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Dismal Performance of Power Generation Company Continues

Power Sector Generation – 2018

The Government of Pakistan made a provision of efficient electricity supply system as one of the key objectives of the National Power Policy 2013. To achieve this, the Government set in a motion a huge program of power generation and infrastructure through both the additions through the China-Pakistan Economic Corridor (CPEC) and Federal Government spending. Help was also sought from the private sector and multi-lateral agencies for the improvement and development of Pakistan’s power sector. The following sections provide an overview of the generation sector and discusses new generation capacity, public sector generation’s woes and difficulty and progress made so far on critical power generation projects.

The following projects have been added to the national grid as per the CPEC program:

Operational Power generation Projects – China Pakistan Economic Corridor

Project Description Status
1,320 MW Port Qasim Supercritical coal power plant 1st unit operationalized while second unit awaits COD
1,320 MW Sahiwal Imported Coal Supercritical coal power plant Project completed in 2017 and connected to national grid

 

Apart from the CPEC projects, the Government’s own power sector generation initiatives are as follows. As it can be seen however, that performance of the public-sector generation projects requires a much-improved performance than the one currently demonstrated.

Near Operational Power generation Projects – Public Sector

Project

Description Status
Quaid-e-Azam RLNG Power Project 1,320 MW RLNG Power Project Not operationalized.

 

Produced 66 million Kwh in the month of Feb 2018 as compared to monthly optimum production capacity of 807 million Kwh (8.2%).

Balloki Power Project 1,320 MW RLNG Power Project Not operationalized completely.

 

Produced 17 million Kwh in the month of Feb 2018 as compared to monthly optimum production capacity of 807 million Kwh (2.1%).

Havelli Bahadur 1,320 MW RLNG Power Project Not operationalized completely.

 

Produced 33 million Kwh in the month of Feb 2018 as compared to monthly optimum production capacity of 807 million Kwh (4.1%).

Tarbela IV 1,410 MW Hydro power First unit (470 MW) commissioned in February 2018 while unit 2 will be commissioned in May 2018 and unit 3 in June 2018.
Neelum Jhelum 969 MW hydro power Not functional. Cost increased to Rs. 507 billion for project completion.

Source: NEPRA’s Monthly Fuel Price Adjustment Data

The above picture is a gloomy one indeed. The RLNG power plants are producing next to nothing to the national grid and raises serious questions as to their operational viability. The earlier commissioning date for the Haveli Bahadur Shah RLNG plant was April 15. Under the agreement, the COD (Commercial Operation Date) of both the projects was January 9, but so far these are not functional despite the lapse of over five months. While the government wanted these projects to come online before May 2018 – the testing phase keep pushing the eventual operations delayed. The production in the range of 4% – 8% has also affected the RLNG supply chain.

There is also an insurance issue going forth. The National Insurance Company Limited (NICL) has already refused to provide reinsurance cover to the two RLNG projects of 2,460 MW saying the risk factor is on the higher side, as the plants had never been tested or tried anywhere in the world and therefore the Ministry of Finance should provide a counter-guarantee for the reinsurance. The Government remains in a quandary whether to provide for a counter-guarantee or it should start operations with adequate insurance. If NICL seeks a reinsurer to arrange cover from a private entity from the global market, the insurance cost will certainly increase and so will the tariff. Further, since the plants have not come online as per the COD, the Government is believed to have imposed penalty of $1,200,000 per day on the contractor of both the projects ($600,000 per day penalty to each contractor) – which does not bode well for the contractors and sets a bad precedent for the investor community. The Bhikki power plant is also assumed to have come to a halt, as the seal of the power turbine-4 had burnt damaging the rotor. As a result, the Unit-4 is no more operational. The repair will take additional three months.

Power Generation Units – Existing Plants

The performance of public sector thermal power plants (GENCOs) have been found to be lacking in terms of all Key Performance Indicators (KPI) for the past many years. As NEPRA reported in its 2016 State of the Industry Report:

It was also observed that a number of power generation units have outlived their useful lives, operating at lower than their rated capacities and inferior efficiencies. These power plants have not only poor operational results, the work force which is already on the higher side on per MW basis remained idle due to their closure and non-operation; contributing towards higher cost of generation”

It further continued:

In order not to pass on imprudent costs to consumers, the Authority had earlier advised all the GENCOs to carry out performance tests, so that degradation in their operational capabilities, efficiencies and administrative factors like manpower and overhauling and maintenance schedules are set afresh. The performance tests for two of the GENCOs (TPS Jamshoro and TPS Muzaffargarh) have been completed and the Authority while deciding on the tariff petitions of Jamshoro Power Company Limited and Northern Power Generation Company Limited have determined tariff components using the latest results. At the same time concerns of GENCOs have also been addressed by allowing certain parameters which were not part of their tariff earlier.

