Pakistan Reader# 389, 19 October 2022
Bhoomika Sesharaj
On 1 October, the National Electric Power Regularity Authority (NEPRA) published the State of Industry Report for 2022 and made known the performance and status of the electric power sector of Pakistan. Acknowledging the country’s tumultuous economic instability and its challenges, the report said that issues, including the floods, have affected the “affordability of the end consumer."
The report shed light on the challenges Pakistan faced, including the devaluation of the PKR against the dollar, imported fuel seeing a drastic rise, and fuel supply management. NEPRA, while including the impending energy crisis also seeks to reprieve sustainability from the sector. However, this report sought out critical challenges that could transform the sector into an efficient one.
Following are the three takeaways from this report:
First, the utilization of capacity. The installment of increased capacity versus the demand of the capacity is leading to a rise in consumer tariffs. This rise is owing to the “Take or Pay” and “Must Run” compulsions, which limit the usage of the plants to their full capacity. Generation Companies (GENCOs) need to immediately retire to incorporate better usage of fuel, and to increase indigenous resource-based generation. Traditional power plants amount to a staggering PKR721 billion, with thermal power using 46 per cent and hydropower plants using only 39 per cent of their total capacity. Part Load Adjustment Charges (PLACs), leading up to PKR 41.7 billion of unnecessary costs, ramping inefficient utilization of resources. The lower utilization factor can be supplemented through base-load power plants, resulting in higher intermittency. Additionally, renewable, and thermal power plants are also meant to pay Non-Project Missed Volume (NPMV), which adds about PKR 1.7 billion to the payments on account.
Second, the violation of merit order. Power Generation Companies like those of NPCC (National Power Control Centre) and NTDC (National Transmission Dispatch Company) have been violating the guidelines of the Merit Order rule, which has cost heavily for the power sector in terms of the disregard the companies have. The out of merit plants pose an issue that has plagued the sector for many years. NEPRA has directed the CPPA-G to undertake a strict financial audit while procuring electricity by the DISCOs. The violation of the order, however, incessantly impacts the sector in various ways. An example of this is the employment of efficient oil, like furnace oil, which, compared to natural gas, is 38 per cent less efficient. Costs of inefficiency stand at PKR 41.73 billion, which either says that plants are either not dispatched, or dispatched partially.
Third, the delay in distributive energy. Power generators in the current system have to be replaced for lower power projects to protect their costs for the new power projects. Because the sector is seeing a deficiency in the implementation of the plants, the distribution of energy is experiencing a delay. For an equitable energy distribution, the network of distribution needs to be near the load centres, where adequate resource is available. Renewable Energy (RE) projects are best suited for this positioning as they base themselves on a utility scale. Liquidated damages and the real nature of the financial impact of the unavailability of low-cost power are apprehended at a deficit of PKR 1.8 billion.
NPCC and SCADA
NEPRA has blamed ineffective fuel to the NPCC’s inadequate efforts to customise the automation of supervisory control and data acquisition (SCADA) and says that NPCC still prefers manual techniques. The sector would have to include Smart Energy Meters and dissipate its dependency on traditional methods to cultivate quick actions to counter the inefficiency. NEPRA’s focus is also laid on the sustainable sales growth of the sector, which bases its inefficiency in pending connections, forced load shedding by the DISCOs, and trends among consumers to switch to solar has been considerably lower as compared to the efforts the sector is pushing. The government has based this initiative solely on an anticipatory model of sustained development, attained through traditional methods of collecting, organising, and repurposing data. For a sustainable and progressive recovery of losses, DISCOs need to improve their effiency and service standards to retain and expand their consumer base, by supplying electricity at competitive rates and adjusting market pressures at timely interjections. The financial well-being of the power sector depends on the performance of the distribution segment, which needs to speed its revenue and supply areas. Owing to K-Electric’s generational plants, the effectiveness of Pakistan’s electric sector is seeing a downside, with delayed payments, overburdening of subsidiaries by the federal government, and loss of balanced renewable power.
References
State of Industry Report 2022, Nepra
“Stocktaking of power sector challenges in NEPRA State of Industry Report,” Profit Pakistan Today, 10 October 2022
“Nepra’s SOI report 2022: a comment — I,” Business Recorder, 07 October 2022
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