Power generation hits 7-Year low, capacity charges might hike

Pakistan’s power generation has hit a seven-year low, experiencing a 17.4% year-over-year decline, highlighting the challenges faced by the energy sector, as the country grapples with a subdued economy and consequently, a slump in energy demand.

In August 2024, power generation in Pakistan declined by 17.4% compared to August 2023, reaching 13,179 gigawatt-hours (GWh) or 17,714 megawatts (MW), according to AHL Research report. This is a significant drop compared to 15,959 GWh (21,450 MW) during the same period last year.

On a month-over-month (MoM) basis, power generation witnessed a dip of 11.4%. For the first two months of the fiscal year 2025 (2MFY25), power generation fell by 8.9% year-over-year (YoY) to 28,059 GWh (18,857 MW) compared to 30,798 GWh (20,697 MW) in the same period last year.

The actual power generation was 13.1% during the period under review, lower than the reference generation. This decline is expected to result in higher capacity charges for the second quarter of the fiscal year 2025 (2QFY25) quarterly tariff adjustment (QTA).

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In the month under review, the fuel cost for power generation declined by 9.3% YoY to an average of PKR 7.49 per kilowatt-hour (KWh), compared with an average cost of PKR 8.27 per KWh during the same period last year. The fall in fuel cost is primarily attributed to the lower cost of generation from local coal (down 21.4% YoY) and residual fuel oil (RFO) (down 9.0%).

Moreover, the generation of power from hydel and nuclear sources as a proportion of the total generation mix increased to 40.7% and 16.6%, respectively, compared to 37.6% and 12.8% during the same period last year. On a MoM basis, fuel costs dipped by 11.4%.

The load factor of combined cycle power plants (CPHG) arrived at zero during August 2024 due to subdued demand from power purchasers. The load factor of Thar Energy Limited (TEL) and ThalNova Power Thar Private Limited (TNPL) settled at 69% and 65%, respectively, and the overall load factor of local coal-based plants came in at 66%.

Hydel-based generation dropped by 10.2% YoY to 5,362 GWh in August 2024, primarily due to lower generation from the Water and Power Development Authority (WAPDA), down 4.2%, and the absence of dispatches from the Tarbela and Neelum Jhelum hydel plants.

The cost of power generation arrived at PKR 7.49 per KWh during August 2024. Including transmission losses and previous adjustments, the fuel cost increased to PKR 8.81 per KWh. This actual fuel cost is less than the reference fuel cost of PKR 9.39 per KWh forecasted at the start of FY25. As a result, there is a projected fall of PKR 0.58 per KWh in fuel charge adjustment, which will be refunded to customers in the October 2024 bill.