The impact of energy (Electricity) losses on load capacity factor: A dynamic ARDL-based evidence from Pakistan

The energy-environment interplay has raised significant concerns among policymakers and experts, with the global shift towards renewable energy being hailed as a key solution to reduce pollution emissions. However, in addition to energy production, the efficient transmission and distribution of electricity is also important which also poses considerable challenges to environmental sustainability. This study aims to investigate the effect of electricity losses on environmental sustainability measured by load capacity factor (LCF). This study uses the DARDL (DARDL) method and Kernel-based Regularized Least Squares (KRLS) to analyze the influence of electricity losses, foreign direct investment (FDI), economic growth, and industrial output on LCF in Pakistan from 1981 to 2022. The electricity losses significantly undermine environmental sustainability by reducing LCF. However, FDI positively influences LCF, but economic growth and industrial output exert a detrimental effect. Additionally, the study observes that both positive and negative counterfactual 10 % shocks in electricity losses result in negative and positive impacts on LCF. Whereas, 10 % positive counterfactual shocks in FDI positively affect LCF. KRLS analysis confirms the robustness of the DARDL estimates. The study underscores that efficient energy transmission and distribution is pivotal in safeguarding environmental sustainability.