The Future of Energy Storage in Pakistan: Pilot Projects and Market Potential

ntroduction

 

In recent years, Pakistan has faced a significant energy crisis, characterized by peak demand often surpassing generation capacities, leading to daily load-shedding in urban centers and a grid that has become a bottleneck for economic growth. This energy crisis is further exacerbated by rising prices on global energy markets and currency devaluation, placing additional pressure on the country's electricity sector. In response, Pakistan is making strides to diversify its energy mix and explore innovative solutions, particularly in the realm of energy storage. This article delves into the future of energy storage in Pakistan, examining pilot projects, market potential, and the challenges and opportunities that lie ahead.

 

Electricity Sector and Energy Crisis

 

Pakistan's electricity sector is undergoing a significant transformation. As of 2021, the total generation capacity stood at 39,772 MW, with renewables accounting for a mere 5.4%. However, projections suggest a more promising future, with an expected capacity of 61,112 MW by 2030, where the share of renewables could leap to 22.3%. Despite this, peak demand is anticipated to reach 37,129 MW by 2030, underscoring the urgent need for reliable energy storage solutions.

 

Legal Framework and Regulations

 

Efforts to revamp the legal framework for energy have been made, with policies like the Alternative and Renewable Energy Policy 2019 setting ambitious targets. Nonetheless, no specific regulations, administrative procedures, or standards for battery energy storage systems (BESS) are currently in place. This regulatory gap, coupled with trade barriers such as the 100% cash margin on lithium-ion and lead-acid batteries, presents a significant challenge for the growth of the energy storage market in Pakistan.

 

Relevant Ministries and Agencies

 

Several key players, including the National Electric Power Regulatory Authority (NEPRA), the Alternative Energy Development Board, the National Transmission and Despatch Company (NTDC), and K-Electric (KE), play pivotal roles in shaping the country's energy storage landscape. Their responsibilities range from issuing licenses, setting electricity prices, and operating the national power grid to overseeing the Karachi region's power grid.

 

Energy Storage Technologies and Potential Use Cases

 

In Pakistan, lead-acid batteries are commonly used for uninterruptible power supply (UPS) at the household level, while lithium-ion batteries are gaining attention for commercial and industrial (C&I) sector applications. Despite the potential of flow batteries and other technologies like flywheels or compressed air energy storage, there is currently limited interest from industry stakeholders.

 

Pilot Projects Showcasing the Way Forward

 

Notable pilot projects, such as the one by Lucky Cement and REON Energy in Pezu, demonstrate the feasibility and benefits of integrating BESS with renewable energy sources. This 34MW photovoltaic (PV) project, coupled with a 5.589MWh BESS, aims to enhance the efficiency of captive power plants (CPPs) by balancing variable energy outputs. Another pioneering initiative by NTDC in Jhimpir, funded by the Asian Development Bank (ADB), focuses on frequency regulation and grid supportive services, expected to be operational in 2023.

 

Market Potential and Potential Partners

 

The C&I sector in Pakistan, particularly the textile and garment and cement sectors, offers substantial opportunities for energy storage solutions. These industries are under increasing pressure to meet sustainability goals and reduce carbon footprints. Energy storage can play a vital role in helping them achieve these objectives while also addressing the need for a stable power supply.

 

Market Barriers and Risks

 

Pakistan's energy storage market is highly competitive and price-sensitive. Geopolitical considerations, such as its proximity to China and the China-Pakistan Economic Corridor (CPEC), influence the market dynamics. Additionally, after-sales service and warranty issues pose barriers to market entry.

 

Recommendations for Market Entry

 

For companies looking to enter the Pakistani energy storage market, building strong relationships with local partners is crucial. Establishing a local presence and demonstrating a commitment to the market can facilitate small-scale pilot projects that may lead to larger opportunities. Offering solutions that reduce initial costs and providing detailed case studies of technologies can also be advantageous.

 

SWOT Analysis of Pakistan's Energy Storage Market

 

Strengths:

 

Pakistan has developed a relatively resilient democratic system.

Good GDP growth rates and geographic preconditions for renewable energy.

Low labor costs and high growth rates in electricity-intensive industries.

Weaknesses:

 

Lack of skilled workers and a strong focus on short-term gains.

Insufficient regulatory framework and lack of attractive financing mechanisms for BESS.

Inefficient utilization of resources and a long-lasting energy crisis.

Opportunities:

 

Increase in renewable energy capacities and no established major BESS supplier in Pakistan.

Unreliable power supply via the national grid requires alternative solutions.

Threats:

 

Volatile currency, high public debts, and very high climate change-related risks.

Dominance of Chinese companies in certain sectors and traditional price sensitivity.

Conclusion

 

The future of energy storage in Pakistan is poised for growth, with pilot projects demonstrating the potential for integrating renewable energy sources with efficient storage solutions. The C&I sector, particularly the textile and garment and cement industries, represents a significant market opportunity for energy storage. However, overcoming regulatory, financial, and market barriers will be essential to unleashing the full potential of energy storage in Pakistan. By adopting tailored strategies for market entry and leveraging the country's strengths, companies can contribute to a more sustainable and resilient energy future for Pakistan.