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For a net-zero future
ENERGY has become a critical national security issue for Pakistan. The present policy prescriptions have brought us to a dead-end street. It has not only become hard for us to extricate ourselves from them, but they are also fast limiting our options to harness alternative energy.
Solar and wind energy are cleaner, cheaper, and much faster to install and operationalise. Energy sector policymakers are not putting their faith in the full potential of renewable energy. RE promises to help us meet our international climate commitments, get clean air to breathe, and reduce the cost of living while reducing the cost of doing business that is necessary to turn around the economy relatively faster, without further suppressing the energy demand.
Pakistan’s projected energy demand has already shrunk. This is attributed to higher tariffs and tepid industrial activity. The most fundamental concern in the energy sector is the per unit cost of electricity production. At 83 per cent net generation cost, including capacity payments, it is probably one of the highest anywhere in the world.
The IMF has not shown any interest in domestic political compulsions, the need for climate-smart development, or economic turnaround fuelled by cheaper energy, let alone energy justice — a policy commitment to clean, reliable and affordable energy. The IMF’s focus is only on cost recovery by reducing subsidies. Both the IMF and Pakistan are thinking in silos and not taking about RE’s role in this conundrum.
The government is apprehensive that the continued solarisation of rooftops will wean away a growing number of customers, which will further increase energy costs for the poor. Ironically, cost recovery is coming mostly from Karachi and certain areas of Punjab, where rooftop solarisation is the heaviest.
Instead of bringing equity into the equation and facilitating the rural and urban poor in also benefiting from solar technology, the government is seeking to unroll the momentum for home solar units. The decision to discourage consumers and small businesses from HSUs will be counterproductive. Let’s see how the world around us is addressing the issue.
Regional trends
The energy mix in the region is fast changing. In Bangladesh, for example, almost five million households have already been supported to transition to HSUs, impacting nearly 12pc of the entire population by bringing electricity services to about 20m people. The intervention has helped reduce dependency on subsidies and strengthen financial sustainability, and caused a significant reduction in GHG emissions. It is estimated that between 2003 and 2018, approximately 9.6 million tonnes of CO2 equivalent were reduced, that is roughly equal to carbon emissions from 2m cars.
Pakistan must enable low-income groups to benefit from the solar revolution.
India, likewise, has relied on RE to propel its economic growth rate. Its solar capacity has surged from near zero in 2013 to 63.15 GW in 2022. Compared to Pakistan’s one or two languishing solar parks, India is developing 51 solar parks with a total capacity of 37.74 GW. The target is 500 GW of installed capacity from non-fossil fuel sources by 2030, while aiming to generate 75pc of its electricity from RE by 2050.
While doing this, India has reduced production costs, attracted international investments, undertaken domestic manufacturing, and prepositioned itself for the marketplace of long-life batteries. This is made possible by policies supporting financial incentives, tax advantages, subsidies for solar power generation, and net-metering regulations to foster the industry’s expansion.
Several start-ups have been encouraged to work in urban poor neighbourhoods in Delhi, Kolkata, and Mumbai to offer HSU or mini-grid solutions. Some have been contracted to develop mobile apps for generating and collecting electricity bills rather than relying on electricity transmission companies.
Off-grid solutions
Instead of rolling back a solarisation policy that has just begun to deliver, the enabling environment that was given to the urban middle class should also be provided to lower-income groups in rural and urban settings. Off-grid and mini-grid solutions are necessary to augment the energy demand for economic growth.
A vast majority of energy users are at the bottom of the pyramid, with cruelly suppressed demand. Creating policy space and financial instruments for them can help create local jobs, public-private partnerships and SMEs, not to mention reliable and clean energy. The lost revenue can be recovered by shifting the energy sector’s untargeted subsidies.
A regulatory space was created in 2021 by introducing regulations for 5 MW mini-grids allowing citizens to produce, distribute, and collect revenue. The government seems to have backtracked from these regulations, instead of using them to attract local investors. On the ground, these have not been operationalised, nor have the electricity distribution companies been streamlined or privatised.
Just transition
Launched at the climate summit in Glasgow, the Just Energy Transition Partnership (JETP) has emerged as an important vehicle for energy transition away from fossil fuels. The Energy Transition Council, a mechanism of COP26, is committed to supporting energy transition in 11 emerging economies, including Pakistan. The partnership involves a combination of public and private funding.
As of now, the agreements signed include grants, loans, and investments with South Africa ($8.5 billion), Indonesia ($20bn), Vietnam ($15.5bn), and Senegal ($2.7bn). The last one will help increase Senegal’s installed RE electricity capacity to 40pc by 2030. India is currently negotiating a package of about $100bn, but does not wish to commit to phasing out coal and wants funds in the form of grants, not loans.
Pakistan has thus far not systematically engaged with the JETP. It has repeatedly missed ministerial meetings, but last month it attended the ninth meeting, expressing an interest in engaging with JETP. If serious, between now and COP29 in Baku, where the next JETP meeting will take place, Pakistan will need to develop its priorities and set the chessboard for balancing energy agreements under various umbrellas, including CPEC.
In all, Pakistan needs to utilise RE to increase and meet its energy demand, and provide a level playing field to low-income groups so that they can benefit from the solar revolution by promoting off-grid and mini-grid solutions. Net-metering is, after all, an important building block for our net-zero future.
The writer is an Islamabad-based climate change and sustainable development expert.
Published in Dawn, June 6th, 2024
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