By Muhammad Mudassar ISLAMABAD, Jan. 18 (INP-WealthPK) The world has begun transitioning from fossil fuels towards clean, green and environment-friendly energy sources due to serious environmental and health hazards caused by their consumption. With this supreme objective in view, countries around the world are cutting down on fossil fuels and increasing their use of renewable energy sources like wind, solar, tidal, and hydro to name a few. Pakistan also is no exception, as it has been bracing the hazardous effects of climate change in the shape of droughts, sea-level rise, intense heatwaves, and devastating floods taking their toll on human and animal life and food crops. In order to come to grips with this serious challenge, the Government of Pakistan is taking drastic measures for enhanced production of clean and green energy to save the climate and reduce the import bill that has eaten into the country’s hard-earned foreign exchange. Pakistan has massive potential for solar, wind, and hydel power, and the recent policies and initiatives have strongly advocated the need for transition towards clean energy resources. Pakistan has committed to the international community that under the Alternative Renewable Energy (ARE) policy, it aims to realize 30 percent power through hydro and 30 percent share of renewables (currently standing at 4 percent) in the energy mix till 2030. Pakistan recently launched the “Eco-System Restoration Fund” for supporting nature-based solutions to climate change and facilitating transition towards environmentally resilient initiatives, covering afforestation and biodiversity conservation. Moreover, the country also introduced its first electric vehicles policy in 2020 which aims to achieve a 30 percent share of electric vehicles (EVs) by 2030. Moreover, with the recent moratorium on coal by the prime minister at the world climate summit, Pakistan is leaping towards a green energy future. There are many other steps taken by provincial governments like waste to energy plants in Punjab and Sindh and solar tube wells distribution in Punjab. Being an important component of the economy, the transition of energy sector is rather challenging in Pakistan, as it involves a high cost. This South Asian country has been decreasing its reliance on thermal energy sources like local and imported coal, RLNG, and natural gas over the last few years. Pakistan’s total installed capacity of electricity was 37,261MW in FY2021. That’s 4% (1289MW) more than the previous year. Power generation reached 102,742 GWh in 2021. Pakistan's present energy mix consists of 12.2% indigenous gas, 26.5% hydel, 16.8% residual fuel oil (RFO), 19.7% of RLNG, 6.7% of nuclear, 4.4% of renewables, and a minimum amount of imported electricity. Significant growth of RLNG usage in the energy mix has helped improve supply to various power plants. RLNG is also supplied to fertilizer plants, industrial and transport sectors. In September 2021, the Asian Development Bank (ADB) launched Energy Transition Mechanism (ETM). The major purpose of ETM was to accelerate coal to clean energy transition. The ADB has made two separate funds under the ETM. The first one is the carbon reduction fund and the second one is the clean energy fund. The purpose of the carbon reduction fund is to provide a joint finance mechanism to incentivize the coal fire power assets. The clean energy fund purpose is to invest in clean and renewable energy expansion and promotion. Pakistan has huge potential to generate solar and wind power. According to the World Bank, utilizing just 0.071% of the country’s area for solar photovoltaic (solar PV) power generation would meet Pakistan’s current electricity demand. The wind is also an abundant source for power generation. Pakistan has several well-known wind corridors with average wind speeds of 7.87 m/s in 10% of its windiest areas. According to Dr. Abedullah, Chief of Research, Pakistan Institute of Development Economics Islamabad, improving the quality of Pakistan’s power supply and strengthening the energy sector requires investment and operational changes. It can only be possible by engaging foreign investors and slowly moving towards renewable energy. The World Bank has estimated that more than 10,000MW thermal capacity is going to retire and will be replaced with renewable energy by 2032. Due to massive losses in the energy sector, the Government of Pakistan is facing difficulties in moving toward renewable energy. One of the major reasons for loss is cross-subsidization among different sectors. Pakistan’s circular debt stands at Rs2300 billion. One of the major reasons is capacity payments to the power producing entities (IPPs, Wapda). In 2008, the circular debt stood at 1.6% of GDP (Rs. 161 billion) and reached 5.2% (Rs2150 billion) of GDP in June 2020. There is a need to improve energy transmission and distribution systems, reduce subsidies, improve governance and create an open energy market platform for long-term competitiveness, sustainability, and transparency in the electricity business. It will help to increase the revenue.