An Electricity Protection Racket Makes Pakistan Opt Out

Clean power can provide the solution if the government would only accept it.

Bloomberg
Published22 Aug 2024, 01:47 AM IST
An Electricity Protection Racket Makes Pakistan Opt Out
An Electricity Protection Racket Makes Pakistan Opt Out

(Bloomberg Opinion) -- Anyone running a protection racket knows the rule: Squeeze your marks too hard, and they’ll end up breaking. That’s what appears to be happening in Pakistan right now.

For years, the country has been rolling from electricity crisis to electricity crisis. A decade ago, failure to foresee the precipitous decline of domestic gas fields caused widespread power cuts. From 2013, the government of former Prime Minister Nawaz Sharif built a fleet of Chinese-financed coal plants to fix the problem. The cost of all that, plus the imported coal and liquefied natural gas to fuel all those fossil turbines, helped send the rupee tumbling and forced a round of bailouts from the International Monetary Fund.

Over the past year, the government of Shehbaz Sharif — Nawaz’s brother and the current prime minister — has been jacking up power prices in an attempt to mend the yawning budget hole. That’s added further pain to a struggling population. With tariffs rising 155% since 2021, many households are now spending more on their electricity bills than rent, Bloomberg News reported recently. Protests against the price rises last month halted a major road into the capital. On Sunday, Maryam Sharif — Nawaz’s daughter and chief minister of Punjab province, home to half of Pakistan’s population — announced a 45 billion rupee ($162 million) subsidy program to soften the sticker shock.

What all politicians have failed to do is give Pakistan the affordable and clean electricity system that its 240 million people need if they’re ever to close the widening economic gap with other emerging economies. Faced with extortionate costs for a barely functioning power grid, households and businesses have started to opt out. Clean power has been the main beneficiary.

A recent study by BloombergNEF analyst Jenny Chase illustrates the extraordinary scale of this off-the-books boom. Last year, $1.45 billion in solar panels were exported from China to Pakistan. That’s enough to buy about 6 gigawatts of modules, sufficient to provide about 7% of Pakistan’s electricity. Roughly the same amount was imported in the first six months of this year alone. With the drop in cell prices over the past year, that now represents something closer to 13 GW. 

Separate evidence from machine-learning processing of satellite imagery suggests huge amounts of panels are going undetected. The area of arrays visible from space is equivalent to a minimum of between 1.4 GW and 2.8 GW, BloombergNEF found. Much appears to be built on the rooftops of factories, for industries to consume themselves. Chase estimates that a total 12.7 GW was installed by the end of last year and a further 10 GW to 15 GW will be added in 2024, making Pakistan the world’s sixth-largest solar market.

The official numbers couldn’t be more different. The country’s electricity regulator lists just 0.6 GW of solar in the entire country, and its base case long-term plan is for a cumulative total of just 5.5 GW in 2034. Even its most bullish “high demand” scenario only lifts that estimate to 15.6 GW, 10 years from now — a level the country has already likely blown past, on BloombergNEF’s estimates.

From a certain angle, this looks like a success story. Faced with a corrupt, incompetent and authoritarian government forcing them to pay over the odds for dirty, unstable fossil power, households and businesses are voting with their feet for a cleaner alternative. We’ve already seen in South Africa how quickly this dynamic can steady a collapsing electricity grid.

It would be far better, however, if people weren’t being driven to such measures. Pakistan’s electricity system is underfunded as it is. The more that major consumers quit it to generate their own power, the more the remaining costs are forced onto those unable to do so — mostly poor households without the roof space for panels. That will only amplify the vicious circle of rising prices, falling reliability, and unpaid bills.

Starved of capital, the grid won’t be able to invest in the transmission networks or clean generation that it needs to function properly. That will leave Pakistan ever more dependent on imported fossil fuels that undermine the currency in the short term, and in the long term expose its population to rising temperatures and choking pollution. It’s a tragic waste for a country whose rich endowment of hydroelectricity and sunny, windy deserts should allow it to be a powerhouse of clean energy.

The government, whose electricity plans currently see barely any role for solar and wind in its power mix, would be far better to remove fossil fuels. Providing a voracious market for China’s surplus solar panels might also help placate Beijing, a key ally whose $15 billion in loans to build Pakistan’s costly, underperforming fleet of coal generators may never be fully repaid.

As recently as 2008, Pakistan trailed only Sri Lanka and Bhutan as the most affluent nation in South Asia. It now risks slipping behind Nepal to a level that falls short of many countries in sub-Saharan Africa. Turning that around is going to require fixing the energy problems that have plagued the country for decades. Clean power can provide the solution — if Pakistan’s government would only accept it.

More From Bloomberg Opinion:

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

More stories like this are available on bloomberg.com/opinion

©2024 Bloomberg L.P.

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First Published:22 Aug 2024, 01:47 AM IST
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