Category: Opinions

Ranked as the 21^st country in the world in terms of natural gas consumption, Pakistan is currently facing a severe supply crisis, which has intensified with the advent of the winter season. The demand for gas has soared above 2.5 billion cubic feet per day (bcfd) while the supply is around 1.7 bcfd.

However, the deficit for winter 2022-23 has been worked out at 1.35 bcfd. The deficit in the systems of the country’s two public utilities, Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC), is estimated to be 0.9-1.0 bcfd and 0.25-0.35 bcfd, respectively.

While the demand for gas is rapidly increasing — particularly in power, residential and fertiliser sectors — due to its subsidised prices, the supply is constrained by fast depleting local reserves and the increasing reliance on import.

The country’s proved gas reserves significantly decreased from 23.9 trillion cubic feet (tcf) in 2006 to 13.6 tcf in 2020, showing a steady decline in the domestic gas production since 2012. To bridge the gap, the government decided (in 2012) to import LNG from Qatar.

The following years saw significant developments vis-à-vis the LNG import deal, the establishment of auxiliary infrastructure and building of LNG-fired thermal power plants. In 2016, Pakistan signed a multi-billion dollar deal with Qatar to import LNG for 16 years.

Two LNG storage and gasification terminals were completed in 2015 and 2017 in Karachi. A number of LNG-based power plants — including the five major operational ones in Nandipur (525 MW), Bhikki (1,231 MW), Haveli Bahadur Shah (1,277 MW), Balloki (1,276 MW) and Jhang (1,263 MW) — were planned to be constructed.

Mainly due to induction of these power plants, Pakistan’s LNG import increased from 19,795,505 MMBTU in 2015 to 348,587,218 MMBTU in 2020. Correspondingly, the import value increased from $151 million in 2015 to $2,559 million in 2020.

Following the Russo-Ukraine war and consequent spike in prices of LNG in the international market, importing LNG to meet domestic needs is becoming more difficult for Pakistan. The government is struggling even to procure the LNG cargos agreed to under the long-term deal with Qatar, let alone purchase from the spot market.

Notwithstanding the fact that its local reserves will exhaust in the next 10-12 years and the warning from international research institutions that soaring prices of imported LNG are not likely to lessen at least before 2025-26, Pakistan is paying no heed to cutting its dependence on gas. Instead of looking for alternative fuels and sources of energy to cope with the crisis, the country is still planning to expand its gas infrastructure and add new LNG-fired thermal power plants.

Energas and Tabeer Energy are setting up two new LNG terminals in Karachi. The recent iteration of Indicative Generation Capacity Enhancement Plan (IGCEP 2022-31) includes one committed and two candidate LNG-based power projects.

A research launched by the Institute for Energy Economics and Financial Analysis (IEEFA) in June this year warned that Pakistan’s “shift to LNG undermines the country’s energy security and financial stability”. Pakistan’s LNG imports, which were around $2.6 billion in FY2021 are likely to rise above $32 billion in FY2030, the IEEFA research estimates.

Costly LNG is set to complicate pre-existing issues in the country’s gas system, including low final tariffs, inefficient cross-subsidisation, volumes of unaccounted for gas and circular debt. The volatility of LNG prices and supplies can have substantive negative macro-economic spillover effects, affecting power, fertiliser, textile and other sectors that are highly gas dependent.

Apart from its negative financial and economic impacts, gas is not socially and environmentally safe. The gas industry can harm communities and ecosystem in many ways, causing water contamination, air pollution and inflicting harmful impacts on the health, safety and well-being of local communities.

The residents of Rehri Goth, the last fishing village in Korangi creek, are worried about livelihood losses induced by LNG terminals at Port Qasim, Karachi. Thousands of mangrove trees along the Karachi coast are being cut to make way for gas terminals, causing enormous biodiversity losses and posing serious disaster risk.

Although the global LNG lobby has been promoting gas as a relatively climate-friendly transition fuel, methane leaks contribute 20 percent of worldwide atmospheric emissions. Increasing consumption of LNG is posing a serious challenge in the way of achieving the target of limiting rising global temperature at or below 1.5 °C.

Pakistan’s increasing dependence on LNG is not only a contravention of its commitment to the Paris Agreement of 2015, but also against the spirit and principles of climate justice. To curtail its reliance on fossil gas, Pakistan needs to invest more in alternative green energy options, including biogas, green hydrogen, solar and wind power.

As an agrarian country, Pakistan can use animal manure and agriculture waste to produce biogas and substitute it for natural gas, at least for domestic heating and cooking purposes. Biogas, being an indigenous resource, can also help ease the country’s financial burden.

Green hydrogen, the technology for which will become increasingly cost-effective in future, offers another opportunity to replace natural gas in the fertiliser industry, which use gas both as energy and for feedstock.

Besides, Pakistan needs to harness the potential for solar and wind power available in its southwestern parts. There is a huge difference of electricity generation cost between LNG and the renewables like solar and wind power.

During the previous winter season, the cost of power generation through LNG was as high as Rs 16/KWh whereas the price of electricity production through solar and wind technologies was just Rs 6/KWh.

Apart from adopting green energy options to replace natural gas, Pakistan needs to take some policy measures for improving the governance of public utilities and other stakeholders in the gas sector.

 

Energy planning in Pakistan is mostly carried out on an ad-hoc basis as a reaction to an urgent crisis. This hasty and short-sighted approach has not only caused irreversible damage to our environment and local communities but also exposed our national exchequer to external energy supply chain shocks.

Lack of attention to address the structural causes of growing illiquidity in the energy sector has further hampered its financial position. As a result, what we see today is a rather dysfunctional energy sector compromised on both environmental and economic grounds. Our expensive energy mix, heavily reliant on imported fossil fuels, and lower contribution by cheaper renewable energy resources such as wind and solar bear testament to such shortcomings.

The energy sector’s swelling circular debt crossing over Rs2.5 trillion highlights the magnitude of the prevalent inefficiencies. In such circumstances, a long-term system-oriented planning centred at sustainable energy resources such as solar and wind is direly needed. The adoption of a systems approach is particularly important to unleash the true potential of solar and wind energy resources to address issues of energy affordability, energy security and energy sustainability.

Solar and wind energy resources are inherently intermittent energy sources, and for this reason they are also known as variable renewable energy (VRE) resources. In Pakistan their potential has remained neglectfully unexplored, misled by the deep-rooted belief of power planning institutions that their variability would cause additional costs for the system.

A mere six per cent share of VRE in the current installed generation capacity, and over 150 pending wind and solar power projects worth more than 8 GW reflect institutional reluctance towards VRE. Their feasibility is objected by unduly burdening them with system costs of the energy sector.

