Promoting solar and wind power in Pakistan: Current issues and Recommendations under China-Pakistan Economic Corridor (CPEC)

By Yanqi Cheng, Jingyi Ma, Lingxu Kong, Qiao Gu, Yuhang Du

As a developing country, Pakistan’s power demand has increased dramatically. Although the economy keeps growing, Pakistan faces a severe shortage of power supply, which has caused forced power outages of 8 to 12 hours per day in urban and for up to 18 hours per day in rural areas over the past decade. This shortage of energy, in turn, restricts the growth of Pakistan’s GDP and leads back to a bottleneck in the overall development of Pakistan.

Figure1:Electricity Generation in Pakistan

Source:National Electric Power Regulatory Authority

In recent years, the investment in the Pakistan economy has been benefited from the support of the China-Pakistan Economic Corridor (CPEC). Furthermore, electricity generation, especially in coal power, makes up a significant proportion, which alleviates the problem of energy shortage to some extent. As Figure 1 shows, coal has only begun to occupy a place in Pakistan’s energy but expanding at a rapid rate. However, the development of coal energy not only exacerbates Pakistan’s carbon dioxide emissions and water shortages, but also aggravated people’s concerns about the debt crisis of this country as the imported coal increased annually.

Figure2:Pakistan’s current energy mix


Comparatively, the cheap, clean, and even inexhaustible renewable energy, represented by wind and solar power, as Figure 2 shows, account for only 5% in Pakistan’s total energy mix.  Figure 3 indicates that Pakistan has substantial wind and solar potential.

Figure 3:Pakistan’s Wind and Solar Power potential map


Pakistan’s government has also been taking various measures to promote the development of renewable energy. As Table 1 shows, Pakistan’s government has promulgated a series of renewable energy policies since 2006 and has continuously improved the focus of policy in the following years. Pakistan’s government also has the “20X25 and 30X30 targets“, which means to increase the share of wind and solar renewable energy in the total energy mix to 20% by 2025 and 30% by 2030. The government of Pakistan has the ambition to develop renewable energy, but until now, it has not been well-practiced.

Table1:Pakistan’s Alternative and Renewable Energy Policy Timeline

TimeArticle nameProgress and Change
2006Alternative and Renewable Energy Policy  (short term policy)Being attractive for investors; Developing several incentives to facilitate projects
2008Policy Recommendations for the use of Biodiesel as an Alternative FuelFocusing on the national Biodiesel Programme, increasing the share of biodiesel blending
2009Scheme for Financing Renewable projects – soft loansProviding financing for large and small scale renewable energy projects
2011Alternative and Renewable Energy Policy  (medium-term policy)Introducing incentives to attract investment; promoting R&D and developing local ARE manufacturing base
2013Framework for Power Cogeneration 2013 Bagasse and BiomassFocusing on all high-pressure cogeneration projects utilizing bagasse and biomass
2014Upfront Generation Tariff for solar PV Power PlantsAdjusting the tariff for the geographical differences in solar irradiation
2014Pakistan feed-in tariff for solar powerProviding remuneration levels for solar projects for a period of 25 years for projects up to 10MW
2015Pakistan net metering policy for solar PV and wind projectsAllowing solar PV and generators under 1MW of capacity to sell back produced electricity to the national grid
2019Draft Alternative and Renewable Energy PolicyTapping different ARE resources for on-grid and off-grid applications; Encouraging consumer-driven applications and incentives; Having attractive policy instruments for private investment in ARE sector

This paper will briefly analyze the impact of current Pakistan’s coal-based energy development plan from environment, energy access and international relationship, especially the role china. Through providing policy recommendation under CPEC to ease the notably air pollution caused by coal plants, and the insufficient energy access issue in rural area. For more sustainable development, the Pakistani government should shift the focus of future energy development from coal to renewable energy, particularly in wind and solar power.

