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Pakistan requires $62bn to $155bn for energy sector till 2030: ADB

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  • Power, energy sector need most significant investments.
  • Largest investments needed for hydropower capacity’s development.
  • Investment needs for wind, solar energy expected to reach nearly $12bn.

ISLAMABAD: The Asian Development Bank (ADB) has said that Pakistan’s energy investment ranges from $62 billion to $155 billion till 2030, The News reported Sunday.

According to ADB’s Central Asia Regional Economic Cooperation (CAREC) Energy Outlook for 2030 report, energy investment needs until 2030 vary significantly across the three scenarios.

The power generation and the energy efficiency sector need the most significant investments owing to the rapidly growing demand and low baseline efficiency. In all three scenarios, the largest investments are needed for the development of the country’s hydropower capacity, ranging from $11 billion to $26 billion.

Investment needs for wind and solar energy are expected to reach nearly $12 billion in the business-as-usual scenario, $36 billion in the government commitments scenario, and $57 billion in the green growth scenario, which illustrates the country’s ambitious plans for harnessing its large renewable energy potential.

Furthermore, according to the country’s nuclear power generation targets, investments for nuclear facility expansion and rehabilitation total nearly $12 billion in the business-as-usual scenario, $21 billion in the government commitments scenario, and $31 billion in the green growth scenario.

Generational rehabilitation and expansion are the investment categories estimated to require the largest share of the total — ranging from 60% to 75%, or $38 billion to $115 billion, varying across scenarios. The second biggest category is energy efficiency measures on the consumption side, requiring $12 billion in the business-as-usual scenario, almost $21 billion in the government commitment scenario, and over $26 billion in the green growth scenario.

The modernisation and expansion of the power and gas grids and the introduction of advanced metering equipment require investments of approximately $13 billion to $14 billion.

To further unlock Pakistan’s energy market for private companies, several challenges must be addressed. One of the key challenges is the lack of clarity regarding the categorisation of resources.

For example, although hydropower is generally considered a renewable energy resource across the world, the Alternative and Renewable Energy Policy has categorised hydropower sources as nonrenewables.

Considering the 30% renewable energy target in 2030, it would be hardly possible to reach this level only via wind and solar PV sources. If hydropower were to be included in the definition of renewable energy sources, it would make reaching the stated target and introducing stronger competition more realistic.

Another challenge is the lack of a detailed energy plan for the energy sector. Although the National Energy Policy has been approved, the corresponding division of roles among policymakers who would assign policy areas to all relevant stakeholders has not been completed yet.

In the current framework, sector-specific policies are developed by relevant authorities. For instance, the alternative energy policy is developed by the Alternative Energy Development Board (AEDB), whereas the power generation policy is drafted by National Electric Power Regulatory Authority (NEPRA). This not only creates uncertainty regarding the long-term direction of sector development but also leads to unnecessary bureaucracy and delays in project implementation.

With a strong focus on generation over the last several decades, the T&D sectors suffered greatly from underinvestment. As a result, transmission losses in Pakistan are one of the highest in the region, with some distribution companies reaching losses of 38%. While policies, such as the Transmission Line Policy, have been established to attract private investments, a centralised transmission plan considering load development in the future is required to set a long-term direction for network development and to establish realistic targets for reducing T&D losses and attracting investments.

Another challenge stems from the country’s electrification rate, with more than 25Z% of the population having no access to electricity. With an increase in rural electrification, demand will increase significantly, putting more strain on distribution companies and generation. Finally, challenges in the T&D sector are reinforced by the issue of circular debt.

With growing power generation from thermal plants, higher costs were inflicted via the import of high-priced fuels and currency devaluation. At the same time, distribution utilities tasked with energy supply face financial hurdles due to the low collection rate of tariffs and their inability to meet regulatory targets for T&D losses. As a result, distribution companies are unable to pay generation companies for purchased electricity, starting a chain of debts that reach fuel providers via power generation companies.