The 2021 State of Industry Report, issued by the National Electric Power Regulatory Authority (Nepra), says, “while analyzing the financial viability of renewable energy resources, the intermittency cost arising out of the need for keeping back-up generation capacity as well as the affiliated transmission and construction costs must be accounted for to induct the appropriate share of RE in the generation mix.” It further states: “the requirement of back-up arrangement for complementing the intermittent power generation capacity … increases CPP [capacity purchase price] on account of non-utilization of available capacity of base-load thermal power plants”.

It is important to understand our power system elements, their relevant characteristics and interconnections to ascertain the validity of such cost attributions towards VRE. The key components of our power system are: power producers, central power purchasing agency (CPPA-G), power distribution companies (DISCOs) and power consumers.

According to the Nepra report, if VRE share increases, the existing thermal power plants will be underutilized, resulting in increased capacity payments to the thermal fleet. However, the ‘take or pay’ nature of power purchase agreements between thermal power producers and the central power purchasing agency (CPPA-G), necessitates capacity payments irrespective of their utilization.

Moreover, the clauses of minimum offtake guarantee baked into power purchase agreements, such as seen in recent coal-fired generators, translate into additional penalties. So, the portrayal that capacity payments to the existing thermal fleet will increase as a result of increased VRE share is misleading.

Analyzing the cost impact of the increased VRE share on a power system can be further ascertained through assessment of its flexibility. According to the International Energy Agency, the flexibility of a power system is defined by “the extent to which a power system can modify electricity production or consumption in response to variability, expected or otherwise.”

On the end of power production, in Pakistan’s energy mix, the thermal fleet is producing energy on a ‘take or pay’ basis as baseload power plants. But in the presence of higher VRE, only the residual demand will need to be met by the thermal fleet.

So, the baseload nature of Pakistan’s thermal fleet – requiring that it maintains full availability for dispatch of electricity unless the plant has to be put offline for maintenance – adds inflexibility in the system. The resultant cost impact is thus more attributable to the nature of prevalent power system. A fair treatment thus demands categorization of such costs as system costs without disproportionately penalizing the VRE technologies.

VRE resources, on the other hand, are proving to be the cheapest generation options. Their cost is competitive with fossil fuel-based generation technologies, and they are abundantly available in Pakistan. An analysis of the existing solar and wind utility-scale power projects reveals that the lifetime cost of generating electricity from these resources is as low as Rs6-7/kWh. Whereas, for thermal fleet, the latest fuel cost component is as high as Rs35/kWh for furnace oil, Rs30/kWh for high-speed diesel, Rs22/kWh for regasified liquid natural gas (RLNG), Rs30/kWh for imported coal, and Rs16/kWh for domestic coal.

While the balancing and evacuation needs of the system may increase with more VRE share, the costs arising from under or non-utilization of conventional power plants would more suitably be a part of the overall system cost. The studies conducted in the European region on increasing renewable energy shares in the power systems reveal that the costs related to forecasting errors, grid upgrades or extension costs are usually negligible at lower VRE penetration levels, which will be true for Pakistan as well. Though the impact at higher levels remains to be seen, it will not be surprising to see renewables come out as the victor, especially given the prohibitively high prices of coal, oil and LNG.

A more holistic power planning approach needs to be adopted if Pakistan sincerely intends to amend its course towards sustainable and affordable means of power generation. Variable renewable energy presents a unique opportunity for much-needed system flexibility and long-term sustainability.

A total system cost approach can provide the necessary impetus to propel these technologies forward by giving system planners a true idea of the economic advantage they bring forth by reducing electricity prices, reducing the power sector’s carbon footprint and providing energy security to the country.

The global spike in energy prices, starting with lifting of coronavirus-induced restrictions and intensifying with the Russian war against Ukraine, has been the largest since the 1973 oil crisis. The historic highs in the prices of oil, gas and coal have triggered the risk of what economists call stagflation.

Stagflation happens when all three major macroeconomic variables—gross domestic product, unemployment and inflation—are going in the wrong direction. It occurs when a stalling or falling GDP, an escalating inflation and an outpouring unemployment hit an economy simultaneously.

Stagflation is attributed most frequently to a negative supply shock, when something crucial to the entire economy is suddenly in short supply or becomes expensive. The war-induced spike in energy prices, causing a slowdown in global economy, is projected to be an economic nightmare for the entire world.

Middle- and low-income economies like Pakistan are especially vulnerable to the developments. All sectors of Pakistan’s economy are likely to suffer varying degrees of harmful consequences of the global economic recession.

The country’s power sector is overwhelmingly dependent on imported oil, gas and coal. Since the power sector is also crucial to other economic sectors, inefficiency on its part is likely to further blight the national economy.

Two thirds (66 percent) of Pakistan’s installed generation capacity is based on thermal power produced using fossil fuels. Contribution of imported fuels like furnace oil, liquefied natural gas (LNG) and coal, to Pakistan’s installed thermal capacity is 6,507 MW (31.9 percent), 5,838MW (28.62 percent) and 3,960MW (19.41 percent) respectively. It amounts to around 80 percent of the total installed capacity of the country’s combined thermal power build-up.

According to the data released by the Federal Bureau of Statistics in May 2022, Pakistan’s oil import bill surged by 95.84 percent to $17.03 billion in the July-April period compared to $8.69 billion in the corresponding period of the last fiscal year. Further breakup of the data shows that crude oil imports increased 75.34 percent in value while those of liquefied natural gas rose by 82.90 percent in value.

It is pertinent to mention here that the largest chunk of imported fuels is consumed by the power sector. The following facts and figures extracted from the Pakistan Energy Book 2020 give a sense about the power sector’s consumption of LNG, coal and petroleum products.

The power sector consumed more than 60 percent LNG in the fiscal year 2019-20. With its share of 191,684 million cubic feet (CFt), the power sector consumed more LNG than fertiliser, cement, transport, domestic, general industries and commercial sectors.

The power sector’s share in the country’s total consumption of coal was 43 percent in FY 2019-20. Compared to other sectors—including cement, steel, brick-kiln and domestic sectors—its coal consumption (10,896,986 tonnes) was the highest.

In terms of the consumption of petroleum products, the power sector was the second largest consumer after the transport sector in FY 2019-20. The total consumption of petroleum products was 17,038,494 tonnes, out of which the power sector’s consumption was 1,526,796 tonnes.

