Volatility in the global energy markets because of Covid-related disruptions and Russia’s attack on Ukraine have pushed international oil, gas and coal prices to new highs. Some of our power plants use imported coal although the much cheaper Thar coal is available.

The National Power Policy 2013 sought to address Pakistan’s aggravating power crisis by creating affordable, surplus generation capacity. The idea was to not only bridge the supply gap but also to displace expensive fuels for generation with cheaper ones to make electricity affordable over time.

The Nawaz Sharif government built a pipeline of coal power projects under the CPEC initiative for displacing the fast depleting local gas resource and imported oil as primary fuels for power production. At the same time, it decided to exploit the large lignite reserves in the Thar region to reduce reliance on imported fossil fuels and further slash the generation cost.

The NEPRA, the power-sector regulator, also supported the policy direction in view of the declining indigenous gas stocks and a much longer lead time for hydropower projects to materialise. It stated that the coal power plants were the best option in the short-to-medium term planning.

Coal power has since expanded to 4,822 MW or around 12 percent of the country’s total installed electricity production capacity of 39,772 MW. Its share is expected to increase to 20 percent in 2025. Even the small shift to coal, mostly imported, has significantly brought down the average generation cost and energy import bill besides enhancing the share of indigenous coal in the electricity production. The average generation costs dropped 11 percent during the FY2020 on account of the enhanced use of coal for producing power.

Yet, Pakistan remains far from attaining the goal of affordable electricity for its citizens and businesses. The fact of the matter is that power prices are still very high and most Pakistanis and businesses cannot afford electricity at the current rates. Not only that, the government also lacks foreign exchange to import fuel - oil, gas or coal - for generating electricity and is forced to order blackouts despite surplus generation capacity.

The consumers continue to groan under rising electricity bills and the competitiveness of businesses is being eroded fast. Moreover, despite raising the power tariffs multiple times over the last eight years, the government is unable to recover the full cost of power and the energy chain debt, commonly known as circular debt, has swelled to Rs 2.5 trillion.

The current situation in the power sector is not sustainable. The generation cost surged by 66.2 percent to Rs 9.22 kWh in March this year from Rs 5.55 kWh a year ago owing to higher imported fossil fuel prices.

The generation cost of RLNG-based power has increased by 58.5 percent to Rs 14.37 kWh from Rs 9.07 kWh and the generation cost of RFO risen by 89 percent to Rs 22.52 kWh from Rs 11.92 kWh. Furthermore, the price of electricity generated through imported coal has gone up by 71 percent to Rs 12.41 kWh as compared to Rs 7.26 kWh.

Thar coal reserves have the potential to produce over 100,000 MW of electricity for the next 30 years. Thar coal, thus, can provide the country with the much-needed strategic energy security and affordability needed for industrial and economic revival.

The world energy markets are likely to stay volatile in the foreseeable future, jeopardising the energy security and economic revival of developing countries like Pakistan. That also means that Pakistan’s fiscal and external account positions will remain untenable and its industry and exports become even more uncompetitive unless Pakistan cuts its reliance on the imported and expensive fuels and shifts to indigenous resources.

Thar coal can produce base-load power at a fraction of the cost of imported fuels, including coal. A major coal plant in Karachi has already started mixing the local lignite with imported coal to reduce its generation fuel costs. The price of Thar lignite is expected to drop over the coming years in comparison to the imported coal.

Thar coal is the cheapest indigenous energy resource. Its 175.5 billion tonnes reserves have the potential to produce over 100,000 MW of electricity for the next 30 years. Thar coal, thus, can provide the country with the much-needed strategic energy security and affordability required for industrial and economic revival.

The idea of investing in renewable energy sources in the mix is gaining traction globally as the cost of such technologies decrease. Nonetheless, this shift must be gradual and will not be possible without radical improvements in the existing technologies as renewables remain intermittent natural electric power to this day and cannot replace the base-load fuels.

This does not mean that we should not develop our renewable energy resources like solar, wind power and others, which together form less than five percent of the installed generation capacity. But we cannot ignore the associated costs of seasonality, storage, transmission and distribution that make renewables a relatively expensive choice.

The critics of using coal for displacing gas and oil as base-load fuels must understand that the claim that the world is replacing coal and other fossil fuels with renewable energy is misleading. Nearly 8o percent of the energy is still being derived from fossil fuels. In countries like China, India and the US, where base-load demand is high, coal is still widely used to power the economies. India, where coal accounts for 65 percent of the energy mix, is planning an investment of $54.5 billion in ‘clean’ coal projects over the next decade to tap domestic energy sources and curb fuel imports.

Climate concerns are valid but that’s true for all fossil fuels, indigenous or imported. At present, Pakistan contributes just 0.5 percent to the global carbon dioxide emissions compared to over 50 percent by China, the US, the European Union and India.

Even after a full-fledged exploitation of Thar coal resource, Pakistan’s carbon emissions will be 20 times lower than the developed economies, and five times lower than global average on a per capita basis.

Pakistan must push harder for the utilisation of its lignite reserves as the most economical alternative to imported furnace oil and RLNG because it is crucial to the country’s ambition to achieve enhanced economic growth through industrialisation and raise the living standards of its citizens.

The writer is a senior economic reporter at The News, Lahore