Old power plants

Published September 12, 2020

THE government has rightly decided to discontinue 2,900 MW of generation from old, inefficient state-owned power companies. The plan will see the 1,400 MW capacity of four plants being phased out immediately followed by the shutdown of another 1,500 MW by 2022. The government has also decided to end the must-run status of the three RLNG-based plants in Punjab with a combined capacity of 3,900 MW. The existing agreements with these plants force the government to use them even though the induction of cheaper coal- and hydro-based generation and the reduction in electricity demand have pushed them to a lower position in the economic dispatch merit order. The addition of nuclear-, hydro-, renewable- and coal-based capacity going forward is expected to further drive these plants down the merit order.

The decision has apparently been made to slash the overall generation cost, which has driven up power tariffs to one of the highest in the region and made electricity unaffordable for industrial, commercial and domestic consumers over time. Further, the inability of the authorities to cut distribution losses, recover bills and check theft has posed a new quasi-fiscal challenge in the form of circular debt of more than Rs2.1tr in the power sector. The government is striving to find a solution to the issues though. Recently, it struck a deal with private power producers to reduce their profits. But not many believe that these piecemeal, short-term measures will help liquidate the power-sector debt or address the issue of affordability without deeper reforms in the power sector. Sadly, the country’s energy policymakers haven’t proved equal to the task. Take the example of the NTDC’s electricity-generation expansion plan for the next 27 years. A review of the project by the Institute for Energy Economics and Financial Analysis shows that the authors of the plan are completely unaware of ongoing developments in renewables and how these are expected to change the global electricity-generation scene by the time Pakistan turns 100. Instead, it proposes, even if innocently, to lock Pakistan into dirty and expensive generation capacity and saddle the government and consumers with a greater financial burden. What we need is a long-term capacity expansion plan that takes into account ongoing technological advancements in cheaper renewable energy sources to make electricity affordable for consumers. Equally important is the development of a competitive electricity market in the country with the government only playing the role of effective regulator.

Published in Dawn, September 12th, 2020

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