Operation of new power plants like 747 MW Guddu Power Plant and 425 MW Nandipur Power Plant are also glaring examples of poor governance by the public sector. In case of Guddu Power Plant, according to the information provided by the company to NEPRA, the plant underwent testing and commissioning for more than 8 months, whereas prudently done, testing and commissioning phase lasts for 20 to 25 days only. Even after the COD, 747 MW Guddu Power Plant, which is among the most efficient plants in the country, has been operated for 53% of the time only, during the reporting year. Nandipur Power Plant is another typical case of poor handling by the management. However, refusal of the regulator, to allow any imprudent costs related to such projects, is not viewed in the context of the health of overall power sector”

Power Sector Surcharges in Pakistan

tariff rationalization surcharge, neelum jhelum surcharge, deb servicing surcharge

Power sector surcharges

Introduction:

The Government of Pakistan has levied three power sector surcharges in Pakistan as per the latest intimation to NEPRA dated 7th March 2018.

Resources future explores these three important surcharges and its implications to consumers. It also analyzes whether the rationale for levying surch surcharges is correct or not. The surcharges include:

1. Tariff Rationalization Surcharge (TRS)

2. Neelum Jhelum Surcharge

3. Debt Service Surcharge

To read the full report, please download the publication here

Pakistan Solar Update 2018

Pakistan Solar PV Update

Pakistan Solar PV – Opportunities and Challenges

Abstract:

This sector update 2018 tracks Pakistan’s solar energy evolution – where it all began – a transition from upfront feed in tariffs to one based on competitive markets and reverse auctions. The sector update talks about different upfront tariffs offered by NEPRA since 2014 and what issue and challenges remain to keep solar PV on track to make it a potent force in Pakistan’s electricity generation mix.

Download the solar PV sector update here.

Fact Check – Power Load shedding in 2018

There is a lot of talk whether the load shedding has ended in 2018. The Government claims that the quantum of load shedding has substantially reduced on a year on year basis and over the last five years period. However, with an objective analysis, it can be ascertained if the quantum of load shedding has declined or not. Since the monthly electricity generation numbers are available on NEPRA’s website – Resources Future has run a quick reality check.

Load shedding status: 2013 – 2016:

The government believes that they have reduced the load shedding since 2013 which was more than 12 hours of load shedding in rural areas and 8 hours in urban areas. However, it is interesting to note the actual surplus/deficit numbers reported by the NEPRA for last five years. The actual reported numbers are as follows:

Surplus/Deficit in Demand and Supply – NTDC system

Year Generation Capability (MW) Peak Demand in NTDC System (MW) Surplus/Deficit (MW)
2013 14,600 18,827 (4,227)
2014 16,170 20,576 (4,406)
2015 16,500 21,701 (5,201)
2016 17,261 22,559 (5,298)

Source: NEPRA, State of the Industry Report 2016

Going by with above numbers, the total power generation deficit has increased from 4,227 MW to 5,298 MW. This means that the overall quantum of load shedding must have increased from prior years since overall deficit in the system has shown an increasing trend. Going by the above reported statistics, the actual load shedding may not have declined up till 2016.

Load shedding status in 2017

The above numbers till 2016 implies that there must have been little improvement in actual load shedding numbers. But what about the last two years –2017 and 2018. The consolidated numbers of actual electricity generation are not available yet from the regulator and other reporting agencies. However, Resources Future has ascertained the actual electricity generation figures for the last two years based on the NEPRA’s monthly fuel price adjustment data. The consolidated 2017 numbers are as follows:

Fuel Generation 2017 – GWh %
Hydel                                           31,786 30%
Furnace Oil                                           31,933 30%
Gas                                           31,057 29%
Diesel                                             1,648 2%
Coal                                                 961 1%
Others                                             9,684 9%
Total                                        107,069 100%

 

For 2016, NEPRA reported a comparable figure of 100,114 GWh of actual electricity generation. Compared to 2016, the 2017 numbers show a 7% increase in electricity generation – not enough to eliminate load shedding completely. This implies that on year on year basis, after accounting for an increase in peak demand, the actual surplus/deficit must have remained a north of 5,700 MW and above – and almost at the same levels as of 2013 – contradicting the reduced load shedding claims of the Ministry of Energy (Water and Power Division).

