Are the 1,945 billion rupees of capacity payments the primary reason for swelling electricity prices in Pakistan?
Pakistani households and businesses are facing soaring power prices. On 21 July 2023, the National Electric Power Regulatory Authority (NEPRA) announced to increase the average electricity tariff by 47%, up from Rs.16.91/kWh to Rs. 24.82/kWh which will likely worsen the country’s crippling inflation. It’s been argued that the growing cost of power generation caused this hike. Let’s explore the various cost components and if there are any prospects of lowering them soon.
In its latest forecast for power purchase prices (PPP) for the fiscal year 2023-24 issued in July 2023, NEPRA expects a total amount of Rs. 2,859 billion for 139TWh of electricity, translating into 20 rupees per unit. The PPP comprises two main components: capacity purchase price (CPP) and energy purchase price (EPP). CPP is normally paid to coal and gas power plants for their “availability” while EPP represents the cost of primary fuels and operational costs.
Pakistani consumers will pay Rs. 1,954 billion in just one year to cover the fixed CPP, representing a whopping 68% of the total cost. Coal plants will be the major beneficiary of these payments by consuming 35% (Rs. 691 billion) of this cost, followed by nuclear at 23% (Rs. 443 billion). On a per unit basis, however, RLNG plants would be the costliest among thermal plants as they will get Rs. 28/kWh in capacity payments.
The total fuel cost is projected to be Rs. 904 billion, which will be spent to procure coal, natural gas and LNG over the next year. Of that, more than Rs. 500 billion are projected for fossil fuel imports. Depending on international market trends and the rupee’s exchange rate against the US dollar, this amount might increase dramatically, which was evident in 2022 when the rupee’s value plunged amid historically high LNG prices.
领英推荐
Notably, most of today’s coal and LNG plants were built just a few years ago, which will continue burdening Pakistani consumers in the form of capacity payments. Moreover, future coal and LNG procurement cost and the repatriation and repayments of foreign equity and loans will prove to be a major drain on the country’s flagging foreign exchange reserves. There are unfortunately no indications on how this surge can be tamed, let alone reversed.
_______________
?
Visit Herald Analytics Tableau page to explore further: https://public.tableau.com/app/profile/herald.analytics
Economist & Financial Analyst | Energy and Power Sector
10 个月It would be great if you further dissect the Capacity Transfer Rate (CTR) to find what factors are more prominent in ballooning the Capacity Payments. I think the failure to manage debt, accumulating in power sector, could be a reason. I am also doing Research in the Power Sector. Looking forward for the collaboration.
Leading Energy & Sustainability Expert in Corporate Governance and Sustainability
1 年Majid Hussain
Senior Legal Counsel at Kuwait Energy Basra Limited
1 年Thanks for sharing, it’s informative
Technical Advisor / Project Manager at Bahria Foundation LNG Project
1 年Short and brief, very rightly said... I wonder our economic and energy sector gurus mind set to increase energy and fuel cost as the only way out to address circular energy and Gas debts... Despite all measures, no respite seen. Consumers are reducing energy usage by conserving or otherwise and same true for fuel... Monthly statistics reveal the GoP income reduced with declining trends, hence revenue with additional tariffs, taxes projected back to square one.... Power losses on the rise as slums and remote areas refuse to pay or bypass meters with violent scenes to make WAPDA or KE staff run for their life. A volcano is ready to explode as energy cost becoming unmanageable,... Our of box thinking required before it's too late to manage.... Thanks Rabia, please send you articles on my email [email protected]... Glad to see you excel in this field, best wishes
Consultant/Managing Partner
1 年Impressive article