Pakistan’s energy generation mix is improving. It had been long overdue. That said, it is not furnace oil free yet. In December 2017, it was the surplus stock of furnace oil waiting to be cleared, that resulted in shifting from RLNG to FO based generation. In January 2018, RNLG based generation was recorded the highest ever at 1603 Gwh, and coal based generation was also at highest ever monthly number of 1145 Gwh – yet the FO based generation was north of 1600 Gwh, despite almost identical total power generation.

The reason was a massive drop in hydel based generation. Jan-Mar is when water flow recedes, leading to lower hydel generation, increasing the reliance on other fuels. Thankfully, come summers, hydel generation would be back to normal, but would it also be sufficient to fulfill the promise of zero load shedding, remains in serious doubt.

In the next three months, another 1300 MW of coal based power is all set to be added to the grid. Roughly 800 MW of nuclear based electricity is also slated to be added before peak summers. From what it appears, even with more gas available in low gas demand season, peak demand would still result in FO based generation of at least 2500-3000 MW – given new coal plants may take some warming up.

January’s average fuel cost component at Rs6.31 per unit stood highest in over a year despite a much improved energy mix. The total electric generation fuel bill for January 2018 at Rs48 billion was even more than that in September 2017, when the generation was almost 44 percent higher than January 2018.

So there may well be enough electricity available come summers, it increasingly promises to be pricier. Before peak summers, new coal based plants will further push RLNG plants down the merit order – which could mean more burden on the tariff though capacity payments. Mind you the circular debt has soared to what it was when the government too charge, that too, excluding close to Rs450 billion parked in the holding company.

Yes, things would have been much worse, had FO still been the base load, but imported LNG and coal are not getting any cheaper. The tariffs would soon need to be revised to cover all sorts of capacity, fuel, and interest surcharges. No matter how much additional capacity the system may have, pressing receivables could ensure more trouble.

Things seem to be moving in the right direction, as far as fuel mix is concerned. It could be better with more hydel based power generation, but given its cyclical nature, coal and RLNG will continue to be the base load. This is surely much better than relying on FO. But is the pricing component is not taken seriously, all the good work could go in vain. And we have not even touched the transmission and distribution inefficiencies yet. It looks all rosy now – but a lot needs to be done to save embarrassment come summers and elections.