Pakistan’s energy minister has said that the country plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming year as it seeks to rejuvenate a crippling foreign-exchange crisis.
Large areas of Pakistan were plunged into hours of darkness last year following a shortage of natural gas which accounts for over a third of the country’s power output. This was exacerbated by a surge in global prices of liquefied natural gas (LNG) occasioned by Russia’s invasion of Ukraine and a dwindling economic crisis had made LNG unaffordable for Pakistan.
“LNG is no longer part of the long-term plan,” Pakistan Energy Minister Khurram Dastgir Khan was quoted as saying by reporters, adding that the country plans to increase domestic coal-fired power capacity from 2.31 GW to 10 gigawatts (GW) in the medium-term.
At a time when many developing countries are struggling to keep lights on, Pakistan’s plan to switch to coal so its citizens could have reliable electricity underscores challenges in drafting effective decarbonisation strategies.
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Despite power demand increasing in 2022, Pakistan’s annual LNG imports fell to the lowest levels in five years as European buyers elbowed out price-sensitive consumers.
“We have some of the world’s most efficient regasified LNG-based power plants. But we don’t have the gas to run them,” Dastgir said in an interview.
The Shanghai Electric (601727. SS) Thar plant, a 1.32 GW capacity plant that runs on domestic coal and is funded under the China-Pakistan Economic Corridor (CPEC), started producing power last week. The CPEC is part of Beijing’s global Belt and Road Initiative.
In addition to the coal-fired plants, Pakistan also plans to boost its solar, hydro and nuclear power fleet, Dastgir said.
If the proposed plants are constructed, it could also widen the gap between Pakistan’s power demand and installed power generation capacity, potentially forcing the country to idle plants. The maximum power demand met by Pakistan during the year ended June 2022 was 28.25 GW, more than 35% lower than the power generation capacity of 43.77 GW.
Although it was not immediately clear how Pakistan will finance the proposed coal fleet, the minister said setting up new plants will depend on “investor interest,” which he expects to increase when newly commissioned coal-fired plants are proved viable.
Financial institutions in China and Japan, which are among the biggest financiers of coal units in developing countries, have been backing out of funding fossil-fuel projects in recent years amid pressure from activists and Western governments.
Story was adapted from Reuters.