Thermal power is heavy not only on the country’s fuel import bill but also on consumers’ pockets. According to the State of Industry Report 2021 by the National Electric Power Regulatory Authority (NEPRA), several factors account for the high cost of electricity generated by thermal power plants. These include unutilised ‘take or pay’ power generation capacity, impact of ‘must-run’ power plants, old in-efficient power plants, increasing capacity payments, a whopping circular debt, a weak transmission and distribution system, a lack of coordination among relevant power sector stakeholders, improper planning, poor governance, use of primitive technology, taxes, fees and levies in electricity bills etc.

In addition to the economic cost, thermal power has high environmental cost. Carbon dioxide and other greenhouse gases emitted in the wake of fossil fuel combustion for thermal power generation contribute to global warming and climate change.

The policy makers acknowledge the high economic and environmental costs of thermal power generation and promise policies and principles to mitigate these costs.

However, these policies and principles turn out to be a mere lip service. Indicative Generation Capacity Enhancement Plan (IGCEP) 2021-30 prepared by the National Transmission and Despatch Company (NTDC) is the best example of this.

Notwithstanding its ‘least cost principle’, the NTDC included eight thermal power plants of 5,193 MW capacity as committed projects in IGCEP 2021-30. These include five local coal-fired projects of 2,970 MW, two imported coal-based plants of 960 MW and one RLNG-fuelled power plant of 1,263 MW. The candidate projects under the IGCEP 2021-30 also include a local coal-, four imported coal- and two LNG-based thermal power plants.

In preparing the next iteration of the IGCEP this year, the stakeholders cannot afford to be unmindful of the spectre of stagflation. The ‘least cost principle’ will have to be adopted both in letter and spirit.

Pakistan’s energy sector has been facing potential losses and distortions in the distribution sector for years now, costing the national exchequer billions annually. In 2019 alone, DISCOs posted a loss of Rs171 billion due to less recovery of pending bills and another Rs38 billion due to technical losses.

On average, nearly 20 percent of the electricity transmitted to the distribution system is lost the effects of which are borne by end consumers. Due to these losses as well as reliance on imported fuels, Pakistan’s power generation costs are disproportionately high. These losses have also been significantly contributing to circular debt.

Despite surplus energy, power cuts are widespread, especially in high-loss feeders. While the country has long been seeking a strategy to minimise these losses, these decade-old problems in relation to technical and financial losses in the power sector as well as the energy access gap continue; traditional intervention solutions have been at the root of the ongoing unsustainable trajectory.

What can be done to improve distribution performance? As the local context differs from region to region, a major discourse in the specific case of Pakistan is how solar PV penetration in high-loss configurations offers an ‘irresistible’ and ‘necessary’ alternative to improve energy access (electrifying the last mile and improving reliable access to energy) and address the longstanding technical and inter-linked financial losses in the power sector. These applications can potentially defer transformer and transmission line upgrades, extend equipment maintenance intervals, reduce electrical line losses, and improve distribution system reliability.

So, a logically compelling, economically viable and action-oriented framework for RE uptake in Pakistan could be fostering solar PV penetration in high-loss DISCOs. This, however, needs a realistic action plan based on significant stakeholder support, alignment of national and provincial electricity and energy policies and planning, a facilitative and enabling environment, and consolidated changes at each stage of the energy value chain.

The growth in decentralised PV has now unleashed myriad benefits – particularly for developing countries with failing centralised utility models. It offers most fertile space for leapfrogging renewables in the context of Pakistan, where the prevailing energy access gap has created an instinctive self-desire for prosumption and already distilled a momentum for alternate energy systems. Frustrated with decade-old injustices associated with the centralised energy sector, many residents have switched to decentralised modes of energy generation. Although these decentralised configurations are largely undocumented, some statistics do highlight its magnitude.

In a study, the International Finance Corporation has indicated that an estimated $2.3 billion is spent annually on alternative lighting alone in Pakistan. Another study indicates that more than 68 percent of the end-users rely on alternative back-up energy systems (mostly UPS and fossil-fuel-run generators). So, reliance tends to be more skewed towards other systems, and high carbon back-up appliances have become mainstream technologies in the country.

A great share of energy consumption in the country originates from the residential sector. Physical landscape – free rooftop space available in the household sector – further align to drive solar PV applications. Solar PV generation is also one of the world’s most promising technologies and an emerging sustainable solution for reducing losses. Generation close to consumption offers insulation from the substantial transmission and distribution losses which characterise the power sector of Pakistan. All this warrants attention towards an optimal strategy and country-based solutions to strategically sited DG uptake, which could contribute to the versatility of energy sources, emission abatement and energy security. It particularly provides three key major advantages: encouraging renewable energy uptake, reducing distribution losses and providing uninterrupted supply to end-users.

However, despite the strong suitability of distributed renewable energy (DRE) systems in the context of case-country, it remains an overlooked aspect in the national energy expansion plan. The potential in this sector remains untapped due to lack of necessary policy and institutional framework and strong inertia from DISCOs. Among other factors, the high upfront cost of technology, awareness gap, financial impediments, policy and regulatory design faults, absence of facilitative organisation models, and overall misalignments in policy, planning, and coordination have been restricting its uptake.

In terms of reducing losses, the general principle directs that the losses increase with an increase in the distance between generation facilities and load centres. A well-chosen distributed generation facility can decrease technical losses up to 15 percent. In parallel, distributed generation is also a useful tool for the liberalisation of energy markets. With the liberalisation of power and energy markets, the reliability in energy supply and cost-benefit analysis is assured. So, loss minimisation, reliability, sustainable energy provision, and clean and cheap energy mechanism – all could be aligned with the solar photovoltaic based distributed generation in regions with high losses, interruption of power supply and high consumption tariffs.

It is hence an opportune time to recommend a roadmap for targeted solar photovoltaic (PV) applications in those feeders of DISCOs that are experiencing excessive transmission losses. These benefits will not materialise without a strategic approach to new market regulations and innovative business models that supports targeted PV uptake in high-loss zones. The relevant authorities should anchor a facilitative organisation model around these decentralised solutions – and on a priority basis.

In a conventional approach, environmental degradation caused by development is considered nothing more than an externality. Planners and implementers disdain the pain suffered by the locals because of environmental externalities. They consider it as an inevitable but trivial price that must be paid to achieve economic growth.

Marked with apathy towards people and environment, this development approach is evident in the implementation of the ongoing coal power projects in the Thar desert of Pakistan, which hosts the sixth largest coal reserves of the world. Since the beginning of the so-called coal power development in Thar Coalfield Block-II (TCB-II), hundreds of local families have been facing forcible eviction from their ancestral houses and villages to make way for coalmines and thermal power plants.

Without providing any alternative source of livelihood to the desert dwellers, the coal power companies have been encroaching on their farmlands and pastures, erecting fences around them, and banning the entry of local communities and their livestock. As if pains and sorrows of dispossession and destitution were not enough, the increasing depletion and poisoning of groundwater — an environmental externality of coal power development — has started to impact villages adversely.

