Every winter, you hear Pakistan finally opting out of the furnace oil-based power generation. Every summer, furnace oil makes a return of sorts. Whatsapp forwards are making rounds since last week, citing a letter originated from the National Transmission & Despatch Company (NTDC), titled as “accute [sic] shortage of RFO for thermal power plants”.
Now, you have all heard that before. The NTDC letter in question itself draws references to ten previous occasions in 2020 alone, the earliest on January 23, 2020. From what it appears, the letter could well be on auto trigger mode as the FO oil drop under the Power Purchase Agreement (PPA) requirement.
As on June 18, 2020, the FO stock with power plants was estimated at 0.33 million tons. That would last for no more than nine days. Crisis, then? Well, not really. The PPA requirement for stock to be maintained is calculated at full load of power plants. The stock positions differ from one genco to another, and from one IPP to another.
There may be instances of a particular IPP struggling to procure enough FO before it runs out of stock. On a cumulative basis, the stock should last much longer than 9 days – because the assumption of operating at full load is what it is – an assumption. The actual consumption could at most times be lesser by 4 to 5 times than what is calculated for flagging “accute [sic] shortage.”
Based on NTDC’s own merit order for June 2020, it is difficult to see how most of these IPPs will anyways be required to operate at anywhere near full throttle. Not that the merit order is always followed religiously, but it is followed to a large extent, minus occasions where the government makes room for the “refineries on the verge of closure” every now and then.
In the merit order, there are no IPPs in the top ten. Mind you, the merit order is only for thermal plants – hydel and other renewable are already much higher in the pecking order. There are two FO based IPPs in the top 60 of the merit order list. One of them has critically low FO stocks, but is a relatively small player. The other Gencos and bigger IPPs are way down the merit list – with the Energy Purchase Price in excess of Rs13/unit., whereas the average EPP for June should be near Rs9-10 per unit. This, when some circles believe FO based power generation has got cheaper.
The power demand is not likely to cross last year’s 13 billion units for June, when the economic activity is believed to be struggling to stage a rebound. Pakistan’s hydel and coal capacities have also gone slightly up since last June. This should not turn into another crisis. It was about time not having FO for power, should have been good news.
It is almost the beginning of fiscal year 2021. By now, any FO shortage for power plants should not even have made headlines or lead to SOS calls. The very fact that FO based power still one way or the other keeps staging a comeback, is a failure of a bigger magnitude, than the variety of factors which may have led to a temporary shortage of fuel.