In summary, the level of generation, transmission and consumption is as under: According to the Pakistan Economic Survey 2021–22, the installed electricity generation capacity reached 41,557MW in 2022.
The maximum total demand coming from residential and industrial estates stands at nearly 31,000MW, whereas the transmission and distribution capacity is stalled at approximately 22,000 MW. (figures for 2023-24 are in same proportion)
Pakistan Credit Rating Agency (PACRA) report on Energy 2024 has described the following generation and demand status of energy of Pakistan, other than Karachi.
This is the figure related to NTDC. In Karachi there is effectively no excess generation.
Power generation in Pakistan declined by 1.2% YoY to 13,715 GWh (19,048MW), compared to 13,876 GWh (19,272 MW) in June 2022. However, on a month-on-month basis, generation increased by 11.7%. For the entire FY23, the generation sloped by 9.5% YoY to 129,590 GWh (14,793MW), compared to 143,193 GWh (16,346 MW) in FY22.
This means that there is a substantial excess capacity. If the average generation on the basis of data is taken at 17,000 MW then it means that for the year 2024 there is an excess capacity of 20,000MW. Even if the same is discounted there is no reason to state that at least 15,000MW is excess capacity in the NTDC system. Out of the total capacity, around 20,000MW is the capacity with the IPPs for which a capacity charge is being paid by NTDC.
If all other factors and reliability of supply is also accounted for then on the basis of an analysis and the record available with power regulator Nepra there is an excess of at least 8000MW to 10,000MW installed by IPPs for which capacity charges are being paid and are being charged to the consumers. This has negatively impacted the economy in three ways.
Firstly; as a part of capacity payment in-built in the system, consumers are paying it as a cost. Secondly; all these plants are foreign-funded; therefore Pakistan’s foreign exchange is being used for the payment of principal and interest on a loan which has been obtained for an asset not being used. Thirdly, Return on Equity (RoE) is being paid for no reason as there was no need for these plants.
Out of the total installed capacity, around 20,500MW of power is from IPPs. There are three kinds of owners of these IPPs.
a. Chinese-owned (5000-7000)
b. Pakistan investors (4000-6000) (Including Thar Coal around 2000 to 3000)
c. Government of Pakistan/ Government of Punjab owned (8000-10,000)
There is no reasonable basis to identify why this excess generation capacity with fixed capacity charges was installed. It is all the more bewildering that all were either CPEC projects or Government-owned ones. When such Government-owned projects were installed it was claimed that these projects would ultimately be sold, which has not been done. Resultantly, there has been an increase in the number of public-sector power generating units in defiance of the policy on privatization of public sector entities. This author has not been able to find any policy paper that recommends the installation of IPPs in the Government Sector during that period of time.
This is equal to a criminal offence in policymaking, a policy which was made totally for political reasons. During 2013-2018, around 7500MW was added to the grid on imported fuel. The major projects are shown in table 2:
Total capacity of these plants comes to around 7500 MW. This is effectively the definite excess power in the system. All these projects were done during 2013 to 2018. The question is whether or not there was any economic justification in addition to this generation capacity. Instead, it was an additional burden on consumers.
It needs to be noted that even after this addition actual generation was much less on account of lack of transmission and there was enormous load-shedding. This generation capacity would not be utilised even in 2027. In order to justify their wrong action, the policymakers may raise an untenable argument that old Gencos are no longer efficient. This would also be a wrong notion as old Gencos (Guddu, Jamshoro and Faisalabad) have the installed capacity of less than 5000 MW.
This policy crime has been accepted by Nepra in its own industry report in 2024. It states as under:
“2.1.1 Challenges of Surplus ‘Take or Pay’ Generation Capacity: The power sector in Pakistan is facing a significant challenge - an excess of ‘Take or Pay’ generation capacity. While surplus capacity may seem beneficial at first glance, it brings along a host of complications. Under contractual agreements with power producers under ‘Take or Pay’ arrangements, payment of capacity charges is guaranteed regardless of non-utilization of such power plants. This problem has placed a significant burden on power sector on one hand while on the other hand the electricity consumers’ are paying for electric power generation capacity that remains unused, which results in higher electricity bills. The primary question is the installation of capacity that can never be used on account of lack of demand and non-availability of the transmission system.”
The use of the word ‘never’ is highly important to note. NEPRA is stating in 2024 that such projects will never be used. However, NEPRA had approved the said project when installed. They placed albatross around the neck of the nation to please their political masters. If it is so then there is no reason for a regulator, which is supposed to be independent of the executive.
Nepra report further states:
“2.3.7 Energy Charges vs. Capacity Charges: The consumer-end tariff comprises Energy Purchase Price (EPP), Capacity Purchase Price (CPP), the impact of T&D losses, Distribution & Supplier Margin, and Prior Year Adjustment. In FY 2022, EPP constituted around 60% of the tariff, while CPP accounted for about 40%. The percentage of CPP in the overall tariff is on an increasing trend…….
The increase in CPP percentage is due to the augmented capacity of power generation plants and the addition of the HVDC line in the system. At present, fixed charges billed to electricity consumers range from approximately Rs. 200 to Rs. 500 per kW/month, determined by their Actual Maximum Demand (MDI) for the month or 50% of sanctioned load, whichever is higher. In contrast, capacity charges billed to DISCOs by CPPA-G remain consistently over Rs. 4,000 per kW/month.
This highlights that only around 3% to 4% of the fixed costs is accounted for as fixed charges, while the rest is billed based on variable charges depending on energy consumption
To alleviate the impact of heightened capacity charges, it is crucial to boost the growth rate of electricity sales by implementing cost-reduction measures. Additionally, it is essential to retire generation capacity that has surpassed its initial licensed lifespan, along with low efficiency power plants of GENCOs and KE. Furthermore, the decision in respect of induction of new generation capacity shall be made only after a thorough consideration of all relevant factors and comprehensive analysis.“–To be continued
=========================================================Period Generation Demand During Surplus/ Capability (MW) Peak Hours (Deficit) (MW)=========================================================2018 23,766 26,741 (2,975)2019 24,565 25,627 (1,062)2020 27,780 26,252 1,5282021 27,819 28,253 (434)2022 27,748 24,564 3,1842023 34,729 25,779 8,9502024 37,226 28,027 9,1992025 40,213 29,389 10,8242026 43,380 30,814 12,566===============================================================================================================================================================Name Location Owner Capacity MW======================================================================================================Huaneng Shandong Sahiwal, Chinese 1320Ruyi (Sahiwal Imported Coal) PunjabQATPL (Bhikki) Bhikki, Punjab Government of Pakistan 1180NPPMCL (HBS) Haveli Bahadur Shah, Punjab Government of Pakistan 1230NPPMCL (Balloki) Balloki, Punjab Government of Pakistan 1320Port Qasim Electric Power Port Qasim, Sindh Chinese 1230Punjab Thermal Power Trimmu, Punjab Government of Pakistan 1320======================================================================================================Copyright Business Recorder, 2024