Groundwater is the most precious resource in this arid and water scarce region of the country. A majority of the local population depends on dug-wells some 10 to 100 metres deep and the water quality from saline to brackish.

Thar coal is buried under three layers of groundwater — dune sand aquifer, coal seam roof aquifer and coal seam floor aquifer. To extract coal, mining companies have to first drain out the aquifers. For this purpose, they have installed submersible sumps at the bottom of pits. Dewatering of open pits is an essential component of coalmining since it helps keep the mine dry and safe.

Due to the ongoing dewatering of coalmines in TCB-I and TCB-II, water table is fast depleting in the villages neighbouring the mining sites. Water level of dug-wells has lowered from three to four feet in five villages, including Jaman Samoo, Bitra, Aban Jo Tar, Khemay Ji Dhani and Thario Halepoto.

Water drained out from the coalmines is acidic, contains heavy metals like arsenic, copper and lead, and leave a harmful impact on local water resources. They pose a serious threat to public health and ecosystems. For the disposal of wastewater discharged from mines, the coalmining companies have built two reservoirs at Gorrano and Dukar Chaou.

Gorrano is a natural depression about 27 kilometres south of the mining site in TCB-II. Spanned over 1,500 acres, with capacity to hold 30 million cubic metres of water, Gorrano is the first reservoir to be built. Around 10 kilometre south of Gorrano, is another natural depression near Dukar Chou, where an additional reservoir was built last year. In recent months, the companies have started to dump wastewater in Dukar Chou reservoir.

Since these reservoirs have not been lined with a geo-membrane or a soil sealant, percolation of saline water has already started to pollute the area, particularly 12 villages around the Gorrano reservoir. Due to the seepage of effluent water from Gorrano reservoir, water level of wells in Gorrano, Burd, Gawaran, Shivay Jo Tar, Gopay Ji Dhani, Bhopay Ji Dhani, Khokhar Jo Tar, Mutu Jo Tar, Nibbay Ji Dhani, Suleman Hajjam, Kattan, Chothay Ji Dhani and Esan Shah Jo Tar villages has started to rise and contaminate the wells. This has caused a serious water crisis, particularly in Gorrano and Suleman Hajjam villages.

The local communities complain about the drying up of local trees, which serve as the only fodder for their livestock in winters. The residents of seven villages — including Dukar Chou, Meehari, Ganjri, Harimar and Gawaran — held a number of protest demonstrations against Dukar Chou reservoir in front of Islamkot Press Club last month. They raised concerns of toxicity that is threatening farmland, pastures, plant-life and livestock – mainly because of the Dukar Chou reservoir.

Apart from dumping wastewater into the two reservoirs, Sindh Engro Coal Mining Company has been reinjecting surplus wastewater into the aquifer. The company has laid a pipeline from the mining site in TCB-II to Meghay Jo Tar village, where a water reinjection plant has been installed. The surplus mine water is being re-injected into the aquifer through this plant.

It is common practice to re-inject ‘treated’ water into underground aquifer the world over, but only after a rigorous environmental analysis, stringent regulatory framework and monitoring mechanism. Reinjection may cause serious environmental consequences, like seismic activity arising out of aquifer reinjection; increase or decrease in groundwater pressure; changing the flow paths between the aquifers; mixing of different groundwater chemistries; and groundwater contamination.

In case of the Thar coal, however, it is largely believed in the area that the company is violating environmental standards and safeguards while reinjection surplus mine water at Meghay Jo Tar.

The water woes of Tharis caused by coalmining and thermal power generation are not limited to the designated wastewater disposal sites, i.e. reservoirs in Gorrano and Dukar Chau and mine water reinjection plant at Meghay Jo Tar. The companies have also been dangerously dumping wastewater around Tilwaiyo, Warwai (TCB-I), Jaman Samoon and Bitra (TCB-II). For last several months, hundreds of camels, cows, sheep and goats have died after drinking wastewater released in these villages.

In October 2021, the Sino Sindh Resource Limited (SSRL) began dumping wastewater in the grazing land of two neighbouring villages of TCB-I, namely Tilwaiyo and Warwai. As a result, a dug-well of sweet water has become toxic in Tilwaiyo village.

Around 250 families and 500 animal heads were dependent on the well. It took the local community four to five months to dig the well at the cost of Rs700,000. The well has been rendered unusable for the past three months.

The contaminated water released by coalmines and power plants becomes breeding grounds for mosquitos. Malaria has now become endemic in the area.

The gravity of water woes induced by the Thar coal power projects must be addressed on priority basis. An inclusive oversight of the coal industry’s environmental management must be established at the earliest.

EXTREME cold weather across the country, a domestic gas supply gap of 1,300mcf per day and skyrocketing imported LNG prices that Pakistan can ill afford — it is a nightmare for the government. The prime minister’s recent directive to gas utilities to build an LNG terminal by next winter may be rooted in the right reasons. Still, such a terminal may elude economic justification with fears of it turning into another stranded asset, resulting in increased electricity and gas tariffs for consumers.

The power sector consumes the largest proportion of LNG imports, followed by general industries and the fertiliser sector, which uses it both as feedstock and fuel. Back in 2015, when the first LNG import terminal was set up, investments in LNG infrastructure and power plants were justified with the argument of pivoting away from the use of expensive furnace oil for power production. Even up to 2019, LNG import prices ranged from $7-$10mmBtu and decreased to less than $2/mmBtu in 2020. Compared to other fuels, the low price provided temporary respite to power producers.

Unfortunately, the trend has since reversed. The last quarter of 2020 brought in an extremely cold winter in North Asia, causing the demand for natural gas to soar. Extreme LNG price volatility continued into 2021, with single shipments selling as high as $56/mmBtu in October 2021. Countries exposed to the spot market had to pay these exorbitant prices or go without fuel. Pakistan, which sources over half of its LNG from spot markets, had to face the same at $30/mmBtu and, at such unfavourable rates, often failed to procure the fuel.

Pakistan has four long-term contracts with LNG suppliers, however, higher profit margins in international spot markets incentivised suppliers to default on cargo deliveries. Without sufficient legal protection to prevent this, Pakistan was forced to look towards the spot market for emergency procurement at a higher price. For example, in October 2020, when Pakistan floated tenders for six cargoes to be used in December, the bids received were in the range of 16 per cent to 19pc of the Brent rate (the international benchmark for crude oil pricing), much higher than the 13.37pc of the Brent rate offered by the long-term LNG supply contract with Qatar. This winter, two long-term contract suppliers defaulted on term deliveries. To compensate, Pakistan had to buy LNG at the highest price ever of $30.6/mmBtu from Qatar Energy to meet its peak winter demands for December.

