Abstract:
Pakistan is suffering from electricity crisis that has led to power outages throughout the country. The government has been trying to reduce power outages by introducing energy sector reforms and adding electricity generation capacity in the country. However, the problem of power outages has not yet been resolved. The primary reason for power outages is the non-utilization of available capacity of electricity in the country. There has been a shortage of oil and natural gas resources since the government is unable to finance these purchases due to liquidity crunch. The above situation is a direct consequence of rising circular debt and it has disrupted the power. This study examines the relationship between power outages and underlying factors. We use power outages and electricity generation data of Pakistan for 1980 to 2020. The empirical model employs Johansen cointegration approach to determine the link of power outages with electricity demand, fiscal deficit, thermal power generation, crude oil prices, installed capacity and distribution losses. The results provide evidence that fiscal deficit, transmission and distribution losses and electricity consumption raise power outages whereas crude oil prices, installed capacity and share of thermal power generation tend to decrease power outages. The study concludes that power outages cannot be eliminated without suitable financial management. Moreover, electricity generation from renewable energy sources should be pursued. This may help in addressing reliability challenges that are related to the inefficient generation fuel mix of electricity in Pakistan.
