Pakistan generated 7.5 billion units of electricity in November 2018. This is an increase of 5 percent year-on-year. Pakistan’s dependable capacity is now in excess of 30,500 MW. Electricity production in November 2016 was 7 billion units – and the dependable capacity back then was 26,000 MW.
Winter means lower electricity demand. Just three months ago, Pakistan recorded its highest ever monthly power generation at 14 billion units. The domestic sector roughly consumes half the electricity, and the demand from domestic sector considerably goes down between Nov-Feb. But there sure is a sign of lower demand from industries and commercial sector as well, as domestic alone would not be responsible for such a drastic cut. The economic slowdown is getting visible by the day.
Back to power. Low demand has ensured that the power generation continues to be managed on financial grounds. That the power generation mix has improved over the years has been well established and all the credit to the previous government for that. But that has not necessarily meant a proportionate improvement in the overall dependable generation capacity.
The share of furnace oil in overall dependable capacity stands at 21 percent – whereas FO based power generation in November was almost nil. FO sits very low in the merit order of power generation and it is not surprising that of all the 6300 MW available capacity, nothing was produced. This has meant lower fuel component for November – but all that power not produced while available has come at a dear cost of capacity charges. The authorities must seriously start thinking of decommissioning some of the FO based plants – as it continues to be a drag on the consumer tariff. Simultaneously, more ways to increase demand and grid production must be explored. (Read: A case for higher power consumption, published December 18, 2018).
The share of LNG based power production stood at 17 percent at 1.3 billion units – down from the peak of 3.37 billion units generated in July 2018. Nearly two-third of the 5,721 MW dependable capacity sat idle, being low on merit order, with the bulk priced above Rs10 per unit. Generation from natural gas costs half that of LNG, but higher domestic demand meant the optimal gas-based generation could not be reached either.
Hydel generation, being cyclical, is all set to go down for the next five months. This means the FO plants will soon be running again. At current rates, a host of FO based power plants are placed higher than one of the large LNG ones in the merit order. With the capacity payments indexed in dollars, and with the interest rate going high, the capacity charge is also going to go north. Pakistan is facing more months of zero generation from a number of plants, yet will dole out tens of billions in capacity payments. Demand is not expected to go through the roof in a jiffy. The higher LNG and coal prices have not helped either. Ensuring only the availability part of the equation is only half good. It is half bad too, as energy affordability appears miles away right now. Something needs to give to put the house in order. Just having the mega power plant structures is not going to cut the deal. It has come with a hefty price.
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