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Federal Minister for Energy, Awais Leghari, recently acknowledged that Pakistan currently has the highest electricity costs in the region. Speaking at the National Youth Convention in Islamabad, the minister assured that the government is actively working towards resolving issues related to Independent Power Producers (IPPs) and is hopeful that positive news will soon emerge.
Addressing IPP Challenges
During his speech, Awais Leghari revealed that the government, in collaboration with intelligence agencies and other institutions, is focused on delivering solutions concerning IPPs that would benefit both the public and the industrial sectors. He indicated that within the next one to two months, there could be significant developments in this area, which are expected to have a favorable impact on the cost of electricity.
The Reality of Pakistan’s Power Generation Capacity
One of the critical points highlighted by Awais was the discrepancy in the reported power generation capacity of the country. Contrary to the widely cited figure of 45,000 MW, Awais clarified that Pakistan’s actual power generation capacity stands at 29,000 MW.
Furthermore, he noted that the demand for electricity varies throughout the year. The average year-round demand is just 7,000 MW, with peak demand reaching up to 24,000 MW. Despite this, the country maintains an additional 1,845 MW in the system, which is only required for 85 hours annually. This surplus comes at a significant cost.
The Cost of Excess Capacity
Awais explained that maintaining this excess capacity incurs an annual cost of Rs 50 billion. He suggested a strategic approach to managing this capacity, proposing that the country could endure 85 hours of load shedding over 40 days, potentially saving the national exchequer Rs 50 billion.
Moreover, he pointed out that if Pakistan could tolerate 874 hours of load shedding annually, which equates to approximately 10% of the year, the savings could increase to PKR 100 billion in capacity payments.
“Capacity payments are the price we pay to avoid load shedding,” Awais Leghari remarked, emphasizing the financial burden these payments impose on the nation. He acknowledged the challenge, stating, “I admit, we are providing the most expensive electricity in the region.”
Potential Impact on the Public and Industrial Sectors
The minister’s remarks underscore the government’s commitment to addressing the high cost of electricity in Pakistan. By re-evaluating capacity payments and considering controlled load shedding as a strategic measure, there is potential to significantly reduce expenses and pass on the benefits to consumers and industries alike.
While these proposals may require the public to endure some inconvenience, the long-term financial savings could contribute to a more sustainable and economically viable energy sector in Pakistan.
