ISLAMABAD: Even without taking into account the fresh aggressive campaign for induction of 10,000 megawatts of renewable energy by the coalition government, the National Electric Power Regulatory Authority (Nepra) is expecting a surplus power production capacity of more than 12,670MW within five years owing to generation projects currently in construction phase.
This is despite the fact that the country’s transmission network is already facing serious capacity constraints and incurring over Rs150bn worth of annual energy not served to various consumer categories and yet adding to their overall energy costs. This happens at a time the capacity payments, for energy consumed or not, has already been growing from Rs570bn in 2019 to Rs860bn in 2020 and Rs970bn in 2022.
“The surplus capacity as provided during FY2021-22 is 3,184MW which is on increasing trend in the years to come and will reach 12,674MW in FY2026-27. This huge surplus quantum of electric power capacity, if with the “Take or Pay” and/or “Must Run” conditions, will be a challenge for power sector of the country due to huge capacity payments on account of unutilised capacity”, observed the regulator in its State of Industry Report 2021-22.
The regulator said the surplus would touch 9,000MW during the current year (FY2023) as per planned generation capacity of 34,730MW against the peak-hour demand of about 25,800MW that would keep growing every year. The surplus would thus stand at 12,674MW by FY2027 as peak demand was estimated at 32,275MW against the total capacity of about 44,950MW.
Already, the overloading of 500kv and 220kv transmission network was causing about Rs72bn loss in addition to about Rs50bn loss due to under-loading of a major China-sponsored transmission line because of the delay in completion of power plants for which the multi-billion-dollar project was contracted.
The regulator said the national transmission company had been allowed 2.5pc losses for FY2021-22, but it reported actual losses for the said year at 2.63pc with lost units of 3,696GWh having a cost effect of around Rs72bn. The technical constraints and congestions in the existing transmission network like congestions in the Sarfraz Nagar, Gatti, New Multan, Peeran Ghaib, Lahore-Shiekhupura, etc. have been affecting the economic dispatch and operations of the power plants, and appropriate dispatch of the cheaper electric power generation besides compromising the reliability of the transmission system.
During FY2021-22, the financial impact of plant operations in violation of economic merit order (EMO) due to transmission constraints stood at Rs3.67bn. Similarly, in several cases, the transmission facilities have not been completed as per the design, within the given timelines, and approved cost. “This has an additional financial burden on the power sector and end-consumers”.
It said removal of the constraints in the transmission network was of utmost importance on a war footing basis to save the power sector from avoidable loss occurring due to their system shortcomings. Similarly, congestion in the evacuation of power from most efficient RLNG plants, Hubco, China Power Hub, etc. was urgently needed to be removed on priority.
Nepra pointed out that due to the lack of required generation capacity, the High Voltage Direct Current (HVDC) Matiari-Lahore transmission line remained underutilised during FY2021-22 and was causing a financial burden on end-consumer in terms of per unit cost of electricity.
“The capacity payments of PMLTC (Matiari-Lahore Line) during the period of September 1, 2021, to June 30, 2022, was Rs49 billion while total electrons transmitted through this line during the same period was 11,560 GWh with utilisation factor of around 36pc which is quite low”.
The regulator deplored delayed project implementation saying the national transmission company (NTDC) “in most of the cases has been unable to meet the timeline” and “interconnection timelines are revised time and again which results in cost overruns”. Delay in interconnection as per design delays evacuation of power from cheaper sources in a reliable manner and hence forecasting and planning should also be improved.
Nepra also criticised the provincial governments of KP and Sindh for not operationalising their transmission companies for which they were given licences 3 to 4 years ago which now stood expired. The very objective of issuing the licences to the provincial entities was to enhance the utilisation of local resources, fast-tracking the development of cheaper power generation plants, develop a regional grid to share the burden of national grid company for transmission of electric power within the province, improve efficiencies and bring competition in the transmission services.
“However, to date, no progress by these companies has been witnessed on ground regarding the development of their transmission network and rendering transmission services”.
The regulator also highlighted violation of economic merit order (EMO) in procuring electricity from various power plants and noted serious deficiencies in the merit order standards as well. It said that since the power generation plants are contracted on either of “Take or Pay”, “Take and Pay”, “Must Run”, merchant power plants, or ancillary services, it is needed that the EMO should take these contractual frameworks into account. Criteria for purchase of electricity from merchant plants shall need to be developed which enable procurement of electricity on price base, whenever it is cheaper.
It said the EMO was prepared based on fuels which are not available in the first place on ground. For example, historically indigenous natural (pipeline quality) gas was the cheapest fuel due to its price, and the plants operated on this fuel, even inefficient, appeared on top in the EMO. Due to depletion, the indigenous pipeline quality gas has not been available for power generation for the last 2 to 3 years. However, despite the non-availability of pipeline-quality natural gas, the EMO is still being prepared considering this fuel, alone or in combination with other fuels, which is misleading and causes confusion for stakeholders.
Published in Dawn, October 3rd, 2022