ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has anticipated that loadshedding will continue for the next four years. According to regulator's State of Industry Report 2014, the next four years indicate a gap of more than 5,500 MW between supply and demand; thereafter the position is expected to improve somewhere in years 2019-20.
The regulator is of the view that obviously it is not possible to completely turnaround the situation in one or two years, but hectic efforts for timely completion of projects, ensuring fuel for the already installed power plants, improving performance in terms of efficiency and availability of power plants, and removing constraints in the transmission and distribution networks for delivery of power to the load demand points, would provide relief to consumers.
Nepra has been supporting GoP's efforts for inducting renewable and alternative energy based projects in the country. In this respect, Nepra announced an upfront tariff for wind power projects which drew considerable interest of investors and during the year 2013-14, eleven wind power projects with an installed capacity of 576.20 MW who opted for upfront tariff have been approved by Nepra. Nepra also approved an upfront tariff for solar power projects during the year and five projects having a total installed capacity of 48MW have been approved by Nepra.
The report further observed that although induction of renewable energy based projects would also diversify the energy mix; however, as already stated in earlier reports of NEPRA, renewable energy by itself would not provide solution to problems of the sector. Firstly at present level, the tariff is quite on the higher side at least during first ten years when the loans have to be paid back.
Secondly, the renewable energy source is not an answer to the capacity shortfall over daily load cycle. In properly designed systems it replaces expensive energy in the mid region of the load duration curve while base load power plants provide stable power to the system. In Pakistan, however, there is a shortage of capacity and energy due to expensive fuel and constraints in the fuel availability. Thirdly their operation in integrated network of Pakistan requires further assessment about their technical performance, especially during fault conditions on the network. It may be noted that NTDC system has remained prone to breakdowns as storms and foggy conditions have resulted in major blackouts during the past years. An addition of large quantum of renewable energy (solar and wind) would add to the fragility of the transmission system as due to their inherent technological limitations, renewable energy based projects would be the first ones to be disconnected from the network whereas during restoration phase they become a liability instead of contributing to the recovery of system.
The role of regulator becomes extremely important in view of the above observations. It is therefore stressed that induction of renewable energy in the integrated network should be backed up by specific simulation studies and a detailed analysis about the network under all operating conditions. Accordingly, Nepra has directed NTDC for carrying out detailed technical studies for evaluating the capacity of renewable energy based projects which can safely operate in an integrated system.
The regulator further stated that circular debt remained one of the major issues. Due to inefficiencies of the sector, GoP's burden in the form of Tariff Differential Subsidy (TDS) has remained very high. The gap between Nepra determined average sale rate and GOP's notified tariff translated into Rs 149.03 billion per annum. One of the major reasons for this is the high transmission and distribution losses in the distribution network. The impact of missing Authority's set T&D losses target by the Discos resulted in a per annum figure of Rs 64.30 billion. Here it is pertinent to mention that the Authority's set T&D losses target for the FY 2013-14 pertaining to Discos at 13.19%, whereas the reported T&D losses for the same period remained at 18.60%.
Adding further to the T&D losses is the low recovery ratios of Discos. The Authority assesses recovery target of 100% while setting the consumer-end-tariff for all the Discos, whereas the actual level of recovery remained around 89% for the FY 2013-14. As on 30th June, 2014 the overall distribution sector receivables stood at Rs 512.91 billion (including Rs 28 billion pertaining to K-Electric). The Central Power Purchasing Agency's (CPPA) net payable as on 30th June, 2014 stood at Rs 256 billion.
The re-emergence of circular debt is quite alarming as the Federal Government had already paid around Rs 480 billion last year to jump start the sector. The receivables of IPPs are around Rs 200 billion. According to IPPs due to non adherence to the schedules in their PPAs, IPPs are forced to service their working capital requirements from their shareholders. IPPs have not even received the capacity payments which have accumulated to around Rs 50 billion. As a result the receivables of IPPs have almost reached that level where they may take the remedies under their PPAs and any such steps would send negative signals at a time when the government is planning to initiate privatising other power sector entities.
Pepco practically has been in control of all dealings of Discos. All the posting and transfers, appointments and induction of new work force, allocation of funds for operation and maintenance of their systems were through Pepco. Reportedly, the Discos still have to surrender all the collected revenue to a central kitty.