More but costlier power

Pakistan’s power situation is much improved from what it was 12 months ago. But that is only confined to increased electricity availability, and higher generation. That sure is one vital cog of better energy security. On the face of it, the power generation mix has also improved considerably from a year ago. Or has it?

Apparently, Pakistan now relies much less on furnace oil based power generation, but all of it has not necessarily translated into lower fuel bill. And that is where the energy affordability aspect goes haywire. Granted, that there are many more megawatts in the system today, than any other time in the history. Customary credit goes to the previous government and CPEC and all that. But the more pressing issues still persist – and in some cases – bigger and scarier.

Consider the fact that Pakistan’s power generation mix is now more evenly divided amongst gas, RNLNG, coal, hydel and furnace oil. It was used to be heavily reliant on furnace oil a year ago, with almost 30 percent share. That share has now gone down to 20 percent, but still higher than what the government had earlier anticipated, after supposedly banning the import of furnace oil for a brief period. But the stark realities of the situation struck hard, and the government had no option but to revert to more FO based generation, with a 19 percent share. Recall that it had dipped to as low as 8 percent in winters.

On the other hand, power generation from hydel sources has significantly come down to 23 percent in 11MFY18 as against 30 percent in the same period last year. This factor alone has almost nullified the impact of savings on account of reduced FO based generation. Yes, the generation from local and imported gas and coal increased, but so has the fuel cost for most of these components.

Pakistan’s average power generation during 11MFY17 improved by 13 percent year-on-year, whereas the fuel cost component in the same period went up by 26 percent year-on-year. Granted that had the power generation mix not improved, the fuel bill would have been higher, but the loss of not having enough hydel based generation in the system, has been very costly.

The power generation bill for 11MFY18 stood at Rs557 billion, up 26 percent year-on-year from Rs441 billion in 11MFY17. Had FO based generation been reduced as planned, the impact of increased fuel cost would have been much lower. But the delays in power generation from three leading RNLG plants coupled with low water levels – have hurt the affordability aspect.

The cost of coal and LNG based generation has significantly increased from last year, by 45 and 29 percent respectively. These two now constitute 26 percent of total generation, versus only 6 percent in the same period last year. It is imperative that the RNLNG plants higher on merit order with better efficiencies start generating power at full throttle, as the peak consumption months arrive.

The ailing transmission and distribution system is always there to go worse on cue. As the fuel cost rises, T&D losses also go up. It is high time the discos get penalized and not incentivized for underperformance, without which, more power generation would simply mean more losses and higher circular debt.

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