After decades of electricity shortage and countless hours of load shedding across the country, now Pakistan has a new challenge – too much generation capacity.
Pakistan’s power supply ended up in surplus for the first time in 2020, after a flurry of coal- and natural gas-fired plants were built, primarily as a result of the Belt and Road Initiative project, reported Bloomberg.
By 2023, the power generation projections for Pakistan show as much as 50 percent surplus electricity as compared to the local demand, said Special Assistant to Prime Minister on Power Tabish Gauhar.
While it may seem like a good thing to have surplus production of electricity, the past trends of shortage in the country meant that the government needed to be the sole buyer of electricity. That continues to be the case even now, and the problem is that the government still has to pay producers even when they do not generate.
Now the government is in negotiations with the power producers to end that system, reduce their tariffs, and delay starting new projects, the SAPM said, adding that the government is also trying to convince industries operating on gas to switch to electricity. “We have a lot of expensive electricity, and that is a burden.”
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Another undeniable challenge that comes with excess production is the dilapidated transmission system, coupled with the need to maintain a cheaper supply while also controlling emissions.
Bloomberg report quoted Simon Nicholas, an analyst at the Institute for Energy Economics & Financial Analysis, saying, “Pakistan has overcapacity, yet it still has power shortages because of the unreliability of the grid. They haven’t invested in the grid the same way they’ve invested in power plants.”
The recent nationwide blackout is still fresh in the memory of the citizens of Pakistan, which happened just last month after an outage at the country’s largest facility. The power mix is also undergoing shifts, with new plants already taking coal generation to a record fifth of the power mix. Additionally, Pakistan is planning to increase the share of wind and solar to 30 percent, while another 30 percent will be generated from river-run dams.
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The new arrangements made by the government in this regard with power producers entail that the government will pay private power producers Rs. 450 billion ($2.8 billion) in overdue electricity bills in a deal to reduce future tariffs.
The government is aiming to pay 40 percent of that bill by the end of February, with the second payment scheduled before December, according to Gauhar.
A third of the payment will be made in cash, with the rest in fixed income instruments, he added.
The government aims to delay about 10 gigawatts worth of planned power projects, including coal and wind plants since there won’t be any need for them the next year, the SAPM informed.
