ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged National Electric Power Regulatory Authority (NEPRA) to conduct an independent capacity audit of the existing power generation fleet before approving any new additions proposed under the Indicative Generation Capacity Expansion Plan (IGCEP) 2025–35.
In its comments on the Integrated System Plan (ISP) 2025–35 — comprising IGCEP and the Transmission System Expansion Plan (TSEP) — to be reviewed by NEPRA in a public hearing on May 20, 2026, FPCCI argued that Pakistan’s electricity crisis is not due to a shortage of generation capacity.
Instead, it described the issue as one of low load factor, locational imbalances, and flawed industrial policy.
FPCCI highlighted a structural asymmetry in the power sector, noting that capacity payments remain fixed year-round, while hydropower generation and residential demand are seasonal. It warned that unless this imbalance is addressed through measures such as capacity payment caps, budget financing of strategic deviations, and a credible industrial demand growth strategy, additional capacity will worsen circular debt and tariff pressures.
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According to FPCCI, under the Low Business-as-Usual (BAU) scenario, electricity demand is projected to increase from 136,760 GWh in FY2024 to 180,605 GWh by FY2035, reflecting a modest compound annual growth rate (CAGR) of 1.8 percent.
Peak demand is expected to reach 35,521 MW, while under the Demand-Side Management (DSM) scenario it is reduced to 28,622 MW — a 20 percent decline, indicating that the issue lies in efficiency and utilization rather than capacity shortages.
The business body noted that the plan incorporates 8,120 MW of net-metering capacity, acknowledging the structural shift toward behind-the-meter generation. However, it argued that battery energy storage system (BESS) requirements are underestimated despite growing variability from renewable energy sources.
FPCCI criticized the inclusion of an 800 MW “market-based” capacity quota, stating that it represents only about 1.3 percent of total projected capacity by FY2035. It called for abolishing this ceiling and mandating that all new capacity additions be procured through the Competitive Trading Bilateral Contract Market (CTBCM).
The federation further pointed out that the plan implies a reserve margin of 50–80 percent throughout the planning horizon, significantly higher than the global norm of 15–20 percent. It argued that this indicates a structural surplus rather than a shortage of capacity.
FPCCI maintained that there is no economic justification for new capacity additions over the next three years beyond already committed projects. It noted that installed capacity is projected to rise from 39,591 MW in FY2024 to between 62,657 MW and 70,720 MW by FY2035, against peak demand of only 30,940–34,069 MW in the rationalized scenario — implying a surplus of 28–35 GW.
The federation also questioned demand projections under high and medium scenarios, with assumed growth rates of 4.4 percent and 3.5 percent, respectively, describing them as “capacity-justification forecasts” rather than realistic demand estimates. It added that industrial demand remains suppressed, with industry reportedly operating at only 35 percent of maximum demand indicator (MDI) and 13 percent of sanctioned load.
FPCCI further challenged the assumption of negligible future self-generation, citing the import of 22 GW of solar panels in 2024 and a decline of 2.8 percent in grid electricity sales. It also flagged the absence of any rupee depreciation assumptions, warning that every 5 percent depreciation could increase capacity payments by Rs 1.5–2 per unit.
The federation raised concerns over inconsistencies in the treatment of projects, including K-Electric’s renewable energy optimization, hydropower pipelines in AJK and Khyber Pakhtunkhwa, and Punjab’s project portfolio across different IGCEP iterations.
It warned that excluding Karachi’s renewable optimization could lead to inefficient long-distance transmission planning, increasing costs for consumers nationwide. Karachi accounts for nearly 60 percent of Pakistan’s manufacturing GDP.
FPCCI also pointed out that IGCEP simulations rely on dispatch-based plant factors rather than contractual take-or-pay obligations, leading to an understatement of capacity payment liabilities. It noted that low-BTU gas plants, with guaranteed availability payments, cannot be modeled purely on economic dispatch.
The federation highlighted a discrepancy between installed and derated capacity of 1,811 MW, which it said directly affects reserve margins and tariff calculations. It also flagged chronic project delays, particularly in hydropower, coal, and nuclear projects, warning that delays in projects like Diamer-Bhasha Dam could result in significant unplanned capacity payment exposure.
Additionally, FPCCI noted that TSEP 2025–35 is based on IGCEP 2024–34 rather than the updated IGCEP 2025–35, making the overall system plan internally inconsistent.
It also raised concerns about transmission constraints, particularly the lack of progress on the 500 kV Matiari–Moro–Rahim Yar Khan corridor, has led to stranded generation in the south while northern consumers face high tariffs.
FPCCI argued that the ISP 2025–35, in its current form, is a supply-driven plan lacking a credible strategy for demand growth, load factor improvement, or containment of capacity payments. It warned that approving the plan would exacerbate the circular debt crisis.
The federation noted that capacity payments have already exceeded Rs 1.8 trillion annually, describing them as a major quasi-fiscal burden equivalent to sovereign infrastructure debt but passed on to consumers through tariffs.
It further cautioned that the plan envisages additional commitments of $47.13 billion in present value terms, of which an estimated 40 percent could translate into new capacity payment obligations of Rs 700–1,000 billion annually in the FY2030–35 period.
FPCCI reiterated that only 1.3 percent of planned capacity additions are market-based and called for all new projects from FY2027 onward to be procured exclusively through the CTBCM or financed through budgetary mechanisms. It strongly opposed the approval of any new negotiated power purchase agreements (PPAs).
The federation urged NEPRA to return the plan to the Independent System and Market Operator (ISMO) with clear, binding directions before granting any approval.
Copyright Business Recorder, 2026
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