EDITORIAL: The petroleum minister recently informed the Senate Standing Committee that a massive power generation capacity had been contracted to meet the air-conditioning requirements of a few people during the summer peak load, meaning that the base-load is being added to meet the peaking demand.
He is correct insofar as this observation is concerned. However, he has failed to mention that this massive capacity was added to the system during the previous PML-N tenure (2013-18), a government of which he was a part and parcel, so to speak.
Now, as a minister in the incumbent government, he is assailing the very policy he once supported for which he deserves to be lauded.
It is important to note that when the PML-N government assumed power in 2013, the country was plagued by massive load-shedding, and their primary goal was to deal with this challenge effectively. However, to achieve this, they contracted a significant amount of power capacity in a very short period of time, which has rendered the system unsustainable.
The decision to ensure excessive power generation was a political move by the then PML-N government to secure votes in the 2018 elections, but this decision is now eating away their political capital in 2024. In their haste to inaugurate projects before the end of their term in office in 2018, they added extra projects to the system without adequately expanding transmission lines to evacuate optimal power from the newly installed plants.
Many of these projects were part of the CPEC (China Pakistan Economic Corridor) initiative, where the Chinese were interested in connecting the road and port network to link Gwadar to China. In return, the then Pakistan government requested them to install power plants, mostly fuelled by imported coal.
Even for local coal, the private sector partners demanded that Thar Coal projects be included in the CPEC, as they faced challenges in arranging financing for this dirtier fuel. China did assist, but only at the locals’ request.
Despite these projects, the government chose to install several RLNG plants independently (two each by the federal and Punjab governments—both under the PML-N government). The question remains: why did they opt for RLNG projects when coal had already been decided upon?
The issue didn’t stop there. To ensure a steady gas supply to the RLNG plants, the government entered into long-term contracts to purchase RLNG from Qatar, a move further supported by PMN-N government’s successor, PTI government. As a result, the government is now producing expensive RLNG-based electricity relatively cheap from imported coal projects.
Interestingly, the petroleum minister has pointed out that long-term contracts with Qatar for RLNG are forcing the government to import it despite declining consumption. However, he again has failed to acknowledge that this situation stems from the PML-N government’s (2013-18) policies.
To utilise the excess RLNG imports, there is now a growing consideration to include captive power plants in the grid, as these can consume imported gas. Ironically, the same petroleum minister previously advocated for ending gas supplies to captive power plants to push them to join the grid. Captive plants typically operate with lower efficiency, which improves in a combined cycle.
However, combined cycle production cannot be sold to the grid. Today, even without the combined cycle, using RLNG in the industry is cheaper than purchasing power from the grid, as inefficiencies and capacity payments are making grid electricity more expensive at higher gas rates.
If the supply to captive plants is cut off, the ministry fears a challenge in deploying the imported gas, which they are contractually bound to import. Captive players pay a premium price, which cross-subsidises other sectors. If this is removed, the gap between cost and price will widen, prompting the petroleum ministry to reverse its earlier stance.
The bottom line is that the numerous power and gas contracts have rendered the sector unviable, forcing the current administration to adopt suboptimal solutions. All successive governments have contributed their fair share to the mess that prevails in the energy sector and the country must now face the consequences.
Copyright Business Recorder, 2024
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