The differential between NEPRA-approved and uniform tariffs is paid via a tariff differential subsidy, which adds a significant financial burden to the government. However, the government is moving toward tackling these challenges and improving the investment climate by establishing a clear and favourable environment for private investors in the energy sector. Pakistan recently approved an implementation plan for a regulatory framework that will establish a competitive market structure in the wholesale segment via a bilateral contract.

Furthermore, the government plans to unbundle natural gas utilities into transportation and distribution companies and establish a competitive natural gas market, which will prove beneficial in terms of attracting private investments in the long term.

Pakistan has already introduced specific incentives for its renewable power sector to take advantage of its substantial renewable resource potential of more than 3,000 GW (including hydropower). With feed-in tariffs for wind and solar PV technologies and a clear plan for renewable energy generation, it aims to support further development of renewable energy.

Considering the sizeable development needs in the energy sector and the government’s prioritisation of renewable energy, investment opportunities are significant.

To resolve power issues and improve energy distribution capabilities, the government is considering partial privatisation of distribution companies through management contracts and concession agreements. This opens up the possibility of ensuring sufficient power supplies, mitigating losses, and increasing competitiveness in the distribution market.

Being one of the largest markets in the CAREC region, Pakistan’s population is currently growing by 2% annually, with an ever-growing potential customer base. However, more than a quarter of the population does not have access to power. With suitable government priorities and regulatory frameworks, this would provide a substantial basis for investment in the energy sector, with more possibilities for return on investment and project implementation.

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Significant surge in the price of gold in Pakistan

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On Friday, the price of gold in Pakistan continued to increase.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of 24-karat gold per tola has risen by Rs2,200, reaching Rs249,000.

The price of 10-gram 24-karat gold increased by Rs1,886, reaching a total of Rs213,477. On Thursday, the cost of 10 grammes of 22-karat gold was Rs195,687.

The global gold market likewise had a rising trajectory. As per APGJSA, the worldwide rate was $2,404 per ounce, showing a decline of $24 during the course of the trading day.

The local market witnessed constant silver prices at Rs2,900 per tola.

Market observers attribute the increase in gold prices to other variables, such as volatility in the global market, currency exchange rates, and economic conditions. The ongoing surge in gold prices is likely to impact investment choices and consumer behaviour in the near future.

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Gold prices in Pakistan have risen by Rs 1,200 per tola.

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The price of one tola of 24 carat gold rose by Rs1,200 and reached Rs246,800 on Thursday, compared to its previous sale price of Rs245,600 on the last trading day.

According to the All Sindh Sarafa Jewellers Association, the cost of 10 grammes of 24 karat gold rose by Rs1,029 to reach Rs211,591, compared to the previous price of Rs210,562. Similarly, the price of 10 grammes of 22 carat gold jumped from Rs193,016 to Rs193,959.

The price of silver remained unchanged at Rs2,900 per tola and Rs2,486.28 per ten grammes.

According to the association, the international market price of gold rose by $10, reaching $2,382 from $2,372.

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The federal government has declared wage and pension increments for its employees.

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The Ministry of Finance has formally declared a rise in the remuneration and retirement benefits of personnel working for the federal government, offering substantial economic alleviation.

According to the notification, personnel in grades 1 to 16 will experience a 25% increment in their salaries, while officials in grades 17 to 22 will be granted a 20% rise. The implementation of this modification will commence on July 1, 2024, and will be applicable to the employees’ fundamental remuneration.

In addition, retired federal government employees would receive a 15% rise in their pension payments. This increase is applicable to retirees from both the civilian and military sectors. It is important to mention that employees who retire on or after July 1, 2024, will also qualify for this pension rise.

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The 15% increase in pension will be computed based on the amount of pension received by retired employees after deductions. Nevertheless, the letter specifies that ad hoc aid will not be factored into the calculations for pension and gratuity.

Moreover, this increment will have no effect on the calculation of housing rent allowances for employees.

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