Load shedding status in 2018:

To analyze the load shedding claims in 2018, the monthly fuel price adjustment numbers have been consolidated. Till date, from July 2017 to February 2018 generation numbers are tabulated below as compared to monthly numbers from the same period of FY2017.

Gwh Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18
Hydel          3,847.6      4,196.5      4,142.6      2,438.4         2,212.5     1,231.5          606.3      1,356.6
Coal              368.1          405.1          551.2          687.4            961.8         909.5      1,144.4      1,102.0
HSD              335.6          336.0            60.3                 –                   –           51.5                 –              0.8
RFO          3,198.5      3,123.0      2,328.5      2,547.5            648.5     2,251.5      1,630.5          581.4
Gas          2,145.2      2,186.0      1,882.0      1,683.0         1,778.0     1,767.6      1,657.3      1,672.9
RLNG          1,514.5      1,369.0      1,326.0      1,492.0            865.0         395.1      1,802.0      1,340.1
Nuclear              641.6          432.2          777.6          837.6            634.2         728.1          821.0          609.2
Import                54.3            44.7            49.2            48.6               40.6           38.8            38.0            34.5
Mixed                26.7              7.8            56.7            56.8               56.1           65.4            72.4            61.1
Wind              232.8            82.6          141.7            76.8               71.1         188.8            73.1            84.9
Baggasse                75.3            69.0          110.3            65.6               55.5           86.4            86.9            81.0
Solar                56.6            52.0            61.9            62.0               42.2           48.8            54.8            54.7
Total        12,496.6    12,303.9    11,487.9      9,995.6         7,365.5     7,762.8      7,986.6      6,979.1

 

Gwh Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17
Hydel          3,948.0      4,249.6      4,249.6      2,762.0         2,842.5     1,642.7          511.8      1,493.5
Coal                  5.4            10.4            10.4            10.2                   –             2.5              8.6              4.6
HSD                65.5          142.2          142.2          172.6                   –           60.6          362.1              6.0
RFO          3,186.7      3,054.4      3,054.4      2,630.7         1,345.0     2,673.3      3,297.0      1,677.5
Gas          3,041.4      2,620.9      2,620.9      2,459.5         2,211.7     2,152.0      1,866.8      2,334.6
RLNG                     –                 –                 –                 –                   –                –                 –                 –
Nuclear              434.6          432.2          432.2          437.4            338.5         441.7          580.6          581.1
Import                45.8            44.7            44.7            41.3               35.0           32.1            34.6            33.8
Mixed                  8.1              7.8              7.8              6.0               14.6           27.8            32.5            36.1
Wind              129.9            82.6            82.6            71.6               46.7           54.1          106.6            81.0
Baggasse                68.8            69.0            69.0            18.7               56.0           69.8            73.3            80.5
Solar                57.6            52.0            52.0            56.4               45.3           43.2            39.9            54.2
Total        10,991.8    10,765.8    10,765.8      8,666.4         6,935.4     7,199.7      6,913.6      6,382.9

 

In absolute terms, there is an increase in electricity generation from 68,621 GWh in FY2017 to 76,378 Gwh in FY2018 – an 11.3% increase. If the same 11.3% increase continues, the country would be able to make 119,167 Gwh at the end of FY2018 – highest in its history. However, does that mean that it will be able to reduce the absolute quantum of load shedding? Again, just as it happened in FY2017, the 11% increase is electricity generation in FY2018 is not large enough to ameliorate the load shedding gap completely – as this still leaves a gap of more than 4,000 MW of average electricity generation to be fulfilled.

Net electricity generation addition:

In a snapshot, the total increases in electricity generation in the last five years has been as follows:

Year Electricity Generation (Gwh)
2013 88,835
2014 95,441
2015 97,881
2016 100,114
2017 107,619
2018 E 119,167

 

The CAGR increase in generation is 6.05% – not large enough to eliminate the load shedding, assuming the demand also grows by 5-7% per annum.

What may have gone wrong:

All the power sector projects that the government expected will be online before their term has unfortunately not been completed fully. For instance, the much awaited Neelum Jhelum power plan of 969 MW was expected online much before but so far only generates 60 MW. The three RLNG power plants of 3,600 MW are still in the testing phase and has not come online fully. Second, the circular debt has surfaced up again – albeit in a bigger proportion today. The large outstanding circular debt of Rs. 1,000 billion as of April 2018 (including PHPL) has constrained fuel supplies and has impeded continuous electricity generation. Last, the generation addition projects continue to face evacuation issues. While generating electricity has been the focus, the transmission bottlenecks has not allowed the electricity to be evacuated to distribution networks – causing the load shedding to stay as a permanent feature of Pakistan’s power sector.