Industry: Electricity and Power

Pakistan electricity and powers sector has potential of renewable energy generation (solar,

biomass, wind, hydro) but it generates most of the electricity through thermal power plants

which is costly because Pakistan has to import crude oil to generate electricity though this energy

can also be generated from abundantly available and renewable sources and would be cheaper.

Due to this increased cost of production, prices get higher and consumers have to pay a higher

cost. Pakistan can also generate great amount of electricity from coal fired power plants as it is

known to be the third-largest country to have coal reserves. Pakistan also has wind power plants

at Nooriabad, Sindh, which are owned by private sectors.(Shakeel et al., 2016) Demand for

power and electricity is more than the production of it which leads to load shedding and rising

cost per unit of energy, a 270.7 CPI as of base year 2008.

(CPI_Monthly_Review_January_2020_old_base.pdf, n.d.). The International Energy Agency

(IEA) suggests that the electricity demand will rise by at least 40% by 2030. (“Review of oil and

gas, power and renewable energy sector of Pakistan,” 2019) State owned institutions are not

performing well, they can increase the capacity of plant which can make it more efficient or

install new plants and use renewable sources to generate electricity and power. The previously

proposed plans of Diamer-Basha and Mehmand Dams, if completed, would have increased the

energy generation. From 2013 to 2018, a 4% decrease in the hydroelectricity generation and a

constant 64% thermal energy generation (14-Energy.pdf, n.d.) explains the inefficiency of the

existing companies in developing a more eco-friendly power generation plan and the usage of

Pakistan’s resources. There are some non-operating power stations in the country which require

a little investment and technical improvements to restore them. Such power units can be made
effective to pull the economy out of complete doom. Resultantly, these projects will maintain the

smooth flow of energy and will at least prevent any further widening in the demand-supply gap.

It is necessary for Pakistan to change its power market. Today, the whole model is based on

Single Buyer Model where distribution companies, are assigned to get power from generation

companies. The distribution companies agree on a profit along with long-term contract, however,

lack of incentives results in low efficiency. “Central Power Purchasing Agency has finalized a

Competitive Trading Bilateral Contract Market plan, which if approved will transition the

country’s current single-buyer electricity market into a competitive one,” Javed Mingas, Chief

Information Officer at CPPA.[ CITATION Jav17 \l 1033 ] Pakistan has planned to change its strategy

in electricity market by shifting it from single-buyer electricity market into competitive one.

Therefore, if the plan is accepted by National Electric Power Regulatory Authority (NEPRA), by

2020 new buyers would enter the market.[ CITATION Jav171 \l 1033 ] If companies were allowed to

compete freely for supplying electricity, the efficiency gains from the competition would benefit

the consumers since they would enjoy lower prices. Buyers are most powerful when the market

is highly concentrated but in Pakistan buyers are not in a strong position to bargain due to

Single-model. Consumers are not allowed to choose their generators and are therefore left with

only one option: buy electricity from state owned Distribution Company or newly privatized K-

Electric. Pakistan enjoys one of the highest insolation in the world, averaging around 8 to 9

hours of sunshine per day. These conditions are deemed to be perfect in solar power generation.

Energy Minister Imtiaz Ahmed said a new project will be installed in which solar systems will be

installed on rooftops of all Government buildings in Karachi and Hyderabad along with

deploying solar home systems in 200,000 rural households of Sindh.[ CITATION Gov19 \l 1033 ]
For now, the oligopolistic industry of Electricity and Power Generation, after the privatization of

biggest market sharers like K-Electric, and the segmentation of WAPDA, the industry has a

reduced political scope, but with IEA’s previously mentioned forecast of the drastically

increasing demand, the Government might want to overtake the industry for revenue generation.

The economic scope of the industry can be found in unparalleled figures of profit displayed in K-

Electric’s Annual Report 2018. The company in the fiscal year 2015 enjoyed a net profit of 32.41

Billion Pkr but, the number has fallen to 12.31 billion Pkr in fiscal year 2018, (“Financial Data,”

n.d.) suggesting the decreased market share and earning per share. The possibility of this is the

newly developing alternative resources for energy generation, however, the potential of the

industry lies in the fact that the production of power is based 2% on renewable energy and only

7% on nuclear energy, with thermal and hydroelectric plants still dominating the game, (14-

Energy.pdf, n.d.), therefore, newer technology for the existing companies might prove to be the

game changer in achieving record high figures. As for the environmental scope, the emission free

energy generation is becoming a global trend with rising concern of climate change, the investors

look forward to thriving businesses that have global attention. For the Government, this is a great

time to privatize its underperforming institutes in the industry.

Bibliography

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