Energy Storage Trends and Opportunities in Pakistan's C&I Sector

Introduction

Pakistan's Commercial and Industrial (C&I) sector is undergoing a significant transformation in terms of energy management and sustainability. The energy crisis that the country has been grappling with for years has prompted the need for efficient energy storage solutions. The situation is exacerbated by the longstanding energy crisis, with peak demand frequently surpassing generation capacities, leading to daily load-shedding of 8-12 hours, even in urban centers. This article aims to explore the current energy storage trends, the potential use cases, market barriers, and the opportunities that lie within Pakistan's C&I sector.

Electricity Sector and Energy Crisis

Pakistan's electricity sector has been in a state of flux, with rising prices on the global energy markets and currency devaluation affecting the cost of energy. The total generation capacity in 2021 was 39,772 MW, with renewables accounting for 5.4%. By 2030, the projected capacity is 61,112 MW, with a significant increase in the share of renewables to 22.3%. However, the peak demand in 2021 was already at 23,792 MW, emphasizing the urgent need for sustainable energy solutions.

Legal Framework and Regulations

The legal framework for energy storage in Pakistan is still in its infancy. There are no specific regulations, administrative procedures, or standards for battery energy storage systems. This lack of regulation poses a challenge for energy arbitrage, which is the act of absorbing low-cost, off-peak power and selling it during peak demand periods. Nevertheless, several policies have been introduced over the years to address energy issues, including the Policy for Development of Renewable Energy for Power Generation (2006), National Power Policy (2013), and the Alternative and Renewable Energy Policy (2019). The Integrated Generation Capacity Expansion Plan (IGCEP) 2021-30 projects long-term electricity demand and is expected to explicitly include battery energy storage systems in its next issue.

Relevant Ministries and Agencies

Key players in Pakistan's electricity sector include the National Electric Power Regulatory Authority (NEPRA), Alternative Energy Development Board (AEDB), National Transmission and Despatch Company (NTDC), and K-Electric (KE). These bodies are responsible for various aspects of power generation, regulation, and grid operation.

Energy Storage Technologies

Pakistan's energy storage landscape is currently dominated by lead-acid batteries, which are commonly used for UPS at the household level. Lithium-ion batteries are gaining attention for C&I and grid-scale applications due to their higher efficiency and longer lifespan. However, other technologies like flow batteries and flywheel/compressed air energy storage systems receive little to no attention.

Pilot Projects

Pilot projects such as the one by Lucky Cement and REON Energy in Pezu, which combines a 34MW PV plant with a 5.589MWh battery energy storage system (BESS), showcase the potential for integrating renewable energy into industrial operations. The NTDC's project in Jhimpir, a 20 MW wind energy project with a 20 MWh BESS funded by the Asian Development Bank (ADB), aims to provide frequency regulation and grid supportive services.

C&I Sector – Potential Partners

The textile and garment sector, being Pakistan's most important industrial sector with an export volume of USD 19.33 billion in 2021, presents significant opportunities for energy storage solutions. Similarly, the cement sector, which is the 7th biggest exporter worldwide, has a high electricity requirement estimated at 720 MW and could benefit from energy storage to stabilize its energy supply.

Market Barriers and Risks

The Pakistani market is price-sensitive and highly competitive, with a geographical and political proximity to China influencing the dynamics of the energy sector. Relationship building, after-sales services, and warranty issues are critical factors to consider for market entry. Additionally, there is a lack of an attractive financing mechanism for BESS, insufficient regulatory framework, and a lack of awareness and knowledge about energy storage technologies.

Recommendations for Market Entry

For businesses looking to enter the Pakistani energy storage market, it is recommended to engage local partners, establish a local presence, and start with small-scale pilot projects. Providing detailed information and case studies of technologies, offering solutions that reduce first-year costs, and considering the sale of small-scale applications can pave the way for success.

SWOT Analysis

Pakistan's market for energy storage presents various strengths, weaknesses, opportunities, and threats. While the country has good preconditions for renewable energy and low labor costs, it is still heavily reliant on fossil fuels and imports. The energy crisis and load shedding are persistent issues, and the regulatory framework is insufficient. However, there are opportunities in the increasing capacity of renewable energy, the lack of established major suppliers of BESS, and the unreliable power supply via the national grid. The Chinese-Pakistan Economic Corridor and dominance of Chinese companies are also factors to consider.

Conclusion

Pakistan's C&I sector offers a fertile ground for energy storage solutions, with significant opportunities for growth and investment. The evolving legal framework and pilot projects are paving the way for a more sustainable and reliable energy future. However, market barriers and the need for regulatory improvements must be addressed to fully leverage the potential of energy storage in Pakistan's C&I sector. With careful planning and strategic partnerships, businesses can navigate these challenges and tap into the promising market of energy storage in Pakistan.