In Pakistan, electricity is a necessary but costly good that presents a difficult problem for both customers and governments. The high cost of power in the nation is caused by a number of interconnected variables, which calls for a closer look at its political, infrastructure, and economic aspects.
The high reliance of Pakistan’s energy generation on fossil fuels, especially furnace oil and diesel, is a major contributing factor to the country’s high electricity costs. Due to this reliance, the energy industry is subject to changes in the price of crude oil globally, which drives up costs and passes them down to customers. In addition, transmission losses and antiquated infrastructure are among the inefficiencies in the energy production and distribution chain that lead to higher electricity costs.
Consumer financial strain is further compounded by the ongoing problem of circular debt, which arises from revenue shortfalls and operational inefficiencies in the energy sector. Achieving sustainable pricing models is made more difficult by political forces that frequently skew market dynamics, such as tariff laws and subsidies.
Pakistan’s high electricity costs must be addressed with a diversified strategy that includes modernising infrastructure, diversifying the energy source, and changing policies to increase affordability and efficiency. A more sustainable and easily accessible energy landscape for the country can be developed by stakeholders through an awareness of the complexity that underlie the cost of electricity.
There are a number of factors that might influence the price of electricity in Pakistan, making it more expensive than in other places. The following is a list of factors that contribute to Pakistan’s high electricity prices:
Dependency on Non-Renewable Energy Sources: Pakistan’s electricity generation is primarily dependent on non-renewable energy sources including coal, natural gas, and oil. Changes in the price of fuel globally can have a big effect on how much power costs.
Inadequate Domestic Energy Resources: Pakistan has some domestic energy resources, like coal reserves and hydroelectric potential, but it has difficulty effectively utilising them. Decreased capacity for exploration and extraction adds to reliance on foreign fuels, which raises expenses.
Challenges with Pakistan’s Energy Infrastructure: The country’s energy infrastructure is inefficient, with losses in transmission and distribution resulting from theft, old equipment, and technical malfunctions. The entire cost of producing and distributing power is increased by these losses.
Lack of Diversification in Energy Mix: Pakistan heavily relies on thermal power facilities, resulting in a lack of diversity in its energy mix. A less robust and more costly energy system is the result of low investment in renewable energy sources like solar and wind.
Dependency on Subsidies: Although meant to lower the cost of electricity for consumers, subsidies on electricity use put a pressure on public coffers and deter investment in energy-related infrastructure upgrades and efficiency initiatives.
Policy Instability: Investors may become uneasy due to shifting energy laws and regulations, which makes it more difficult to make long-term plans and investments in the energy industry. Private investment in infrastructure development and modernization may be discouraged by inconsistent policy.
Power providers’ Financial Viability: Pakistan’s state-owned power providers frequently struggle financially due to debt loads, ineffective operations, and problems collecting taxes. The financial limitations may result in increased prices to pay for debt servicing and operational expenses.
Capacity Shortages and Demand-Supply Gap: Pakistan frequently has both a supply and demand mismatch for energy. Utilities may use costly emergency measures, including operating inefficient backup power plants, during times of peak demand, which raises overall expenses.
Underinvestment in Renewable Energy: Despite the nation’s large potential for renewable energy, there has been a lack of funding for these projects, in part because of financial limitations, regulatory obstacles, and a preference for conventional energy sources.
Geopolitical Factors: Pakistan’s geopolitical position, which encompasses security issues and conflicts in the region, can affect energy supply chains and raise the price of maintaining steady energy supplies.
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