ISLAMABAD-The Asian Development Bank (ADB) has given policy recommendation to government of Pakistan to improve the energy sector and to resolve the outstanding issues being faced by the sector.
A latest report published by the ADB titled “CAREC Energy Outlook 2030” recommended to continue energy sector reforms via privatization and develop competitive markets further. The shift towards a competitive energy market for both electricity and natural gas should continue, with clearly adopted legislation to ensure efficient implementation.
It also recommended to gradually decrease energy subsidies for generation and distribution. This can potentially be achieved by revising the existing tariff structure to allow higher returns for T&D companies, thereby decreasing circular debt while enabling larger infrastructure investments. The revised subsidy strategy for power consumers devised in 2021 is an important step in this direction.
“Continue the expansion of and support for the renewable energy sector. The tremendous potential for solar PV and wind power generation should be developed rapidly. A transition away from thermal generation would reduce both emissions and supply risks, decreasing the country’s dependency on imports”, the report added.
Introduce carbon pricing, specifically an emissions trading scheme. Carbon pricing is an effective policy instrument to mitigate GHG emissions, mainly by passing the cost of emitting to the emitters and thereby giving them financial incentives to reduce their emissions. Launching the National Committee on Establishment of Carbon Markets in December 2019 was the first step in this direction.
The report further proposed to introduce a detailed energy plan for the energy sector that establishes concrete actions and measures. The successful adoption of a detailed energy plan for the energy sector will improve transparency and help guide private investors in their search for investment opportunities.
Clearly define resource categories to ensure proper development. Categorizing hydropower as a renewable energy resource is crucial for the successful implementation of further projects, and for attracting more investment via incentives for renewable power projects.
The report recommended to establish development plans for the transmission sector and rural electrification. One of the key challenges is high T&D losses, which is also a primary cause of circular debt in the market. “The successful implementation of the country’s transmission line development plan will provide a defined strategy toward the reduction of losses. In addition, strategy planning for the electrification of rural regions is of great importance, as it will introduce more customers to the grid and enable further economic development”, the report added.
It also proposed to further introduce energy efficiency policy measures in consumption sectors via building codes and relevant legislations. While an energy efficiency policy with a strong development goal has been established, further implementation of related rules and secondary legislation is required to ensure sufficient progress during the implementation stage.