Environmental hazards caused by coal power generation

In the past few years, Pakistan has faced an imbalance of demand and generation. As Figure 4 shows, the Government of Pakistan chose to develop traditional energy to solve the energy problem, such as oil, gas, and coal. During the electricity generation, the use of traditional energy can emit lots of pollutants, including NOX, SO2, PM2.5, and greenhouse gas (GHG). These pollutants cause air pollution, water pollution, and soil pollution in Pakistan.

Figure 4: Pakistan: Installed Electricity Generation by Fuel (Percent 2017/18)

Source: Data drawn from Pakistan’s Power Future, Institute for Energy Economics and Financial Analysis (IEEFA)

As Figure 5 shows, the air quality of Pakistan is alarming. In the middle east part of the country, pollution is the most serious. About 114,000 Pakistanis die annually from the impact of air pollution, accounting for 9 percent of all deaths.

Figure 5: PM2.5 Concentration in 2016

Source: Air Quality Life Index (AQLI)

In Figure.6, coal-fire power will be an essential part of the future of Pakistan. Pakistan’s coal expansion plans amount to nearly 236% of the current capacity. From Chart 1, the Pak-TIMES Model shows that the emission of the pollutants in the business-as-usual scenarios. If Pakistan continues this energy mix condition, Pakistan will have many more pollutants in the future, which will harm the health of people, and then the government will pay much money on decreasing the pollution.

Figure 6: Pakistan’s coal fired power generation capacity


Table 1: Air Pollution Emissions in BAU (kton)

Source: Energies 2020,13, 108

Therefore, it is a better option for the Government of Pakistan to change the energy mix condition and develop renewable energy. As mentioned in the background, Pakistan has a geographical advantage, which has abundant solar potential and wind potential. For example, solar photovoltaic (PV) is the technology that converts the energy of photons coming from the sun into electrical energy. It is convenient to be used in remote areas that can effectively solve the problem of transmission.  

Insufficient focus on rural electrification

For decades, a very critical part of Pakistan’ s energy development goals is to increase the access to electricity, particularly mentioned that by utilizing renewable energy technologies to achieve universal energy access in Pakistan’s short-term renewable energy development policy which is tentatively valid until 2018. However, in the Renewables Readiness Assessment prepared by IRENA (2018), more than half of the rural residents are still suffering from electricity shortage, and approximately 20% of all villages are not connected to the grid (NEPRA). Moreover, policy research working paper (World Bank Group, 2018) demonstrates the impact of electrification on householders’ income and expenditure: “gaining access to electricity is associated with a 37 percent increase in per capita income and an 11 percent increase in expenditure (15 percent for food, 9 percent for nonfood). Equally important, the research mentions that the connecting of electricity is associated with better living standards and education outcomes.

Currently, at the federal government level, the focus is primarily on utility-scale projects in areas already served by the national grid. Without a stable government policy and finance tilt, the development of the rural electrification investment market is not easy since it is considered as high-risk commerce due to the contradiction between high construction costs and the current low grid demand . Consequently, the distribution utilities are reluctant to expand their grids into these rural areas, which leads to a vicious circle. Several provincial governments have introduced rural energy initiatives intending to apply small-scale solar energy projects as a promising solution, and the NGO – Pakistan Poverty Alleviation Fund also strives for promoting rural electrification. Specifically, an AEDB project initiated in Sindh and Baluchistan (2005) evaluation in 2011-2012 revealed that the majority of the systems were not operational as the batteries had become obsolete .

Comparing with expanding the centralized grid to the rural area, distributed renewables for energy access (DREA) systems could provide a more effective and cost-saving alternative to rural and remote areas achieving access to modern energy. Take China as an example, through launching 583 projects and increasing the investment (totally USD 4.2 billion) in rural electrification by emphasizing the use of solar PV- battery, small-scale power projects and mini-grids; China has achieved full electrification of its 1.4 billion population in 2015. All in all, designing an innovative, standard, and locally relevant DREA solutions could acclimate the dynamic needs of individuals and communities more expeditiously. Concurrently, to increase national energy security, lower fuel-related costs, ease the burden of collecting fuelwood and reduce indoor air pollution from kerosene lamps and inefficient stoves.

