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Pakistan’s deluge deepens its long-term energy crisis

by SuperiorInvest

An unprecedented deluge has turned one-third of Pakistan into an inland sea of ​​desertion 33 million homeless people and cause approx 30 billion dollars economic damages. This devastating monsoon, the largest on record, transformed parts of the Indus River into 100 kilometer wide lake. These “monsoons on steroids”, as the UN chief described, caused a massive humanitarian crisis, drowning more than 1,400 people and injuring thousands more. This humanitarian disaster will soon be accompanied by a preventable energy disaster.

This crisis highlights why governments should prepare for the impending climate crisis and the importance of resilience in the energy sector. The interrelationship of the energy sector with other economic activity, particularly agriculture, makes resilience particularly vital for Pakistan and other developing countries. Extreme heatwaves, forest fires and now this ‘superflood’ show off Pakistan front line about the deepening climate crisis. Pakistan is the eighth most at-risk country for climate change, and the lack of preparedness and mismanagement can perhaps serve as a cautionary tale to inspire climate preparedness reform globally and within Pakistan itself.

Pakistan’s energy sector is particularly vulnerable to exogenous shocks and rising input costs due to Pakistan’s dependence on imported fossil fuels and infrastructure bottlenecks. Pakistan gets 27% hydroelectric power, but with the country dependent on a single primary river system, the Indus and its tributaries, recent floods have threatened major power grids and exacerbated power shortages across the country.

In the northern region of Gilgit-Baltistan, which has huge hydropower potential and is the gateway to the China-Pakistan Economic Corridor (CPEC), 22 power plants were damaged and 90% of the region was left without electricity. In the southern province of Sindh, worst affected by the floods, power plants in Khairpur district remain flooded, leading to increased power outages. Last week, the authorities tried to successfully secure it Dadu Power Plantwhich supplies electricity to six other districts as a forecast of heavy rain threatened to cut power across most of interior Sindh.

Hydropower is not the only energy source devastated. Numerous gas pipelines in Balochistan were damaged, interrupting supplies to the UCH power plant that supplies 932 MW electricity to the ground. While repairs are underway, consumers continue to face 10-15 hours of outages per day across the country. The lack of energy supply has also increased the cost of energy for the people of Pakistan.

This energy crisis could not have come at a worse time, occurring amid near-insolvency prior to IMF approval 1.1 billion dollars loan. In addition, Imran Khan’s removal from office, his call for early elections, the current government’s inaction to stabilize the country, and the controversy surrounding the appointment of a new army chief have increased political instability and economic uncertainty in the country.

Rising utility bills and power outages aren’t just a product of the devastation caused by recent floods. They are the result of Pakistan’s non-diversified energy strategy and insufficient infrastructure resilience. These floods disrupted an already broken power system.

Pakistan was facing a massive energy crisis even before the floods, as its energy import costs skyrocketed due to soaring global commodity prices. Islamabad paid 4.9 billion dollars only for its LNG import bill for the year ending June 2022. Despite the deteriorating impact of imported energy on the country’s fiscal situation, Pakistan has decided to secure more foreign LNG supplies while consciously avoiding domestic investment because it is easier to fill gaps in demand in the short term for energy given the existence of production infrastructure and the ease with which LNG-powered electricity can be added to the national grid. Only with Pakistan getting 6% of its energy from renewables and 4% from nuclear, this lack of diversification has proved disastrous.

Even in its limited efforts to diversify electricity generation, lower production costs and preserve crucial foreign exchange reserves, Pakistan has turned its attention away from heating oil not to cleaner gas or renewables, but to a politically cheap and convenient, yet heavily polluting fuel: coal. CPEC-led coal-fired power projects are unsustainable due to increased greenhouse gas emissions and eventual economic obsolescence of coal. These projects are also exacerbating Pakistan’s debt crisis.

At the same time poorly executed Iran-Pakistan gas pipeline project has fallen victim to the sanctions imposed on Iran and has failed to provide any benefits to Pakistan to solve its energy woes despite the political threat and reputational risks. While recently development including considerations between Pakistan and Iran behaviour energy trade in the form of barter to avoid the triggering of US sanctions signal that the project may be revived, the security threat from separatists and the continuation of sanctions against Iran prevent the comprehensive implementation of this energy commitment.

The recent floods combined with Pakistan’s mismanagement of energy and management are creating a cyclical crisis. Record inflation is set to further reduce consumer purchasing power as the full impact of floods, shortage of domestic food supplies along with rising energy production costs will increase electricity and food bills.

The devastation across Pakistan’s fertile heartland will not only affect domestic food security, but also threaten Pakistan’s agricultural export earnings, which are crucial to meeting its foreign debt and energy import bills. Rising global LNG and oil prices have already created massive inflationary pressures in Pakistan’s commercial sector, with floods further stifling business activity due to power outages. This ongoing energy crisis will continue as damage to existing energy infrastructure will significantly reduce Pakistan’s capacity to generate electricity.

In the midst of such a multifaceted crisis of Prime Minister Shehbaz Sharif approval of a 10,000 MW solar power project called the National Solar Energy Initiative along with plans establish another nuclear reactor is a step in the right direction to reduce Pakistan’s dependence on imported energy. As China continues to push its coal energy investment agenda through the CPEC, the United States can protect its interest in Pakistan and separate it from China by strengthening its energy cooperation with the country through investments in the development of its untapped renewable and mineral energy resources that would also helped stimulate economic growth.

Asia’s nuclear future is on fire. As a nuclear power, Pakistan should also invest significantly in its own nuclear energy production, increase the capacity of its existing reactors and establish new ones. Finally, Pakistan should open up trade with India in staple foods, which would help not only in fighting inflation but also in easing grievances. Pakistan’s energy crisis and policy miscalculations represent an avoidable economic and energy sector failure. Failure is an excellent teacher, hopefully everyone can learn from it.

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