What If- Renewable Powered Power Trade Between India And Pakistan

Readers might be surprised to know that India’s trade in power is not insignificant when it comes to its neighbours. The country annually imports around 1,200 MW of power from Bhutan, exports 1,200 MW to Bangladesh, exports 450 MW to Nepal and 3 MW to Myanmar. India is also working on a plan to develop an undersea cable for trade with Sri Lanka that could potentially cut the latter’s generation costs by $180 million annually. However, the biggest potential for power trade remains unused, ie, that between India and Pakistan. Power, like so many other trade commodities, from sugar to wheat to capital goods and pharma, is an area where Pakistan stands to save literally billions of dollars, if it were to trade directly with India.

A market-based approach between grid operators of the two countries would probably be the easiest to execute, if political differences did not exist, as a significant demand centre like Lahore in Pakistan is barely a few kilometres away from, say, Amritsar on the Indian side.

Unfortunately, the power exchange possibilities between India and Pakistan have been left largely unexploited, a circumstance not helped by the current suspension of trade between the two countries due to geopolitical conflicts surrounding Kashmir, especially since Article 370’s abrogation. Pakistan’s long years of a power crisis, involving frequent outages for 6-8 hours at a time, has many causes: flawed energy policies and poor planning, high cost of generation, poor transmission and distribution infrastructure, high dependence on expensive and imported furnace oil, lack of technical know-how to develop renewable sources even though resources like solar and wind are present aplenty. India, on the other hand, would seem to face a problem of plenty, with solar costs reaching Rs 2 per unit, and utility-scale projects at a price of Rs 2.70 still to find takers. In Pakistan, by contrast, prices across domestic and industrial categories are 15 to 20 percent higher, and seemingly locked into an ever-escalating cycle due to continued dependence on fossil fuels.

Oil-produced costly electricity coupled with delayed payments by households has led the Pakistani government to finance power single-handedly and get caught in ‘circular debt’ for years which now exceeds PRs two trillion. According to the Pakistan Economic Survey 2019-2020, the country’s principal source of energy- thermal power- accounts for a massive 60% approximately. Interestingly, the total installed generation capacity is 37,402 MW, and while the maximum demand is 25,000 MW, the distribution capacity is capped at 22,000 MW. Clearly a paradoxical situation- surplus capacity and power shortage- has developed in the nation in recent times. Interestingly, there will be 50% ‘excess’ energy by 2030 which will increase the government’s financial burden. The reason for this excess power may be attributed to the much-hyped China Pakistan Economic Corridor (CPEC)- a $47 Billion investment (worth $62 billion as of 2020) in Pakistan’s infrastructure (chiefly, the energy industry) as part of China’s ambitious Belt and Road Initiative that aims to increase China’s trade and growth through forging connecting routes with Europe, Africa and the rest of the world. The institutional capture of the country’s energy sector is complete when one considers the modest renewable energy targets the country has set itself. Or the way outdated costs and limitations of solar energy are still bandied about in official circles to justify a higher focus on oil, coal and gas-powered energy supplies. In fact, as a country that will be at the forefront of the impact from climate change, the case for Pakistan to change its energy mix was never stronger, and the least the country needs to do is to stop further development of coal-based plants.

Even the CPEC project is riddled with major red flags, especially the setting up of major coal power plant/s which will make electricity costlier in the future and have a detrimental impact on Pakistan’s environment, further adding to its health, pollution and water woes. The country’s power shortage, which persists today despite surplus energy, will not be mitigated unless investment is made towards developing renewable sources and improving the existing transmission systems. Since significant progress in this direction hasn’t been made to date, Pakistan would have done very well by importing solar-powered energy from India where solar costs have been driven down to levels well below coal power (especially for plants located away from mining pit heads). Keep in mind that border states like Gujarat and Rajasthan are emerging as renewable energy hubs in India, lowering possible transmission costs further for exports to Pakistan, should the need arise.

Annual potential for power exports ranges from 1500 MW to 3000 MW, depending on how one evaluates demand in Pakistan. And the price of such power, especially if the final price for a Pakistani grid operator was to be below Pakistani Rs 6.50 per unit (INR 3.16).

Note: The ‘what if’ series is an effort by us to present occasional interesting scenarios that make us consider the possibilities that would exist with a little more common sense and imagination. Suggestions are welcome for more such explorations in ‘what if’.