ISLAMABAD: Pakistan currently faces a challenge with surplus electricity capacity, which often leads to fiscal strain.
However, this surplus power can be transformed into a vital asset by driving a new industrial policy that targets energy-intensive manufacturing.
By reallocating surplus electricity to industries like steel, copper smelting, and aluminum, Pakistan can boost exports, create jobs, and stimulate economic growth.
With the rise of solar power and household battery storage reducing grid demand, there is an urgent need to integrate this reality into energy planning and policy.
Rethinking Power Pricing and Industrial Growth
Moving away from outdated cost-plus pricing models towards a marginal cost pricing system is crucial.
This approach would allow surplus power to be auctioned to industries that generate maximum economic value without cross-subsidies or direct subsidies.
The focus should be on fostering industrial growth that adds real value through forward and backward integration, particularly in energy-intensive sectors.
Additionally, cold-chain infrastructure in agriculture, currently underdeveloped due to high power costs, can benefit from affordable electricity sourced through a blend of solar and grid power.
This would encourage value addition in agriculture, reducing waste and increasing exports.
Policy and Economic Implications
Global studies highlight how subsidies can distort trade and industrial sectors, yet targeted state intervention can unlock latent advantages in overlooked industries.
A well-designed industrial policy must measure results, keep incentives time-bound, and allow unproductive ventures to phase out efficiently.
Pakistan’s installed power generation capacity has outpaced peak demand and will likely continue to grow, especially with increasing solar adoption.
This creates idle megawatts that could be sold at marginal or fuel-only cost prices to qualified industries, encouraging higher electricity consumption and export growth.
Policy tools include auctioning surplus power for greenfield and brownfield projects, revitalizing special economic zones, and improving infrastructure services like electricity, gas, water, and effluent treatment.
Clear export targets linked to power supply could help track industrial performance and phase out non-performing players.
Capitalizing on local coal, gas, and minerals through better power pricing can boost value addition and exports from regions like Sindh and Balochistan.
Pakistan now faces a choice: let surplus power remain a financial burden and risk grid instability, or leverage it as the foundation for a new era of export-led industrial growth and job creation.
With discipline and clear policy, power-led industrialization could become a key engine for Pakistan’s economy.
