Power generation cost declines

Tariff drops Rs9.02 per unit on low demand, use of cheaper generation plant

KARACHI:

The cost of fuel in power generation maintained a downward trend for the fourth consecutive month, falling to Rs9.02 per unit as a drop in demand for electricity kicked expensive plants out of the system, making room for cheaper ones in October 2022.

The reduction in use of expensive fuel for the generation of electricity is a blessing in disguise, as this is achieved at the cost of economic activities.

The partial or complete closure of factories in different sectors of the economy (including textiles, car manufacturing and construction materials) has partially cut demand for energy in the month under review.

The cost of fuel component dropped almost 9% to Rs9.02 per unit in October, compared to Rs9.91 per unit in the month of September. The cost dropped by 3% in the month, compared to Rs9.30 per unit in the same month of October last year (2021).

The total cost of generating electricity in the country hit a record high, at Rs14.72 per unit, four months ago in June 2022 and has continued to slide since then.

The month of June recorded one of the worst power crises in history, as the high cost of production forced the government to produce low electricity to keep the monthly utility bills within the reach of industries and households.

“The increase in billings sparked fears in the sector of consumers defaulting on payment of their monthly bills,” an official of a leading power company had told the Express Tribune.

In October 2022 alone, power generation dropped by 5% to 10,705 gigawatt-hour (GWh), compared to 11,296 GWh in the same month last year. The reduction in cost, however, was led by an increase in generation from cheaper sources like hydel-based generation that rose by 20% in October, compared to the same month last year.

Arif Habib Limited’s Analyst, Rao Aamir Ali said, “On a year-on-year basis, the decline in fuel costs was witnessed after 22 months in October 2022.”

“Nuclear-based generation soared by 58% year-on-year, wind-based generation increased by 20% and solar-based production surged by 25% in the month, compared to the same month last year,” he stated.

“The significant rise in nuclear-based generation has been witnessed due to the addition of KANUPP-3 to the system in March 2022, with an installed capacity to generate 1,100 megawatts. The rise in hydel-based generation was due to the addition of Karot Hydro Power of 720 megawatts, installed in June 2022, while Neelam Jhelum was unavailable due to a technical fault in the month. The rise in wind-based generation was also witnessed due to the addition of new plants in the system,” said the analyst.

“Accordingly, the country saw an 87% drop in power generation from expensive furnace oil, 32% from RLNG-fired plants and another 12% from coal-based plants in the month, compared to the corresponding month last year,” he said.

Cumulatively, in the first four-month (July-October) of the current fiscal year 2022, power generation decreased by 9.3% to 51,786 GWh, compared to 57,086 GWh in the same period of the last year.

In the last four months, the country witnessed the highest power production of 34.5%, from a total of 51,786 GWh, from one of the cheapest sources – hydel. The nuclear plants produced 16.1%, RLNG plants produced 14.6%, coal generated 13.7%, local gas produced 10.2%, furnace oil generated 6.1% and wind powerplants produced 3.1% of the country’s energy.

Solar, bagasse, imported, diesel and mixed sources generated power in the range of 0.1% to 0.6% of the total production in the last four-month.

Published in The Express Tribune, November 20^th, 2022.

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