Home / This Week / Cover Stories / Pakistan’s choices in a changing global energy market

Pakistan’s choices in a changing global energy market

The global energy markets are in flux and the scene is changing rapidly. Most analysts believe that profound shifts are shaping the way energy is supplied and demanded. They also feel that these are not mere occasional aberrations or cyclic adjustments but a fundamental transformation is underway that will persist much longer and have important implications for developed and developing countries alike.

Though the changing energy scene poses many challenges to our policy makers, it also offers a rare opportunity for them to reshape the nation’s energy future along more secure and sustainable lines.

There are striking developments on the supply side. Noteworthy among these are the technological advances and productivity gains, mainly from non-OPEC suppliers led by US shale gas revolution, which expanded the recoverable oil and gas reserves by upward of 20 percent during the last decade (BP’s Statistical Review of World Energy 2018). These resulted in a supply glut in the global market leading to lowering of fuel prices.

Even more striking are the technological strides seen in the non-fossil fuel sector, mainly solar and wind, which have contributed to their making unprecedented inroads in the energy supply market, even in the face of cheaper and abundant fossil fuel supplies.


According to a press release from International Renewable Energy Agency (IRENA) in April this year, in the power sector alone, 94 GW of new photovoltaic (PV) capacity was added during 2018 bringing the total worldwide PV capacity to 480 GW. Similarly, a 49 GW of new wind capacity was added during 2018 bringing it to a total of 564 GW.

The demand for various energy supplies has been not only sluggish, it has been changing in important ways too.

Spurred by the prevailing price volatility in the fuel market and efforts to reduce energy and carbon intensities of their economies, many countries, in particular the developed ones and also China, have made important structural adjustments that significantly reduced their demand for fossil fuels, thus further contributing to the market volatility.

Society’s push for shifting its energy mix towards cleaner and lower carbon fuels, primarily to counter the looming threat of global climate change, has also resulted in lowering of demand for carbon-intensive oil and coal supplies, making renewable and natural gas as the net beneficiaries.

Meanwhile, the composition of energy demand has also been changing significantly. There has been greater penetration of IT systems and IT-based applications in the production and consumption sectors of society, leading to expansion of less energy intensive service-oriented productive activities while a corresponding contraction of energy-hungry industrial processes.

These technologies have also enabled consumers to better manage their energy demand, and in some cases actually offer their demand response capabilities back to the utilities to reduce their overall energy bills.

Also, on the demand side, two additional trends merit specific mentioning. One is the significant inroads that electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) have made in the transport sector, especially in developed countries. The other is the increasing utilization of energy storage technologies, largely for storing electricity, for small, medium, and large scale applications.

Collectively, these trends have acted to dampen the high demand growth rates that were being experienced in the past, in particular lessening the burden on oil supplies. Consequently, the global energy demand grew by just 1.9% in 2017 — almost half the growth rate seen over the past decade (BP’s Statistical Review of World Energy 2018).

The global energy scene is expected to remain dominated in the future by four strategic drivers.

First, society’s environmental concerns, in particular that of potential climate change and energy’s central role in combating this threat (over 75 percent of greenhouse gases emissions originate from the energy sector), will continue to force nations to strive for more efficient and less energy- and carbon-intensive pathways for socio-economic development.

Second, renewable energy sources and technologies will play increasing and critical role in serving the future energy demands in more sustainable ways. Bloomberg New Energy Finance’s (BNEF)recently released New Energy Outlook 2018 predicts that some 11.5 trillion dollars will be invested worldwide in renewables between 2018 and 2050 (largely solar and wind), two-thirds of it going to the power sector alone.


Third, EVs and PHEVs, will gain further ground over time, and will thus not only reduce society’s dependence on oil but will also contribute significantly in offering back-up storage means to regulate the demand on power grids. BNEF’s Outlook 2018 also predicts that electric vehicles will represent 55% of the world’s new light-duty vehicles sales in 2040, some 41 million cars. International Energy Agency (IEA), under its Electric Vehicle 30@30 Initiative assumptions, estimates total light-duty electric cars stock to exceed 220 million by 2030. The stock of 2 and 3-wheeler and commercial EVs will be extra.

Fourth, storage technologies will also dominate the energy, especially electricity, markets in making it possible for society to meet its demand for energy by relying upon stand-alone electric generating systems based on intermittent and variable renewable sources, mainly solar and wind.

Pakistan’s policy makers must take notice of the emerging trends in the global energy market and respond by re-orienting the nation’s energy supply and delivery systems to reflect the new realities. Continued emphases on large-scale, centralized and fossil-fuel dependent energy structures pose huge risks to the nation as these will be capital-intensive, import-dependent, in-efficient, and socially- and environmentally-unsustainable.

In fact, continuation of the current policy will lock the nation into a situation that might be extremely difficult to undo or reverse as energy sector infrastructure and facilities are not only capital-intensive but long-lived too, often lasting for over 50 to 70 years. Also, once in place, these are difficult and expensive to modify or replace.

The present situation offers a rare opportunity to our policy makers to thoroughly re-visit their existing energy strategy and plans, and ensure that these are alive to the changing realities in the global energy market. They must be prepared to guide and steer the country out of its existing energy crisis and in making the necessary transition to a more affordable, secure, and sustainable energy future.

Pakistan’s new energy vision must build on the following five pillars: (i) maximum efficiency and minimum carbon intensity; (ii) maximum reliance on distributed and renewable energy sources like solar, wind, and biomass; (iii) gradual shifting of public and private transport fleet from fossil fuels to electricity mostly drawn from renewable sources; (iv) development and deployment of reliable and affordable energy storage technologies and systems to make the most of renewable energy; and (v) a flexible, modular, and enabling energy transportation and delivery infrastructure to facilitate the above four.

The strategy to realize the above vision must have four complementary threads.

First, it should offer an umbrella legal and policy framework to guide and steer the required transition by laying down the nation’s energy sector strategic priorities and establishing ground rules and regulations to discourage short-sighted decision making and encourage projects and investments that are responsive to and supportive of the country’s strategic energy vision.

Second, it should target building local capacity for planning and development of efficient, clean, and renewable energy generation, transportation, and delivery schemes. This should involve education and training in energy efficiency, demand management, and renewable technologies, as well as R&D to promote local manufacture and adoption of related technologies and systems, including storage technologies. A necessary ingredient of this capacity building should be acquiring the necessary tools for planning and design of such schemes and also the data and information bases to aid this planning and design processes.

Third, it should catalyze developing of an enabling infrastructure, in particular a smart and intelligent electricity grid, that is capable of bringing together a range of energy technologies and processes, both electric and non-electric, and various market actors, producers, operators, and end-users, with the aim to optimize resource utilization and operating performance, minimize economic and environmental costs, and maximize system security, reliability, and resilience.

Fourth, the strategy should also strive to develop suitable financial schemes and incentives to encourage investments in small-scale and distributed energy generation, efficiency improvement, and demand management projects that might otherwise appear unattractive or high-risk to private investors and individual customers. Financial schemes can be introduced from the platform of public utilities that are designed to cover, or at least share, the initial costs of small wind and solar projects and more-efficient appliances and later recovering these costs through customers’ utility bills.

Dr. Rahim is a freelance consultant, specializing in sustainable energy and power system planning and development. He can be reached via email at msrahim@hotmail.com

Check Also

Intricacies of the national budget

Intricacies of the national budget

Whether budgetary conditionalities of the International Monetary Fund (IMF), directives of the State Bank of …

Leave a Reply