Transmission losses, import dependence, and political instability: A Co-integration perspective on Pakistan's energy crisis

This study interrogates the structural drivers of Pakistan's enduring electricity supply–demand imbalance by empirically modelling the national energy gap the systematic shortfall between grid-delivered electricity and contemporaneous demand over the period 1990–2023. Utilizing a cointegrated vector that incorporates energy consumption (EC), transmission and distribution (T&D) losses, energy imports (EI), electricity access (AE), real GDP, political instability (PI), labor force (LF) and unemployment (UE), we estimate long-run elasticities through Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) estimators, with Canonical Cointegrating Regression (CCR) employed for robustness. Results indicate that a 1 % increase in real GDP or LF enlarges EC by 0.42–0.45 %, whereas equivalent increments in T&D losses, EI, UE and the PI index widen the energy gap by 0.38 %, 0.29 %, 0.17 % and 0.21 %, respectively. Asymmetry tests reveal that positive shocks to PI and losses transmit gap-widening effects 1.5 times larger than equivalent negative shocks narrow the gap. The findings corroborate that governance volatility and technical inefficiencies are first-order constraints on supply adequacy and imply that reducing T&D losses below 12 % of net generation, diversifying the energy mix toward domestic renewables, and insulating sectoral governance from political cycles are necessary conditions for eliminating the gap and achieving sustainable electricity security by 2030.