An integrated energy plan is the need of the hour where all energy producing and consuming sources are seen with one lens. The grid supply is already higher than the demand, given the price anomalies; usage of captive power plant is high. The impact of increasing burden of capacity payment, due to addition of new power plants, can only be diluted through increasing consumption on the grid.
The problem is that there are two grids operating in Pakistan - NTDC and K-Electric and they both are making decisions of new supply independently, which is sub-optimal and can exacerbate the circular debt problem (read ‘Power[ful] scenarios’, and ‘A case for higher power consumption’).
There are plenty of new plants coming online in South, and some of these should be novated to K-Electric, so that the burden of capacity payments can be passed on from NTDC to KE. Since, KE has forecasted shortage while the NTDC is going to be in surplus, it makes perfect sense to shift some plants to KE.
The peak demand of KE is around 3.400 MW while its own capacity is 2,200MW. Within it 1,000MW is relatively new and efficient while the rest is old and of low thermal efficiencies. Two of its old plants’ Power Purchasing Agreements (PPAs) are about to expire and the sponsors are attempting to renegotiate the respective agreements.
Last month, Tapal Energy filed a tariff petition to extend PPA of its 120 MW FO plant to NEPRA which is discouraged in this space (read ‘A big no to extend Tapal Energy PPA’). Now Gul Ahmed plant’s PPA is expiring in November 2019 and it has also submitted tariff review petition. Both these extension requests should be rejected in better interest of the country.
The story does not end here. In the recent PM’s visit to China, 700MW power project by KE was announced. The company has signed an agreement with state-owned China Machinery Engineering Corporation (CMEC) to develop an IPP at Port Qasim. The tariff is already approved by NEPRA and land has also been acquired at Port Qasim. The buck does not stop here, as invitation for prequalification of bidders for another 450MW combined cycle power plants at Port Qasim by KE is advertised in newspapers.
This is absurd. KE is a one stop solution where it can have its own IPPs. The exuberant returns within the power sector chain are in IPPs while grid and distribution businesses are not that lucrative. Hence, it makes business sense for KE to come up with new plants with guaranteed returns in dollar terms, but that will leave NTDC new plants to be used by its grid where the demand is simply not there at this point of time.
Both the new plants are coming on imported fuel which will add burden on already stressed imports. There should be a ban on imported fuel based power plants and all the focus should be on domestic coal and renewable. But as always, the decisions are made in silos. It is unfortunate that with two capable energy sector advisors to PM and a competent minister, there is no solid energy plan to stop such anomalies.
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