Energy Productivity for Sustainable Development – Pt I

Energy productivity has become an important policy instrument across the globe, as it provide details of energy consumed while focusing on growth, economic diversification, innovative technologies and also efficiency in the use of energy. Its effects are positive on country’s economic growth. This new paradigm allows all economic activities to seize maximum economic benefits and minimize environmental concerns through the optimal use of energy. Its focus goes beyond efficiency and demand management, and includes generation through renewables.

Limited Decoupling of Energy and Economy

In Pakistan, unlike most of the countries, we can hardly see any decoupling of energy and economy taking place. Since 2000, percentage increase in energy productivity in Pakistan is less than 5 percent. In comparison, since 2000 world’s average energy productivity has increased by about 11 percent; energy productivity in China, India, Malaysia, Japan, United Kingdom, Germany and United States have increased by almost 46 percent, 23 percent, 24 percent, 31 percent, 59 percent, 32 percent and 34 percent respectively. On the other hand, China and even India were much below Pakistan in 2000 and before, but they have improved significantly.

Energy demand in Pakistan has grown at about 5 percent over the years. 29 percent of the population is still without access to electricity. With rising urbanisation, growing population and burgeoning middle class, energy demand is expected to rise even more in future. Thus, more environmental threats associated with increasing energy demand. Without countering these threats we will be endangering our future generations.

There is enormous potential to reduce demand for energy by increasing energy productivity. According to one estimate, we can reduce 20 percent to 25 percent of energy demand only through its productive use in various sectors, as fourth industrial revolution has empowered us to consume energy more intelligently. 20 percent savings from efficiency and demand management in Pakistan corresponds to more than 50 percent reduction in oil imports.

Consumers of Our Energy

Our industry is the largest consumer of energy, that is, 36 percent of total energy is consumed in industry, whereas, it contributes only 18 percent to our GDP. Most of our industrial units are highly energy intensive and susceptible to high energy losses across various assembly lines. This leads to high energy bills and loss in productivity. Energy costs in total production costs ranges from 20 percent to 50 percent in various industrial units[2]. This affects not only the financial health of our industry but its competitiveness in export markets. Giving them energy price concessions is not going to help, there is a need to improve energy productivity of our industrial units, especially SMEs, to boost their competitiveness. According to SMEDA, there is a little awareness and even less expertise in SMEs in terms of energy saving practices and skill development to achieve best energy management practices.

International evidence suggests, enterprises that implement plans to increase their energy productivity can enjoy reduction in overall costs, increase in profits and overall competitiveness. Besides, it mitigates greenhouse gas emissions, creates new jobs, and improve energy security.

Energy Saving Potential

Pakistan has the potential for industrial expansion. Our industry can increase its competitiveness by applying energy-efficient best practices in new industries. In existing ones, only by replacing obsolete technology can save enormous energy costs. For example, by 35 percent in boilers and 20 to 30 percent in electric motors.

Similarly, transport is the second largest consumer of energy, i.e., 34 percent of total final energy consumption and almost 59 percent of liquid fuel consumption in Pakistan. We are dependent on imports for more than 80 percent of our liquid fuel consumption. In 2017-18, we spent more than 50 percent of our export earnings on oil imports. Saving energy in transport by only 10 percent in 2017-18 could have saved us about US$ 1.2 billion. This can be transformed into a saving of about US$ 10 billion (at the current exchange rate) by 2030. It is easily achievable, only through strict compliance with fuel efficiency standards; discouraging low occupancy private cars; cost-reflective road pricing and through the increased use of renewables in various transport modes.

In buildings, whether they are domestic or in the commercial sector, energy efficient building codes are not enforced properly as building control authorities are short of resources as well as expertise. There is enormous energy saving potential in buildings (in monetary terms for the users also) which can be achieved through proper building design and through the replacement of inefficient lighting, air-conditioning and water pumping systems. Similarly, in agriculture instead of giving them subsidy, we can encourage them to use efficient water pumping and avoid wastage of water resources.

Renewable Energy

Other important aspect of energy productivity is use of renewable energy. The use of these resources is increasingly at an accelerated pace around the world but Pakistan has just begun to encourage its consumption. At present, more than 60 percent of the electricity generated in Pakistan comes from fossil fuel based generation, including gas, coal and oil. In comparison, installed capacity of renewables (wind, solar and bagasse) is only 6 percent[1]. Moreover, the upcoming generation capacity under CPEC is largely from coal-fired power plants, seven times larger than the expected renewable installed capacity. In Pakistan, the idea of energy conservation and demand management has not remained popular because of government neglect and because of lack of public awareness of its overall benefits. Likewise, we are going at a snail’s pace in adding renewables in our energy mix.

[1] Cited from Energy Efficiency Roadmap for Pakistan, World Bank, 2019.

[2] https://smeda.org/index.php?option=com_content&view=article&id=18&Itemid=120

[3] https://www.pc.gov.pk/uploads/annualplan/AnnualPlan2019-20.pdf