by 5 percent, primary energy growth has historically lagged behind economic growth. Between 2007 and 2017, the average rate of primary energy growth was 2.7 percent, compared with a 3.8 percent average annual increase in GDP.
Pakistan depends principally on oil and gas for over 70 percent of its primary energy and has become increasingly dependent on oil and gas imports. Although Pakistan has some domestic crude oil production (about 90 thousand barrels per day in 2018), this only accounts for 18 percent of total oil consumption. The growing oil-import bill puts great pressure on budgets and reserves. The International Monetary Fund (IMF) estimates Pakistan’s 2017-18 oil imports at US$14.6 billion, or about a quarter of total estimated current account imports, and 2019-20 imports are expected to be at least US$17 billion. The depreciation of the Pakistan rupee in 2018 added an additional burden to the import bill. Pakistan has had to turn to gas imports as domestic gas consumption has grown (by 7 percent in 2018) and outpaced domestic production. Pakistan’s indigenous gas production has stagnated at about 34 billion cubic meters (bcm) in 2018, accounting for 80 percent of domestic consumption.
Expansion of electricity generation to meet rising demand and reduce the endemic power blackouts and outages has been a high priority of the Pakistan government. Installed generation capacity has greatly expanded from 23,337 megawatts (MW) in 2014 to 33,836 MW in February 2019, and electricity generation increased by 11 percent from 2017 to 2018. Pakistan continues to have a gap, however, of several thousand megawatts in the non-summer months when hydropower output is lower and electricity demand is high
Although natural gas-fired generation provides the largest share of electricity output, Pakistan has significant hydropower production, some nuclear power, and increasing renewable energy generation. We examine more closely the transformation and diversification challenge in the strategic priorities section. — ERMD