Pakistan’s unexpected dilemma: too much electricity

Published February 25, 2021
Large-scale construction of new power plants — largely coal-fired ones funded by China — has dramatically boosted the country’s energy capacity. — AFP/File
Large-scale construction of new power plants — largely coal-fired ones funded by China — has dramatically boosted the country’s energy capacity. — AFP/File

KARACHI: After suffering decades of electricity shortages that left families and businesses in the dark, Pakistan finds itself with a new problem: more electricity generating capacity than it needs.

Large-scale construction of new power plants — largely coal-fired ones funded by China — has dramatically boosted the country’s energy capacity.

“It’s true. We are producing much more than we need,” Special Assistant to Prime Minister (SAPM) on Power Tabish Gauhar said.

But even as supply surges, electricity is still not reaching up to 50 million people in Pakistan who need it, according to a 2018 World Bank report, though expansion of transmission lines is planned.

Power outages also remain common, with a transmission problem just last month leaving many major cities in the dark.

Excess fossil fuel energy capacity also is boosting electricity costs — and raising questions about whether the country will now manage to achieve its climate change goals, with scientists saying coal needs to rapidly disappear from the world’s energy mix to prevent the worst impacts of climate change.

Renewables aim?

Last year, Prime Minister Imran Khan promised that Pakistan by 2030 would produce 60 per cent of its electricity from renewable sources.

Currently the country gets 64pc of its electricity from fossil fuels, with another 27pc from hydro­­power, 5pc from nuclear power and just 4pc from renewables such as solar and wind, Mr Gauhar said.

The country has already scrapped plans for two Chinese-funded coal plants — but another seven commissioned as part of the sweeping China-Pakistan Econo­mic Corridor (CPEC) project have gone ahead, and are expected to add up to 6,600 megawatts of capacity to the grid.

China has also funded new renewable energy but at a smaller scale, with six wind farms set to generate just under 400MW, a 100MW solar project and four hydropower plants expected to produce 3,400MW by 2027.

Vaqar Zakaria, the head of environmental consultancy firm Hagler Bailly Pakistan, said the country’s coal-heavy power expansion was in line with its own former national aims.

“I think blaming the Chinese may not entirely be fair as setting up projects on local and imported coal was our country policy and priority,” he said.

Officials at the Chinese embassy in Islamabad did not respond to calls and email asking for comment.

As new largely coal-fired plants come online, Pakistan is expected by 2023 to have 50pc more power capacity than currently needed.

Because the government must repay loans taken to build the plants and has signed contracts to buy their power, the overcapacity is producing costs “the government has to pay to the power producers under binding contracts, regardless of actual need”, Mr Gauhar said.

“Our fixed-capacity charges have gone through the roof,” he added. Those costs currently stand at Rs850 billion a year, but will rise to almost Rs1.45 trillion a year by 2023 as new largely coal-fired power plants still being built come online, he said.

That is driving up rates consumers pay for power — 30pc in the last two years, Mr Gauhar said — a problem likely to continue unless Pakistan can find more buyers for its new generating capacity, such as by boosting manufacturing or pushing use of electric vehicles.

The government plans to decommission some older fossil fuel plants to cut overcapacity, he said — but it also pushing ahead to add new wind, solar and hydropower capacity to the grid to meet its climate goals.

The government is holding talks to renegotiate tariff rates with the independent power producers, including fossil fuel, hydro, wind and solar companies, he said.

Whether it will seek similar rate renegotiations on Chinese-funded plants still in the pipeline, or longer debt repayment periods, remains unclear.

Gaining power

When electricity projects now in the pipeline are completed in the next few years, Pakistan will have about 38,000MW of capacity, Mr Gauhar said.

But its current summertime peak demand is 25,000MW, with electricity use falling to 12,000MW in the winter, he said.

Saadia Qayyum, an energy specialist with the World Bank, said energy overproduction was a better problem to have than undersupply as it allowed for growth — but the country needed new ways to use the electricity.

Published in Dawn, February 25th, 2021

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