Impact assessment of COVID-19 on Energy and Power Sector of Pakistan

Impact assessment of COVID-19 on Energy and Power Sector of Pakistan

Publication details

  • Wednesday | 15 Apr, 2020
  • Hina Aslam, Ubaid ur Rehman Zia, Nadeem Sheikh
  • COVID-19 Policy Review Series
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Introduction: Since the spread of Coronavirus to Southeast Asia, parts of the Middle East, Africa, Europe, Latin America, and more recently to the United States, commodity prices have been in free fall. As a consequence of reduced air travel, lower economic activity, and refinery shutdowns, it is hurling unprecedented threats on energy and power sector having major impact on generation and supply as well as infrastructure. Global forecasts for oil demand are getting gloomier and crude oil demand, which is projected to be less than one-half the rate of previous forecasts, necessitates action to curb additional output. This policy review attempts to suggest short-term actions policy makers and stakeholders can take to respond to the crisis and supply chain challenges from the global spread of COVID-19 ─ and looks ahead to the long-term solutions for Pakistan. Key Messages: • Energy is among the most critical enablers of modern life and is uniquely affected by COVID-19. • Pakistan has observed 15% drop in electricity demand during COVID-19 as compared to the value of same month in previous year. However, this is a negative indicator since it comes at the expense of many lives, un-employment, and an economic downfall. Global financial contraction, COVID-19, and collapse of oil prices will result in a more competitive energy market in Pakistan and is expected to reduce the LCOE of thermal energy (other than coal) sources. This will provide a major challenge to AER-2019 and penetration of renewables in energy mix of Pakistan. • We must identify the weak links in our supply chain and identify which ones are facing severe operational or financial struggles. Further, relevant stakeholders must identify the available alternatives. However, there is always a possibility that a third-party may serve as a critical failure point in response to COVID-19. • In short-term, Pakistan must decide whether it will rely on already existing supply chains that are mainly China dependent. Since, many Chinese manufacturers have halted their production, we are under a handicapped power development sector especially for deployment of renewables. • Although, oil-based generation might appear a more economic option currently, the broader picture is to look at the long-term implications and we should ensure that current and future system remains reliable and the future outlook doesn’t get lost in flurry of immediate processes. Instead the government must take challenge to step-up its climate ambitions as promised in Paris. • Although, at the current stage, it is difficult to predict time span for countering the pandemic, we must ramp up the research to analyze how the future will look depending on the transition during COVID-19 and how to tackle the current issues since it appears that electricity is indispensable.