Afghanistan’s energy sector faces a significant and persistent deficit, hindering its economic and social development. The country has one of the lowest per capita energy consumption rates in the world, with a high percentage of its population, especially in rural areas, lacking reliable electricity. This has led to a costly reliance on imported power, creating a strategic vulnerability.
This article outlines a strategic pivot toward leveraging Afghanistan’s vast domestic energy resources. The analysis highlights the critical role of private sector investment as the primary driver for this transformation. Key projects, such as the $10 billion Azizi Energy initiative, demonstrate this new paradigm. Achieving this transformation requires a strong regulatory framework and clear incentives for investors. The article concludes with a roadmap to achieve self-sufficiency, which promises to unlock immense socio-economic benefits and position Afghanistan as a future regional energy hub.
Afghanistan’s energy situation is marked by a severe gap between supply and demand. The nation has a per capita annual power consumption of only 150 kWh, which is “negligible” compared to the global average of 2,728 kWh. An estimated 85% of the rural population lacks continuous access to electricity.
Domestic generation accounts for only 22.6% of the country’s total electricity supply, leading to a heavy dependence on imports. Afghanistan purchases between 70% to 80% of its electricity from neighboring countries, a situation that is both a financial burden and a strategic vulnerability. The national utility company, Da Afghanistan Breshna Sherkat (DABS), spends around 300 millions of dollars annually on imports and millions of dollars to operates at a loss, as the cost of generating thermal electricity is significantly higher than its sale price.
The strategic risks are also pronounced, as the country’s energy supply is vulnerable to political and economic tensions or technical disruptions in neighboring nations.
While in stark contrast to its energy deficit, Afghanistan has immense, untapped potential for energy self-reliance. The Ministry of Energy and Water estimates the country’s total renewable energy potential at over 300,000 MW.
- Solar Power: With over 300 days of sunshine per year, Afghanistan has the potential to generate more than 222,000 MW of electricity from solar panels.
- Hydropower: The country’s topography and river systems give it the potential to produce over 23,000 MW of hydroelectricity.
- Wind Power: Estimated at around 68,000 MW, wind power holds significant promise, particularly in the western and northern regions.
Beyond renewables, the country possesses significant hydrocarbon resources. A USGS assessment revealed that undiscovered resources include a mean of 15.687 Trillion Cubic Feet (TCF) of natural gas and 1.596 billion barrels of oil, which could potentially meet up to 80% of the country’s petroleum requirements.
The Engine of Transformation: Pivotal Role of the Private Sector
The strategic shift toward a private-sector-led model is the most critical element of Afghanistan’s energy transformation. With limited government resources, private capital is a “vital” pathway to a self-sufficient and resilient economy.
The landmark $10 billion agreement with Azizi Energy is a key example. This project will generate, transmit, and distribute 10,000 MW of electricity using a diversified energy mix, with the goal of not only meeting domestic demand but also positioning Afghanistan as a regional energy exporter. The project is expected to create between 100,000 and 150,000 jobs, with 98% of the workforce being Afghan nationals. The Mazar Independent Power Project (IPP) provides another case study, as the country’s first private-sector-funded power plant, which serves as a template for future projects and demonstrates the viability of private ventures.
To attract and sustain private investment, Afghanistan has taken concrete steps to develop a transparent policy and regulatory framework. The National Renewable Energy Policy (ANREP) provides a strategic framework with specific incentives for private investors and suppliers. These include income tax exemptions for the first five years of a project’s commercial operation and exemptions on customs duty and sales tax for importing essential equipment. The policy also provides a “must-run” status for all renewable energy projects, ensuring that all electricity generated is used by the national utility company.
Despite these efforts, obstacles remain, including a weak revenue collection system and the need for greater transparency in contracts. The government must continue to act as a facilitator, streamlining investment procedures and guaranteeing legal protections to build long-term investor confidence.
The transformation of Afghanistan’s energy sector is a fundamental catalyst for socio-economic development. The lack of reliable and affordable energy stifles business growth and negatively impacts social welfare.
The UNDP’s solarization initiatives, which have installed solar systems in 30 health centers and 15 schools, demonstrate how clean, reliable energy can ensure an uninterrupted power supply for critical equipment, allowing funds to be reallocated from fuel costs to essential services. In the agricultural sector, projects like the Pashdan Dam, with its modest 2 MW electricity generation capacity, provide power for water pumps and cold storage, and Shah-o-Aros Dam with 2.5 MW electricity generation capacity and dump water for agriculture purpose in northern Kabul Shakardara district can increase production efficiency and reduce post-harvest losses. Access to energy for rural communities is key to achieving social equity and improving health and economic well-being.
A Strategic Roadmap for Sustainable Energy Transformation
The path to a sustainable energy future for Afghanistan requires a deliberate, phased approach.
- Phase I: Immediate Actions (Short-Term): The immediate priority is to stabilize the grid and address the current energy deficit. This involves prioritizing small-to-mid-scale, decentralized projects like solar home systems that can be implemented quickly and efficiently in remote areas.
- Phase II: Scaling Up (Mid-Term): This phase focuses on the full implementation of large-scale, private-sector-led projects, such as the 10,000 MW Azizi Energy initiative, to significantly increase domestic generation capacity. Concurrently, a robust and synchronized national grid must be built to integrate these new sources.
- Phase III: Long-Term Vision (Sustainable Self-Reliance): The long-term goal is to achieve energy self-sufficiency and transform Afghanistan into a regional energy hub. The country aims to reduce its electricity imports from 75% to 0% by 2032 and produce a surplus for export, thereby generating a new source of national revenue.
Conclusion
Afghanistan’s energy crisis is a solvable problem rooted in a history of conflict and instability, not a lack of resources. By leveraging its immense, untapped potential and embracing a private-sector-led model, Afghanistan can transition from a state of energy poverty to one of self-sufficiency. The commitment to landmark projects and a conducive investment environment is a powerful testament that this vision is already in motion. This strategic approach promises to not only solve the energy crisis but also to generate thousands of jobs, stimulate local industries, and lay the foundation for long-term peace, prosperity, and national resilience.
Recommendations
For Afghanistan’s energy transformation to succeed, a coordinated effort is required from the government, private sector, and stakeholders. Based on a close analysis of the sector, the following recommendations are designed to foster a sustainable and self-reliant energy future.
For the Government
The government must prioritize creating a stable and transparent investment environment by implementing legal reforms that guarantee legal protections and contract enforcement. It should simplify bureaucracy and offer clear financial incentives, such as tax and duty exemptions for energy projects. Additionally, the government should act as a facilitator by establishing a dedicated financial institution to support projects and focusing on modernizing the national grid to integrate new energy sources.
For the Private Sector
The private sector is encouraged to leverage the “first mover” opportunities in Afghanistan’s pro-business market. It should actively engage in public-private partnerships (PPPs), using successful projects like the Mazar Independent Power Project as a blueprint for future ventures. Investments should focus on a diversified mix of energy sources and include a commitment to local workforce development and community engagement through off-grid solutions, which will foster a sustainable and self-reliant economy.
For Stakeholders (International Partners and Donors)
International partners and donors should continue to provide targeted financial aid and technical expertise to Afghanistan’s energy sector. A crucial role involves supporting risk mitigation by offering political risk insurance and addressing systemic challenges like the weak banking system and international sanctions. Furthermore, stakeholders should facilitate regional integration efforts, building on projects like CASA-1000, to help Afghanistan leverage its strategic location as an energy transit hub and foster long-term stability and growth.
Faiz M. Zadran is Energy Sector Analyst and Executive Board Member at Assembly of Scientists & Experts of Afghanistan.
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