Extreme LNG price volatility has led to another unpalatable effect in power markets. Unable to procure enough LNG from the government, the power producers have now turned to furnace oil to ensure adequate power supplies — the very situation the LNG infrastructure was built to avoid.

So why is Pakistan not looking towards other, and much cleaner, energy sources?

A floating offshore LNG terminal may cost between $400 million and $500m without factoring in operational expenses and imported fuel costs. In comparison, the upfront cost for setting up a solar park, in Pakistan, would be $600,000 per megawatt; meaning that the installation of 1,000MW of solar capacity can cost nearly the same as a single LNG terminal. Furthermore, exorbitant spot prices directly impact the cost of power production when LNG is used as a fuel. This winter, fuel costs alone for LNG power plants went as high as Rs16/KWh, while the levelised cost of electricity generation from solar and wind energy stood at just Rs6/KWh.

In its race to keep its citizens warm and the furnaces lit, as Pakistan scrambles to procure more of this expensive fuel, the PTI government must not lose sight of the pledge it has made to have a 60pc share of renewable energy in the energy mix by 2030, or of how potent methane emiss­ions are. One of the main constituents of natural gas, methane accounts for nearly a quarter of the global temperature rise leading to climate change.

The International Energy Agency’s latest gas market report predicts that price volatility will likely continue in 2022 hurting emerging economies the most. As companies turn towards strategies that lead them on the path to reaching net-zero targets, there will be little room for gas, and LNG use will need to decline by 60pc by 2050.

Even if we set the environmental and climate cost aside and mull over the chaotic supply chain for LNG, it may be prudent not to invest in more LNG infrastructure, given the inability of the government to procure enough cargoes on the spot market. Without gas availability, what is the point of building terminals that may become white elephants? Getting money out of LNG and putting it into renewables instead may be a smarter move in a rapidly changing world that favours climate-friendly investments.

Pakistan plans to expand its power sector substantially. It has enormous solar photovoltaic (PV) potential and all the necessary conditions for its implementation such as high radiation yield, a regulatory framework, a favourable architectural landscape and strong demand forces that support its development.

The Alternative Renewable Energy Policy, 2019 also aims to produce 30 percent of its energy from non-hydro renewable energy resources by 2030. The revised Nationally Determined Contributions 2021 commits to achieving a 60 percent renewable energy share in the next decade.

These targets could be easily transposed as more than 30,000 villages in the country are still without electricity; in rural areas, a majority of people currently live in darkness. Also, many people lack reliable access to energy supply. Solar installations have already seen an unprecedented growth in off-grid and weak grid regions. There has particularly been an exponential growth in the use of solar tube wells and water pumps for irrigation purposes – to counter the soaring diesel and petrol fuel prices in the domestic market.

Due to rising electricity tariffs, there has also been a growing trend in net metering and distributed generation. This indicates that people are shifting towards affordable and sustainable energy resources. Based on the context, solar power has the potential to play a key role in facilitating the transition to low-carbon energy, mitigating climate change and meeting energy demands. However, to create a coherent push to tap these potential indigenous resources, little attention has so far been given to the role of supportive instruments and their interaction across different policy domains, which could trigger transition from the perspective of technology adopters and investors.

The government recently proposed a 17 percent sales tax – previously, zero percent – on the import of solar panels. Before examining the implications of this tax, it is important to understand that the solar PV market of Pakistan is largely dominated by imported products. The uneven statistics indicate that more than 90 percent of the consumer market for solar PV panels is met via imported products. The local industry for the production of these products today is negligible.

In such a scenario, the imposition of GST will only add further complexities. It will increase the retail price of the complete system for potential adopters and disincentivise the national solar drive in an early market. This will widen the gap between imported fossil fuel-based power generation and solar PV energy base – delaying the onset of the targeted indigenisation of power procurement resources.

Imposing the tax will also have a direct bearing on the profitability of investors and vendors, discouraging potential investment in the sector. Moreover, with an inflation rate of 9.7 percent in Pakistan, solar panels have already led to high operation costs for solar companies, which translates into higher installation costs. The ill-timed renewed attempt to impose a tax on solar products is not only incompatible with the existing policy renewable uptake goals and ambitions but will also undermine the solar PV drive cutting into our national emissions reduction potential and power generation indigenisation drive.

If we look at the import statistics of solar panels, we could see that after the government waived off GST on solar panels in 2014, it registered a steady positive-year wise growth – increasing from $44 million in 2013 to $722 million in 2017. The market, however, was impacted in 2019 due to the Covid-19 crisis, nonetheless, reviving in 2021. At this stage, it is important to extend continued support to the nascent solar market in the country.

Decentralised Renewable Energy (DRE) configurations have many benefits for the Global South, and for a country such as Pakistan, they offer a potent option for an affordable, sustainable and climate-safe energy system. Pakistan holds one of the largest unserved populations globally and has a high potential for bottom-up solar PV technological leapfrogging. Importantly, amongst the different PV customer segments in the Pakistan market, the residential sector remains one of the key sectors driving the solar PV growth in the country and is also one of the most price-sensitive sectors. Any further price hikes will only constrain the drive towards solar PV adoption.

Progressive economies of the world are evolving renewable energy (RE) policies to incentivise the stakeholders and support the solar industry’s growth. For example, through America’s investment tax credit system, residential solar PV system owners can claim 26 percent of the project’s capital cost, although the solar PV system cost in the US is highest than in other countries. While in Australia, the incentives cover almost half to two-thirds of the project cost.

Similarly, rather than imposing taxes, the Pakistani government needs to offer loans, rebates, duty exemption and credit schemes. Developing policies and tax benefits that help RE integration should be the government’s top priority. Pakistan can make significant gains in terms of decarbonisation and low carbon development if it facilitates RE adoption and waives off the recently introduced additional tax.

The government should also extend substantial support to domestic renewable energy manufacturing firms in the short- to medium-term, to constructively reduce reliance on imported manufactured solar products. The need of the hour is a long-term strategy, which retains a steady growth trajectory for solar while increasing protection against imported panels in the long run through incentivising local production.

In August of this year, the Asian Development Bank (ADB) launched an ambitious programme to foster the energy transition in emerging Asia, the Energy Transition Mechanism (ETM) for Southeast Asia.

The ETM is a blended finance facility that seeks to facilitate early coal-fired power plant retirements while replacing them with cleaner energy technologies. The ETM initially targeted Indonesia, the Philippines, and Vietnam. It appears that coal-heavy Vietnam has developed reservations about being part of the scheme in the run up to COP26 due to limited grid capacity and concerns for finding alternatives for coal in the given timeframe.

