‘Overcapacity dilemma: mismanagement or misjudgment?’

This is apropos a letter to the Editor titled ‘Overcapacity dilemma: mismanagement or misjudgment?’ carried by the newspaper yesterday.

IPPs have provided a reliable, sustained energy backbone for Pakistan. This investment has been pivotal in alleviating chronic energy shortages, reducing load shedding, and enabling industries to operate more efficiently, which has spurred economic growth and job creation.

The involvement of Chinese companies has also facilitated technological transfer and modernization, enhancing the efficiency and reliability of Pakistan’s energy sector.

Moreover, the minimal difference between the capacity and actual electricity produced by Chinese IPPs contrasts sharply with the significant gap observed in non-Chinese IPPs. As per Nepra report for FY 2022-23, Chinese Independent Power Producers (IPPs), particularly coal-based plants like China Power Hub and Sahiwal, exhibited higher efficiency compared to non-Chinese IPPs.

Chinese IPPs achieved net capacity factors ranging from 26.4% to 69.7% and net output factors between 72.3% and 91.2%, reflecting better utilization and operational stability. In contrast, non-Chinese IPPs, especially those relying on imported fuels like RFO and RLNG, showed lower efficiency, with net capacity factors as low as 0.3% and net output factors around 5.2%.

Given the high efficiency and productivity, Chinese IPPs have the right to receive payments as per the agreements, ensuring they remain financially viable and can cover operational costs, overheads, and fuel expenses. Without timely payments, these companies may be forced to halt operations, which could lead to accumulating capacity payments without any actual electricity generation.

This would not only strain Pakistan’s energy supply but also increase financial burdens due to the continued obligation to pay for idle capacity under the existing agreements.

Interestingly, as of FY 2022-23, Pakistan’s total installed electricity generation capacity was 42,931.835 MW against actual consumption of 13,751 MW, representing approximately 32% of the total installed capacity of 42,931.835 MW. This means that the country paid for nearly 68% of unused electricity which reached billions of dollars over the years.

Qamar Bashir

Copyright Business Recorder, 2024