Hence, the government of Pakistan is suggested to consider evolving policy, regulatory frameworks, and implementation mechanisms to facilitate the distributed renewable energy development, as well as, it is essential to enable a positive environment to engage more private sectors and NGOs. Table 2 illustrates some innovative business models and technologies for electricity access in the Asia Pacific Region.

Table 2: Innovative business models

Source: Asia and the Pacific Renewable Energy Status Report,2019

The impacts of CPEC

Till September 2019, China has invested 12.4 billion dollars in CPEC Plan, among which contains 12 energy production units (2019). China has invested almost 40.4% of the total investment; however, the investment in renewable energy is only 13.5% among the total expenditures (2019).Additionally, the projects under CPEC is at least 15-years’ long, which China has already signed some of the long-term agreements on coal with Pakistan. This tendency leads to that the in-phase investment plans to be about $ 46 Billion (2019).

This investment structure will bring two impacts. The first is the debt trap. According to the IMF, Pakistan’s debt-to-GDP ratio is projected to reach a high of 80.5 percent in 2020, which is partly the result of borrowing from China (2019). Among them contributed by energy, total CPEC debt was about $ 4.9 billion, which was not even 10 percent of the country’s total debt (2020). It reported that the new government in Pakistan is concerned over massive Chinese loans under the CPEC may lead the country to the debt trap (2018).Another concern is about energy security since Pakistan highly depends on coal import. Pakistan imports 38% of coal of its energy requirements. Compared to energy imports, Pakistan’s exports stand at only $21 billion (2019).

Recommendations to solve the debt trap, energy security, and environmental issues under CPEC frameworks are mainly proposed from the perspectives of two stakeholders: China and the international community. As China is the first country to invest in Pakistan’s energy, the determination of China to promote green Belt and Road Initiative plays an essential role in Pakistan’s energy structure. To shoulder the responsibility of environmental issues, China should change its investment structure in Pakistan and invest more in renewable energy. One approach is to assign specific quota limitations of investment on coal power stations for the enterprises under CPEC. Just like carbon trading rights, the quotas can be traded in the market.

Another recommendation is to strengthen the assessments of the coal projects invested by CPEC, which means set up a specialized agency to assess the impacts of the environment, energy security, and economy that every investment will bring to the local. The assessment department under CPEC, following the national and local standards for environmental quality, economy, and technological conditions, establish criteria for China’s enterprises to invest the coal projects.

Finally, from the perspectives of the international community, Adeel Khalid, a Pakistani consultant working at UNDP, indicated that UNDP had done much work coordinating the international cooperation, seeking for innovative governance. Other international organizations can also help to shape the relationship between Pakistan and foreign investors. While the IMF has provided a significant number of loans for Pakistan to develop energy, it can also consider establishing a special fund to support Pakistan’s renewable energy. What is more, the World Bank Group can also provide some polices to appeal to other countries beyond China to invest the renewable energy in Pakistan. 

In conclusion, the article analyzes the current problems and proposes recommendations for each one of the specific issues in environmental pollutions, increased rural electrification, as well as the debt trap and energy security under CPEC. After analyzes the harm brought by the current development of coal power generation. It is necessary to attach importance to rural electrification to realize universal energy access through the development of distributed renewable energy. Through more stringent environmental impact assessment for coal projects under CPEC, the government of Pakistan should strengthen international cooperation in the field of new energy development as well. To achieve more sustainable development, the Pakistani government should adjust the focus of energy development as soon as possible, and regard new energy, especially solar and wind energy, as the most important energy development goal. Even though the future and potential for renewable energy are promising in Pakistan, without cooperation from the government, Chinese investors, and the international community, it is difficult to move forwards. Most importantly, the Pakistani government needs to plan for more systematic and formal development of renewable energy in the future based on the issues from various fields.

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