In Vietnam’s place, the ADB has approached Pakistan to enter the facility, allocating grant funds worth $300,000 to conduct a pre-feasibility study of potential assets that could be retired by the mechanism. The study will commence in January 2022, as the new year begins.

For Pakistan, the ADB programme’s scope has been expanded to target not only coal-fired power plants, but diesel and furnace oil-based plants as well. Coal-fired generation is a recent player in Pakistan’s energy mix, with almost all the coal-fired capacity entering the grid after 2017. So, the ADB rightly assumes that aging, economically inefficient and highly polluting furnace oil/diesel-based power plants seem to be the bigger problem for Pakistan.

Around 66 percent of Pakistan’s power generation mix is thermal based, proving crucial for the system’s grid reliability and baseload generation. Furnace oil-based power plants constitute 19 percent of this share with a total installed capacity of 6507 megawatts (MW). Despite being a recent entrant, coal holds a significant portion of the generation mix, contributing 13 percent of the total installed capacity in the power sector. Coal’s share of electricity generated is even higher, as it has consistently contributed over 30 percent of the energy supplied to the national grid since 2019. This paints a picture of high carbon lock-in within Pakistan’s grid.

Targeting coal-based power assets would come with many complications. Pakistan’s present coal fleet is extremely young; the oldest coal-fired power plant is only four years old. More capacity will enter generation by 2024 to replace aging furnace oil/gas-based plants as they retire, but the average age of coal-fired capacity will remain under five years. These assets would still be paying off their debt for another 10-15 years. It could be a costly bet for the ETM’s coal retirement facility to take on this debt, while equity investors might not be interested in taking a haircut on profitable assets.

While coal-based power is relatively new to Pakistan’s power sector, Pakistan’s dependence on furnace oil/diesel dates back to the 1970s, when oil and hydro were the only form of generation assets the country had. Three out of the four public generation companies (GENCOs) use natural gas or furnace oil in plants commissioned between 1974-1999.

Subsequent policy revisions (the power policy of 1994 in particular) incentivised private-sector investment in the power sector and led to numerous Independent Power Producers (IPPs) over the years, mainly operating on oil or gas. As a result, 42 percent of the installed thermal capacity is aged above 20 years, ranking very low on the merit order dispatch list. At least 11 percent of this capacity has also lived out its economic life of 30 years, yet continues to operate, albeit at very low utilisation rates.

Not surprisingly, these assets have been marked down by the National Transmission and Despatch Corporation for scheduled retirement. Beginning in 2022, almost 6.5 gigawatts (GW) of thermal power generation is expected to retire, of which 5.9 GW are furnace oil-based power plants.

Given this wave of already planned oil and diesel retirements, questions arise as to what precisely the ADB’s ETM will be targeting in Pakistan. Care must be taken to ensure that the ADB’s role is additional, and the government doesn’t consider this a bail-out package for these already retiring assets.

Barring the nationally owned GENCOs, all IPPs have been ensured power off-take through long-term power purchase agreements (PPAs). Re-negotiating these contracts could prove an arduous task, given the demonstrable difficulties the government recently faced in trying to remove foreign indexation and lower the cost of capital when re-negotiating IPP PPAs.

IPPs receiving generous capacity payments baked into their PPAs contribute to circular debt in the power sector and, at the same time, are impacted by delayed payments by the government of Pakistan. Will the ETM take on the financial burden of these capacity payments? If so, this could lead to very high electricity prices in the accelerated timeframe of the ETM; the International Monetary Fund is already insistent that these costs be passed on to consumers to tackle the build-up of circular debt.

Further, new enabling regulations may be required to enable the ETM to affect the transfer of targeted assets into a third-party vehicle for retirement; this could delay the ETM implementation timeline.

Pakistan’s entrenched reliance on thermal-based sources, serving both baseload and peaking power, raises serious questions regarding the country’s energy security. The role of variable renewable energy appears not to be deeply considered as part of the country’s long-term capacity expansion planning. Vietnam’s withdrawal from the ETM was also based on this facet as it deemed its existing coal-powered fleet crucial for the nation’s economy for the next 10-20 years. The same could be true of Pakistan unless these retirements are accompanied by replacement from robust, reliable, and, arguably, more cost-efficient renewable energy-based back-up power solutions.

The ADB ETM programme aims to be cognizant of its target countries’ legal, political, and financial realities to ensure that the scheme works within the local context of the power systems it seeks to change.

However, the fundamental questions loom large for Pakistan: can the ETM help reduce the circular debt burden facing the energy sector? How will the ADB and domestic policymakers ensure that the proposed retirement facility doesn’t target sub-optimal assets already nearing the end of their life? How will the ETM’s goals be reconciled with demand growth in Pakistan and abundantly available, purportedly ‘cheap’ domestic coal? How will the ADB help Pakistan create a more economically and environmentally sustainable grid? Will the money exchanged really flow towards investment in renewable energy?

All the players involved need to think more holistically beyond a ‘mere’ ETM transaction.

In a world that is increasingly moving towards high climate ambition, there are still examples of people vouching for the ‘development and prosperity’ that coal could bring to a developing economy.

Pakistan is one such case where multiple stakeholders, be it project developers, corporate entities or government officials, genuinely believe that investing in coal power development is the optimal pathway to rid the country of its energy woes.

Outdated arguments such as coal being the only ‘least cost’ generation option available to Pakistan and the ‘unreliability’ of renewable energy because of its intermittency are often quoted by proponents of coal development to propagate the misguided notion that Thar Coal development has indeed brought prosperity to the region.

At the crux of the argument is the premise that Thar coal has led to indigenization and security of energy supply in Pakistan. What is conveniently neglected is the fact that variable renewable energy such as solar and wind are equally capable of doing the same. In Denmark, for instance, solar and wind energy contributed around 50 percent of the country’s total energy generation in 2019-2020 – a case in point for the reliability and flexibility of renewables.

The incumbent government has shown good ambition on the climate front by allocating more resources to fighting climate change this year. However, when it comes to coal, the government’s policies are confusing and give mixed signals.

At the Climate Ambition Summit in December 2020, the prime minister announced a moratorium on coal fired power generation but at the same time indicated Pakistan’s plans of giving a second life to coal via coal gasification and liquefaction for energy generation.

While the premier’s intentions for a cleaner energy mix cannot be doubted, existing cases for such technology show that these projects are neither economically nor environmentally feasible and will soon be a technology of the past. An example is SASOL in South Africa which is supported by massive state sponsored subsidies or the Bukit Asam Coal to Gas plant in Indonesia which is set to lose millions annually.

