Cement and Textile Industries: Pioneering Energy Storage in Pakistan's C&I Sector

Pakistan’s economy has been increasingly burdened by an energy crisis that impacts every sector of its industry. The Commercial and Industrial (C&I) sector, in particular, has been deeply affected, with the cement and textile industries at the forefront. This article will delve into the pioneering efforts of the cement and textile industries in adopting energy storage solutions to mitigate challenges faced due to the country’s energy deficit.

The Electricity Sector and Energy Crisis in Pakistan

Pakistan’s longstanding energy crisis is characterized by peak demand surpassing generation capacities, leading to daily load-shedding of 8 to 12 hours, even in urban centers. The grid has become a bottleneck, and the situation is exacerbated by rising prices on the global energy markets and currency devaluation. Despite efforts to increase total generation capacity, which stood at 39,772 MW in 2021 with a renewable share of 5.4%, and is projected to reach 61,112 MW by 2030 with 22.3% renewables, peak demand continues to outstrip supply.

The C&I Sector's Energy Dilemma

Many production facilities in Pakistan are grid-connected but also rely on captive power plants (CPPs) due to the unreliable grid supply. Volatile prices for fossil fuels add to the challenges faced by the C&I sector. The textile and garment sector, Pakistan's most important industrial sector, and the cement industry, the 7th biggest exporter worldwide, are particularly affected. These industries are under pressure to meet sustainability goals and decarbonize, which makes energy storage solutions an attractive proposition.

Legal Framework and Regulations

Pakistan’s energy sector is regulated by various agencies, including the National Electric Power Regulatory Authority (NEPRA), which issues licenses and sets electricity prices, and the Alternative Energy Development Board, which issues permits to independent power producers. The National Transmission and Despatch Company (NTDC) and K-Electric (KE) are responsible for the operation of the national and Karachi region power grids, respectively.

Regulatory frameworks such as the Policy for Development of Renewable Energy for Power Generation 2006, National Power Policy 2013, and Alternative and Renewable Energy Policy 2019 have set ambitious targets for renewable energy growth. However, the lack of specific regulations for battery energy storage systems, along with trade barriers like a 100% cash margin on batteries, hinders the adoption of energy storage solutions.

The Potential of Energy Storage

Energy storage can address several use cases in Pakistan's energy sector, including energy arbitrage, frequency regulation, voltage support, and as a backup solution. Technologies like lead-acid batteries and lithium-ion batteries are prevalent, while flow batteries and flywheel/compressed air energy storage receive little attention.

Pioneering Pilot Projects

Lucky Cement and REON Energy's pilot project in Pezu, featuring a 34MW photovoltaic (PV) plant with a 5.589MWh battery energy storage system (BESS), is a landmark development. Additionally, NTDC's project in Jhimpir with 20 MW wind energy and a 20 MWh BESS funded by the Asian Development Bank represents the first grid-scale battery storage project in Pakistan.

Market Potential and Partnerships

The textile and garment sector, with an export volume of USD 19.33 billion in 2021, and the cement sector, with an electricity requirement estimated at 720 MW in 2016, are prime candidates for energy storage partnerships. The market is price-sensitive and competitive, with geographical and political proximity to China (CPEC) influencing the dynamics.

Market Barriers and Risks

The market faces barriers such as price sensitivity, the need for relationship building, after-sales service concerns, and warranty issues. The presence of Chinese companies in the PV sector due to the Chinese-Pakistan Economic Corridor (CPEC) further complicates market entry for other international players.

Recommendations for Market Entry

To successfully enter the market, businesses should engage with potential Pakistani partners, show market commitment, start with small-scale pilot projects, provide detailed technology information, offer cost-reducing solutions, and consider the sale of small-scale applications at the household level.

SWOT Analysis

The market for energy storage in Pakistan presents opportunities such as good GDP growth rates and preconditions for renewable energy. However, weaknesses like a lack of skilled workers, dependency on fossil fuels, and an inefficient regulatory framework need to be addressed. The increase in renewable capacities and the lack of established major BESS suppliers offer a window for new entrants, despite challenges like volatile currency and high public debts.

Conclusion

The cement and textile industries in Pakistan are at the forefront of adopting energy storage solutions to mitigate the impacts of the country’s energy crisis. The potential for energy storage in the C&I sector is significant, and pilot projects have already demonstrated the benefits. Overcoming market barriers will require strategic partnerships, regulatory support, and innovative financing mechanisms. With the right approach, the C&I sector in Pakistan can lead the way in energy storage, contributing to the country’s energy security and sustainable development goals.