Pakistan may well be having all those additional megawatts in the system, but they are surely are not being put all into use. The dip in demand has been rather telling – the system is not working on full throttle either. The total power generation in November stood at 7.4 billion units – a slight dip of 1 percent year-on-year.
It is the third month in a row of slow or negative generation growth, which goes on to show the talks of economic slowdown are a reality. Half the power demand comes from the industrial and commercial sector, demand of which has not grown. All this while, the system’s dependable capacity to generate power has grown from 26000 MW to 30600 MW.
That essentially means all those megawatts available and not produced due to low demand or any other system inefficiency or financial obligations – simply add to the cost. The cost that is becoming dearer by the day in the form of capacity payments – which are already around 60 percent of the power purchase price as per Nepra determined tariffs.
The power generation mix has continued its topsy-turvy journey. The moment, hydel generation share went down to under 20 percent – almost on cue, the load was shifted to furnace oil. From no FO based power generation in November to a 12 percent share in December means the merit order means nothing, when the push comes to shove.
The local refineries continue to produce furnace oil is a problem. That, the government almost always gives in to the refineries and ends up lifting it to produce power is an even bigger one. The FO based plants have a 21 percent share in the total dependable capacity – and despite sitting very low on the merit order list, power is generated regardless to keep the refineries going.
Recall that the authorities had asked the refineries to ensure minimum FO production, as recently as last month, anticipating higher demand in peak summers. It is difficult to see power demand touching last year’s levels – but even if it does, to be told that there will still be load shedding even if all fuel sources and available capacity is exhausted – tells the dismal state of affairs.
Power generation form LNG had peaked at 3.3 billion units in July 2018 – and it has now come down to 0.96 billion units. Of the 6000 MW available dependable RNLNG capacity – nearly half of it sits very low in the merit order. But the other half is available at considerably cheaper fuel cost than furnace oil. Yet, power was produced from FO plants sitting as low as 89, 76 and 72 on the merit order – while others much higher were not utilized to the fullest- to make room for the FO procured.
The fuel cost bill for December 2018 was 18 percent higher year-on-year for 1 percent lesser generation, despite significantly reduced share from 29 percent to 12 percent.
Had the merit order been followed in letter and spirit, the fuel cost would have been much lower. Reminder that the hydel generation will stay on the lower side for the next four months – and if this month is any guide – FO based generation is not going anywhere. This means higher fuel costs. And if demand stays as it is, tens of billions of rupees will also have to be paid for billions of available but unproduced units.
The power subsidy for the year is already expected to touch Rs250 billion, under usual circumstances. But if FO stays in the mix, expect it to be bigger. Good luck dealing with the circular debt.
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