Power demand rises by 7% in October

Surge in electricity consumption fails to offset higher fuel costs as reliance on expensive coal persists

KARACHI:

The demand for power increased by 7% to 10,262 gigawatt hours (GWh) in Pakistan in October, driven partly by the slow-paced revival of industrial activities and partly by the prolonged summer season compared to the same month last year.

The much-needed rise in electricity generation, however, failed to offset the rising fuel cost in the end-consumer tariff. Fuel costs surged by 10% year-on-year and 9% month-on-month to Rs9.06/unit, primarily due to lower generation from low-cost hydel and nuclear plants and increased reliance on expensive imported coal-fired plants in October 2024, local research houses reported, citing official data.

According to the National Electric Power Regulatory Authority's (NEPRA) data, Topline Research reported on Friday that this surge in demand followed four consecutive months of decline. "This rise in power generation is attributed to a pickup in economic activity," the report noted. Arif Habib Limited highlighted that actual generation exceeded the reference (estimated) generation for the first time in 13 months, rising by 0.7% in October.

However, power generation in October declined significantly by 18% compared to the preceding month of September.

Cumulatively, energy production dropped by 5% in the first four months of the current fiscal year 2024-25 to 50,808 GWh compared to the same period last year. During these four months (July-October) of FY25, the cost of power generation increased by 5% to Rs8.4/unit compared to the corresponding period last year.

Another potential reason for the year-on-year rise in power demand in October was the availability of electricity at subsidised rates. Earlier, the government announced subsidised power tariffs for consumers utilising additional electricity during the four winter months (October 2024 to January 2025) compared to the same period last year.

The package aimed to encourage maximum utilisation of power from the national grid, helping reduce capacity payments and circular debt.

Speaking to The Express Tribune, Sustainable Development Policy Institute (SDPI) Energy Economist Dr Khalid Waleed noted that the significant reduction in inflation to single digits, along with a notable cut in interest rates on bank financing, supported a slow-paced recovery in economic activities, particularly industrial output, in October.

Reports suggest that the textile sector, Pakistan's largest local and export industry, has shown improvement with a rise in demand for textile articles in export markets like the US and Europe. The sector has secured additional export orders amid recent political turmoil in Bangladesh.

Waleed recalled that power demand remained low in October last year when many industries reported complete or partial shutdowns due to high economic and political uncertainties.

Businesses questioned whether Pakistan would manage to secure the International Monetary Fund (IMF)'s $7 billion programme under the then-unstable political environment. Additionally, high inflation and steep interest rates had discouraged industrial operations due to elevated costs.

He added that temperatures were higher this October compared to last year. "People had already switched off air conditioners in October last year," he said.

Waleed expressed doubts about Pakistan's ability to sustain growth in power production moving forward, particularly in the summer season. He projected that production may remain low due to the significant rise in power prices caused by capacity payments, circular debt, and the widespread installation of rooftop solar panels at factories and households.

He predicted that power generation might continue to decline in FY25, with the full fiscal year seeing lower production compared to FY24.

Data shows that imports of Chinese solar panels hit a record high of $1.7 billion in the first nine months (January-September) of 2024, compared to just $400 million in 2020. Cumulatively, Pakistan has imported solar equipment worth $5 billion in less than four years (January 2020 to September 2024).