The technological obsolescence of such projects is compounded by a dwindling political and financial support worldwide for investments in coal in general. Public and political pressure and high investment risks have pushed governments and commercial banks to quit coal altogether. Just last month, the G7 group of rich nations agreed to end support for unabated coal. Global financiers such as HSBC and the Sumitomo Mitsui Financial Group Inc have also declared clear intentions to halt their financing for coal.

South Korea and Japan not only announced that they would decarbonize by 2030 but also committed to exiting from coal-based investments overseas. The announcement is a huge triumph in itself, since South Korea and Japan stand to be the biggest investors of coal in Asia to date and have funneled billions of dollars into coal power projects in Vietnam, Indonesia and Bangladesh.

China also announced an intention to reach a peak in domestic coal consumption by 2025 in April this year. This sets the stage for further commitments and climate ambition from China in the months to come. China’s hosting of the Convention on Biodiversity, COP15 in Kunming this fall could also bear some positive surprises for environmentalists around the world.

An announcement from China to end overseas coal investments would be a huge blow to the handful of countries with plans on pursuing new coal projects including Pakistan. The People’s Bank of China (PBOC) has already tightened its purse strings for overseas coal and many more are expected to follow in its wake. The Industrial and Commercial Bank of China (ICBC), one of the major lenders for four coal power projects in Pakistan, recently pulled out of a $3 billion coal power plan in Zimbabwe. The ICBC termed the project a ‘bad plan’ due to environmental problems.

These recent developments should be sufficient to put coal project developers in Pakistan on alert. Pakistan’s nascent coal industry is entirely dependent upon Chinese financing for sustenance. If a decision to shelve coal investments comes forth from China, Pakistan would be left with no ally to make its dreams of coal-based indigenization of the country’s energy mix come true.

Energy policymakers in Pakistan thus need to preempt a shift away from coal towards cheaper and cleaner renewable energy as early as possible. If Pakistan gives the signal, their Chinese counterparts will be responsive for sure. We saw this happen in Bangladesh, where China recently announced a coal-phase out upon Bangladesh’s request to halt the construction of five coal power plants. The government’s decision in turn was prompted by a massive outpouring of resistance against coal power plants from local residents and the current state of Bangladesh’s domestic energy sector.

Bangladesh’s power sector has been riddled with problems of overcapacity and the rising costs of coal – a situation not very different from Pakistan. Pakistan too has a massive overcapacity problem and coal developments in Thar are being met with increasing pushback from the locals.

COP26 is just around the corner and this year’s focus is solely dedicated to putting an end to investments in coal around the world. Both Pakistan and China will have the world watching them to come forth with smart economic decisions and an ambitious timeline to phase out coal.

China’s willingness to respond to the need of host countries and the recognition of coal as a risky investment by Chinese banks should be enough to initiate a shift away from coal in Pakistan. Such a move however wouldn’t be possible without Pakistan’s keenness to do so. The sooner this happens, the better it will be for Pakistan’s climate, economy and environment.

Ahead ofthe 26th UN Climate Change Conference of the Parties(COP 26) scheduled at the end of the year in Glasgow, many countries have been upping the ante on the ‘green agenda’ to deliver new ambitious commitments. Pakistan has also expressed strong support for advancing renewable energy and fast-tracking energy transition, which is certainly an admirable, and necessary, pathway. This support could be tracked in multiple policies and political statements including the Nationally Determined Contribution (NDCs), Net Metering Regulation 2015, National Energy Efficiency and Conservation Act 2016,Pakistan 2025: One Nation, One Vision, National SDG 7 Framework, and most notably the Alternative Renewable Energy Policy (AREP, 2019) which set a target of reaching 30 percent of non-hydro renewable energy by 2030.

Let’s theorise compatibility of thesecommitments, policies, visions and inter-linked broader political economic landscape.Evena cursory look at themost recent policies and statementsalone indicates major misalignments.For instance, the National SDG Framework targets to increase share of renewable energy to 25 percent in the total final energy consumption.The AREP targets 30 percentof power generation capacity from non-hydro renewables by 2030.Whereas the recently revised Indicative Generation Capacity Expansion Plan (IGCEP) for the period 2021 to 2030 envisage the share of solar and wind at 10 percentin the overall energy mixby 2030. The stated differences in mandates, goals and targetshave created widespread confusion and scepticism toward a uniform decarbonisation strategy and roadmap.

It is important to note here that the very idea of having aplanned power sector expansion trajectory was to avoid misbalanced growth and misaligned systemic institutional logics.The plan itself states its overall purpose to be “fulfillment of outlines, actions, and strategies as stipulated in the relevant policies and decisions of Government of Pakistan”.To this note, IGCEP hence raises several questions, notably its misalignment with ARE Policy, and its blatant disregard for the 30 percent non-hydro RE target.

An incoherent planning system cannot drive a coherent strategy. IGCEP must align with AREP. It is time to walk the walk and ensure that this 30 percent target is met by 2030

What is difficult to comprehend here is not only the paradox of policy and planning, but also the paradox of rationality. For the power sector of Pakistan, a long-standing objective has been reducing reliance on imported fossil-fuels and improving energy security. And although Pakistan always had abundant solar and wind energy resources yet till recently, competing counterclaims associated with the economic and technical constraints ofthese technologies held back its growth. However, withmajor technological breakthroughs, recently renewable energy technologies have undergone a dramatic downward shift in terms of cost, reaching grid parity. The cheaper and widely accessible solar and wind energy hence has the potential to bring down generation cost. Where intermittency of these resources remains a key challenge, but in the specific case of government’s 30 percent VRE target, the recent World Bank commissioned studies have concluded that a large and sustained expansion of solar PV and wind power, alongside hydropower and substantial investments in the grid, are both achievable and desirable. And that a substantial and immediate scaling up of solar and wind capacity could assure several advantages including lowering GHG emissions over the long term and reducing externalities. With these established techno-economic environmental efficiency gains, the only problemstill not addressed is fragmented state oversight, planning and coordination; absence of innovative organisation, business and finance models; as well as grid related constraints-consequently making the renewable transition highly resistant despite promising potential while the reliance on fossil-fuels continues unabated. Theskepticism surrounding renewables is another key impedimentundermining the entire process.The real challenge therefore remains- complementing policy tools with creating an environment for transition. If done so, this could effectively unleash a renewable revolution in the country.

