As per NEPRA’s performance evaluation report on power plants, 82 percent of electricity costs in FY24 were attributed to generation. However, at the same time, utilization of installed generation capacity remained low. Renewable energy was introduced as a low-cost alternative, but transmission bottlenecks are preventing its evacuation to load centers.
This brings us back to the age-old debate about the investment and continuous upgrades required in the grid to keep it modernized. It is imperative to create fiscal space to address technological bottlenecks instead of throwing good money into the growing abyss of circular debt. However, NEPRA has also identified in its evaluation report that key transmission company projects at the 500 kV and 220 kV levels are facing delays.
Focus is needed on strengthening the north-south interconnection at higher voltage levels, as reliable baseload generation continues to be concentrated in the south. NTDC projects facing delays are higher in the north than in the south of the country, with the majority at the 500 kV level. This is evident from the fact that 32 out of 47 power transformers installed at 19 grids at the 500/220 kV level are loaded over 80 percent, indicating a precarious position.
One can sympathize with the grid, which operates with much more inertia and requires less time to turn around, but these reforms are necessary because technology is evolving rapidly. With more renewable energy in the mix, it is of utmost importance to be prepared for handling intermittency.
This requires timely approvals of investment plans and allowances so that businesses can meet expectations without compromising their own sustainability. Similar challenges exist on the distribution side, where line losses and recovery gaps are increasing due to various factors.
The government aims to wean the sector off subsidies and make it self-sufficient, an ambitious, albeit very long-term goal. Putting the power sector on a path to progress requires balancing the interests of operators in this space with clear targets.
This balance can take the form of negotiations with IPPs, the addition of renewables to lower electricity production costs, timely approvals of investment plans, and associated tariff petitions so that the required CAPEX can be immediately allocated. It also requires consideration of the ground realities in which DISCOs operate, with provisions for items such as recovery cost allowances or retail margins in the case of the newly formed supply businesses.
Addressing the sector’s problems requires a holistic approach. However, decisions and measures taken in silos are yielding mixed results. Instead, there is a need for an overarching common thread to bring everything together. Otherwise, the sector will continue to be the ultimate loser, playing a game of whack-a-mole—addressing one problem while many others keep popping up with no end in sight.
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