Overcoming Market Barriers: Strategic Approaches to Energy Storage in Pakistan

Introduction

Pakistan's commercial and industrial (C&I) sector is at a crossroads as it grapples with a longstanding energy crisis that impedes its economic growth. To overcome this challenge, strategic approaches to energy storage are being explored as a means to stabilize the nation's erratic power supply and support its industrial base. This article, inspired by the insights shared by Kai Neuber of energiewaechter GmbH, delves into the potential for energy storage solutions in Pakistan's C&I sector, the market barriers, and the strategic recommendations for market entry.

 

The Electricity Sector and Energy Crisis

For years, Pakistan has been battling an acute energy shortage that has led to daily load-shedding of 8-12 hours, even in urban centers. This crisis has resulted in peak demand consistently surpassing generation capacities, with the grid becoming a bottleneck for reliable energy distribution. The situation has been exacerbated by rising prices on the global energy markets and the national currency's devaluation.

 

Electricity Market Projections

The electricity market projections for Pakistan indicate that the total generation capacity was 39,772 MW in 2021, with a mere 5.4% share of renewables. By 2030, this capacity is expected to rise to 61,112 MW, with renewables accounting for 22.3%. However, peak demand is also projected to increase, from 23,792 MW in 2021 to 37,129 MW in 2030. These figures underscore the pressing need for scalable energy solutions, including energy storage, to bridge the supply-demand gap.

 

The C&I Sector

Pakistan's C&I sector is heavily reliant on grid-connected power, supplemented by Captive Power Plants (CPPs) due to the unreliable grid supply. The volatile prices of fossil fuels used for CPPs have become a significant burden, highlighting the need for alternative solutions like energy storage.

 

Legal Framework and Regulations

The existing legal framework includes the Renewable Energy for Power Generation Policy of 2006, the National Power Policy of 2013, and the Alternative and Renewable Energy Policy of 2019. However, no specific regulations or standards for battery energy storage systems have been implemented, and trade barriers persist, such as a 100% cash margin requirement on lithium-ion and lead-acid batteries.

 

Relevant Ministries and Agencies

Several agencies play crucial roles in regulating and facilitating the energy sector in Pakistan. The National Electric Power Regulatory Authority (NEPRA) issues licenses and sets electricity prices, while the Alternative Energy Development Board (AEDB) and the National Transmission and Despatch Company (NTDC) oversee permits and the national power grid, respectively. K-Electric (KE) is responsible for Karachi's regional power grid.

 

Energy Storage Potential and Technologies

Potential Use Cases

Energy storage in Pakistan has several potential use cases, such as energy arbitrage, frequency regulation, voltage support, and as a backup solution. However, the lack of regulation makes energy arbitrage currently impossible, while frequency regulation and voltage support, especially for NTDC, are the most promising use cases.

 

Technologies

The most common energy storage technologies in Pakistan are lead-acid batteries, used primarily for UPS at the household level. Lithium-ion batteries are the focus for C&I and grid-scale applications, while flow batteries and flywheel/compressed air energy storage systems have received little to no attention.

 

Pilot Projects

Lucky Cement and REON Energy in Pezu

This project consists of a 34MW photovoltaic (PV) system with a 5.589MWh battery energy storage system (BESS) designed to balance variable energy output from waste heat recovery and the PV plant. The project aims to enhance the overall efficiency of the CPP.

 

NTDC in Jhimpir

Funded by the Asian Development Bank, this project pairs 20 MW of wind energy with a 20 MWh BESS, focusing on frequency regulation and grid-supportive services. It is a major learning project for Pakistan, with plans to be operational in 2023.

 

Market Potential and Partners

Textile and Garment Sector

The textile and garment sector, being Pakistan's most important industrial sector, is under pressure to meet sustainability goals and decarbonize. This sector presents a significant opportunity for energy storage solutions.

 

Cement Sector

The cement sector, another vital industry, has an estimated electricity requirement of 720 MW. Energy storage can play a crucial role in stabilizing the energy mix, which currently includes waste heat recovery and multi-fuel burners.

 

Market Barriers and Risks

The market for energy storage in Pakistan is price-sensitive and highly competitive, with a political and geographical proximity to China. Relationship building, after-sales services, and warranty issues are critical considerations for market entry.

 

Recommendations for Market Entry

To enter the Pakistani energy storage market, companies should engage local partners, establish a local presence, and start with small-scale pilot projects. Providing detailed information, case studies, and solutions that reduce first-year costs can help gain traction in the market.

 

SWOT Analysis

Strengths: Pakistan offers low labor costs, high growth rates in electricity-intensive industries, and a relatively resilient democratic system.

 

Weaknesses: The market is hampered by a lack of skilled workers, high dependency on fossil fuels, a focus on short-term gains, an inefficient utilization of domestic resources, and an insufficient regulatory framework.

 

Opportunities: The increase in renewable energy capacities and the absence of major BESS suppliers provide a window for new entrants.

 

Threats: The market is challenged by volatile currency, high public debts, perceived corruption, and climate change risks.

 

Conclusion

Energy storage presents a transformative opportunity for Pakistan's C&I sector to overcome the energy crisis and support sustainable growth. By understanding the market dynamics, regulatory environment, and potential use cases, companies can navigate the barriers and strategically position themselves in this emerging market. Building strong local partnerships and tailoring solutions to meet the unique needs of the Pakistani C&I sector will be crucial for success in overcoming market barriers and harnessing the full potential of energy storage in Pakistan.