muhammadhafeezmalik
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Pakistan’s power system (excluding KE) generated 7.2 billion units in November 2020. It had generated 7.2 billion units in November 2019. And 7.3 billion in November of 2018. Clearly, there is not much ‘incremental’ demand going on from the industries. Power demand remains pretty much stuck in the yesteryears and doesn’t seem to be a believer in ‘Naya’ Pakistan. Or at least not just yet. This is despite the industry now in full swing. Creating additional demand will prove more difficult than initially thought.
Inadequate demand is only one part of the problem equation. Continued disregard for the Economic Merit Order is another. The issue takes the backseat once the peak demand season is over and winters take over. There is enough capacity in the system to cater for the non-existing demand growth without breaking a sweat. And this has led to complacency as far the pace of structural reforms goes.
A much-improved energy generation mix has been around for some time for which the previous government is rightly credited. That has not necessarily translated into cheaper electricity, for numerous reasons, of which capacity payments is one, and the harrowing tale of inefficiency of the plants and that of the system is another.
Now the fuel component has gone down considerably from 2018 and earlier, thanks largely to newer plants on RLNG, coal and nuclear. But the fuel cost keeps getting adjusted upwards month after month, as the reference tariff embedded in the overall power purchase price, righty accounts for availability of cheaper fuels. This is where the transmission constraints, disregard for merit order and legacy of old thermal state-owned generation plants come into play and become a drag on the overall fuel cost.
Consider this. Power generated on indigenous natural gas in November 2020 cost Rs8 per unit – highest ever. It was even more expensive than LNG based power generation which cost Rs6.5 per unit. This is not because LNG was available at lower rates than natural gas. Far from it. RLNG for November 2020 was priced at $7.5 per mmbtu. Natural gas at $5.45 per mmbtu was 27 percent cheaper. But by the time it made to the power plants – making power on indigenous gas was a 23 percent more expensive affair than LNG.
The above example has inefficiency written all over it. And that is nothing new as the regulator has been pointing out the use of inefficient power plants leading to higher fuel cost since almost forever. You can randomly pick out a Nepra State of the Industry Report from the last decade – and you will find the mention of low efficiencies of Gencos., with low utilization, operating on take-or-pay basis, leading to not only higher costs but other issues such as Partial Load Adjustment Charges (another story altogether).
So, when most of the problems are decade-old, and well-documented and discussed at length in terms of viable solutions – there is no need to look “out-of-the-box”. The so-called power sector reform process continues to be fixated with revenue measures aimed at window-dressing to appease either the donors or some private sector players. The solution is not fancy buyouts. There is no more fun in continuing to lament the predecessors, even if it has merit. Cost of inefficiency continues to be incorporated as tariffs, and the problems keep compounding. Winters help in brushing everything under the carpet.
Power generation: Tale of inefficiencies
Pakistan’s power system (excluding KE) generated 7.2 billion units in November 2020. It had generated 7.2 billion...
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