The window of opportunity to achieve the 1.5°C Paris Agreement goal is closing fast. We need to timely head in the right direction. For Pakistan, renewable energy does not only offer an ‘irresistible alternative’ for advancing indigenous sustainable energy but a ‘necessary prescription’ for addressing longstanding challenges in the power sector-a much overlooked discourse. The challenge of advancing renewable energy,however,cannot be achieved by a single government, institution or sector-rather will require consolidated coordination and changes at every level of the energy value chain. Relevant actors and stakeholders, legal and political regulationsmust be organised to successfully leverage the underlying transformational forces substantiating the transition. A systemic approach to solving fundamental barriers and capturing opportunities is therefore imperative to foster the desired transformation. However, as a starting step, the government needs to face the reality and match its grand plan’s words with more action through aligned institutional logics.

Prime Minister Imran Khan’s coal moratorium announcement gains plaudits but the lack of reaction from investors in coal plants, mainly Chinese, raises troubling questions of the way forward.

In a surprising turn of events, the Prime Minister of Pakistan, Imran Khan, announced a moratorium on coal on December 12, at the Climate Ambition Summit held to mark the fifth anniversary of the Paris Climate Agreement, where 195 countries came together and pledged to limit temperature rise to two degrees Celsius (from the 1880 average) through stronger climate action. At the Climate Ambition Summit, leaders from around the world were invited to present their strengthened commitments for decarbonization and greener growth.

Khan’s statement received international acclaim, since Pakistan’s bid to achieve energy security was known to be based on coal-based generation is widely known, indicated by the heavy investments in the sector from Chinese and local investors alike. While the Prime Minister’s statement is certainly a step in the right direction, there is much that is desired in terms of explanation when it comes to its implementation.

See: Scrapping imported coal projects, Pakistan fails to let go of local lignite

When will this phaseout of coal occur? How will the transition happen? Does this mean that existing coal power plants will be shut down too? What happens to those already under construction? Such a transition would have far reaching impacts on most energy projects under the China Pakistan Economic Corridor (CPEC), so why have the Chinese coal investors kept quiet?

Explore a large-scale version of the map here. [Data source: cpec.gov.pk & CSIS]

China is Pakistan’s largest investor and contractor of energy projects, most of which are coal-burning power plants. CPEC includes 17 priority energy projects totalling 11.1 GW in capacity and USD 18.62 billion in investments. Three quarters (8.22GW) of this capacity is coal fired in nature, backed by roughly USD 8.7 billion of insured debt from major Chinese banks including the Industrial and Commercial Bank of China (ICBC), Export-Import Bank of China (China EXIM Bank) and the China Development Bank (CDB).

See: Pakistani military in charge, provinces sidelined in a revived CPEC

Coal a major player in Pakistan

Despite being a recent player in the energy domain in Pakistan, coal is already a major part of the generation mix. The year 2019-2020 saw 19% of the power generation in the country coming from just four coal-fired CPEC power plants. The 4.62 GW of CPEC funded coal-fired generation includes the 1,320 MW Huaneng Shandong Ruyi-Sahiwal Coal Power Plant, the 1,320 MW Port Qasim Coal Fired Power Plant, the 1,320 MW HubCo Coal fired power plant and the 660 MW Engro Thar Coal Power Plant which started supplying electricity to the national grid between 2017 and 2019. A further 1,980 MW of capacity comprising the Thal Nova, Thar Energy (HubCo) and Shanghai Electric (SSRL Thar Coal Block I) power plant are under various stages of construction already.

A complete phase out of coal would gravely complicate matters for these power projects. Pakistan does not have a competitive market when it comes to buying and selling of power. Instead, power purchase is governed by contracts between the government and power producers. CPEC energy projects are considered Government to Government (G2G) projects, founded on the basis of state-to-state cooperation. To divest such huge investments a massive renegotiation and considerable strategic manoeuvring would be needed. The government’s recent attempts to reconfigure power purchase contracts with about 47 independent power producers (IPPs), which are proving to be exceedingly difficult, is a sign of the kind of trouble this would entail.

Effect on new projects?

Perhaps, then the biggest implication of the Prime Minister’s statement would be for coal-based power projects which are still in the pre-permit stage. Take Gwadar for instance, where a 300 MW imported coal fired power plant is in the pipeline, or Thar where a 1,320 MW project is being planned by Oracle. Both plants fall under the CPEC umbrella, with a cumulative worth of over USD 2 billion, a majority of which will be funded by state-owned enterprises in China.

An additional 2,473 MW non-CPEC coal-based capacity has also been planned in Thar, Jamshoro and Arifwala, financed by a mix of local and foreign sources that could possibly reach up to USD 3.3 billion. It would be logical for a moratorium on coal in Pakistan to start from these projects, effectively putting 4.1 GW of planned coal-fired capacity in jeopardy and risking the financial security of billions of dollars in investment.

See: Locals urge Pakistani government to drop CPEC coal mining plans

None of the CPEC coal power projects under operation or planning have responded to the PM’s statement yet. Could this mean that they think they have nothing to worry about? It would certainly not be the first time Pakistan’s climate policy discourse has not gone beyond promises.

New coal plans a big worry

While the first part of the Prime Minister’s statement could be a message of hope, the second part is cause for concern: it refers to the government’s recent plans for exploring the possibility of Coal to Liquid (CTL) and Coal to Gas (CTG) options in a bid to shift away from coal-based generation. The government has already been in contact with two Chinese companies – China Ghazuba and China Coal – for this. Three local fertiliser companies have also been asked to conduct a joint study on the feasibility of this venture. Individual studies conducted separately by these same companies indicated that such an endeavour would not be cost-effective.

Khan’s statement can be construed to essentially mean that mining activities would continue, but instead of coal being directly fed into power stations, it would first be converted to gas or oil. What is surprising is that the premier introduced this as his plan to mitigate climate change, while it is widely known how cost-prohibitive and water and energy intensive these CTL and CTG processes are. The closure of the Kemper County Clean Coal Power plant in Mississippi after construction delays of seven years and a cost escalation up to USD 7 billion is a warning.

Running the state-owned Shenhua’s pilot CTG plant in Ordos, Inner Mongolia, China, led to an almost four-metre drop in water level of the local aquifer in just the first year of operations. Greenpeace reported that several wells less than 30 metres in depth had gone completely dry in the area, and new wells up to 100 metres deep had to be dug to access water.

The same fate awaits Thar, a desert in which the government intends to start its CTG and CTL plants.

And then there are the social impacts surrounding the less-than-transparent process of land acquisition in Thar, which is proceeding without free, prior and informed consent of residents.

If Pakistan is to shift away from coal, then CTL or CTG is not the way to go. The government should come up with a solution that is better thought out, more rounded and ensures that Pakistan’s transition to cleaner energy is socially and environmentally just. Perhaps the government should be looking into the feasibility of battery storage and hybrid renewable energy systems instead.