ISLAMABAD: The government plans to embark on a 10-year transition strategy to shift from gas to electricity in commercial, industrial and residential sectors, and push energy-efficient buildings under a Rs45 billion energy efficiency and conservation project, which envisages energy savings of over Rs500bn a year.

The project was formally cleared by the Central Development Working Party a few days ago for negotiations with the World Bank for a $150 million loan, including a $15m technical grant for capacity-building of the National Energy Efficiency and Conservation Authority. However, it was observed that a 10-year transition period was too long and should be minimised.

The project’s sponsors — the Ministry of Science and Technology and the Energy Efficiency Authority — have reported to the Planning Commission that Pakistan’s current energy-saving potential was around 10m to 12m tonnes of oil equivalent — a unit of energy defined as the amount of energy released by burning one tonne of crude oil.

The country’s current primary energy supply stands at about 95m tonnes of oil equivalent and is projected to go beyond 115m in 2025 at an annual growth rate of 5.8pc, as its per-capita energy consumption is expected to increase from 405 kilograms of oil equivalent to 469kg during the period.

Plans 10-year transition strategy under a project envisaging annual savings of over Rs500bn

High energy intensity combined with the high and increasing cost of energy in Pakistan has serious implications for disposable incomes and for economic competitiveness.

Energy costs already represent over one-fourth of average household expenditure, and with ongoing tariff reform measures required to reduce the circular debt issue, this percentage would rise further.

For industry, the combination of costly and inefficient use of energy puts Pakistan at a significant competitive disadvantage, especially in internationally exposed sectors of the economy.

The project aims to reduce fossil fuel imports, leading to foreign exchange savings and improving the country’s fiscal situation, cut household expenditures, especially on heating and cooling needs, and foster a green and efficient economy, thus supporting Pakistan’s objective to reach upper-middle-income status by 2047 — when the country turns 100.

The project also aims to help meet nationally determined contributions goals by reducing 20pc of the total projected greenhouse gas emissions by 2030. The energy sector would be the main focus for emission reduction as it contributes 46pc of the total emissions.

According to a study conducted by the World Bank for the project, a 25pc reduction in building energy use across all sectors could translate into energy savings of 16 gigawatt-hours, providing cost savings of about Rs291bn per year.

The efficiency gains by shifting gas consumption to electricity could go significantly beyond Rs250bn per year — another component of the multi-purpose project.

Most buildings in Pakistan were not constructed with high energy-efficiency standards, resulting in significant unnecessary energy consumption and costs for consumers.

Besides, in some parts of the country, space heating is required in winter along with inefficient heating of water, which is another drain on depleting domestic gas supplies.

In summer, inefficient buildings lead to higher cooling demand, particularly during peak hours, putting a strain on the national grid and requiring the use of expensive and polluting peaking plants.

The project will involve energy audits and benchmarking of all large federally owned buildings, demonstration of deep energy efficiency retrofits of several ‘showcase’ buildings and development of standardised materials and specifications to support the retrofitting of buildings in the commercial, public and residential sectors.

The project would help the development of building design templates that can be freely provided to housing authorities, relevant government departments and businesses to enable them to specify and construct new energy-efficient buildings as per new “green building codes”.

The building sector consumes 26pc of the total gas consumption in the country, mostly for space and water heating in a highly inefficient manner at the most subsidised rates in the absence of any regulations and standards for appliances.

Strangely, access to the piped gas network is 24pc, whereas access to electricity is more than 73pc. On top of that, with gas shortages every winter, rising gas prices and the country’s increasing reliance on imported liquefied natural gas, an energy efficiency initiative becomes more critical.

The National Energy Efficiency and Conservation Authority has estimated that savings of 10-12pc in winter and 20-25pc in summer utility bills can be achieved by using inverter air conditioners.

In winter, around 46 million standard cubic feet per day of gas would be saved by switching from gas heaters to inverter ACs.

This component will therefore support a gradual shift from gas to electricity to meet heating requirements in the targeted sectors.

This would be carried out in parallel with changes to building designs and codes to ensure improving the energy efficiency of buildings and delivering a coordinated approach that considers both the thermal insulation of buildings and also the efficiency of heat and cooling services provided within them.

Based on current analysis and ongoing studies, the project will involve launching a trade-in scheme for households and businesses to voluntarily replace their inefficient gas geysers or boilers and space heaters with electrically powered alternatives.

This will be based on heat pump technology and replacement of inefficient heating technologies and the upgradation of processes, in particular those that promote a shift from gas to electricity in industrial sectors based on a revolving loan fund to also provide credit lines to households and businesses.

Published in Dawn, April 10th, 2023