Electricity production falls 2.4% in January amid rising fuel costs

KARACHI:

Pakistan’s electricity generation fell by 2.4% to 8,314 Gigawatt hours (GWh) in January 2024 due to low demand on the system during the winter month. However, the cost of its fuel component in total production rose a staggering 23% to Rs 13.79 per unit due to increased reliance on expensive fuels such as imported gas, furnace oil and diesel.
According to data compiled by Arif Habib Limited, electricity generation fell by 2.4% in the month under review compared to 8,515 GWh in January 2023.

Despite low demand in the system, Pakistan has increased generation from expensive fuel-fired power plants, while generation from comparatively low-cost power plants has declined, including nuclear, coal-fired local plants, and coal-fired local plants. natural gas. Output from the cheapest hydro plants rose year-on-year but remained relatively low in the month.

Speaking to The Express Tribune, Pak-Kuwait Investment Company head of research, Samiullah Tariq, said output from the cheapest hydropower plants rose 15.5% to 924 GWh in January on a year-on-year basis.
Production from hydel plants, however, remains low usually in January when water flow is reduced due to canal maintenance.

Output from the second-cheapest nuclear plants fell by about 8% to 1,728 GWh in January compared to the same month a year earlier, “apparently due to the connection to transmission lines that take power from the south to the northern parts of the country. Tariq said.

He argued that while the nuclear power plants are located in Karachi (south), the output from the plants is mainly used in the high demand areas located in the northern part of the country.

Additionally, generation from other cheaper sources such as solar and wind also remained low in January compared to the same month last year due to seasonal constraints.

In this context, and to keep transmission lines running, the government had to increase production from expensive options such as furnace oil and diesel.

Reading Electricity production hits 33-month low

Additionally, the higher availability of imported (expensive) LNG per month allowed the government to use the fuel to generate electricity, pushing the energy tariff higher.

AHL said in a brief comment that in January 2024, actual electricity production was 4.7% lower than reference production. “This reduction in production is expected to lead to higher capacity charges for the third quarter (January-March) FY23 QTA (quarterly tariff adjustment).”

Tariq explained that lower generation causes an increase in capacity payment, thereby making electricity tariffs more expensive for end consumers.

The research house’s work shows production with diesel cost (only fuel component) at Rs 45.61 per unit in January, while there was no diesel-based production in January 2023.
The fuel cost of furnace oil increased by 22.33% to Rs35.44 per unit in the month compared to Rs28.97 per unit in the corresponding month of the previous year.

The price of imported power rose by nearly 28% to Rs 32.80 per unit. Cost of generation (only fuel cost) through imported gas-fired power plants increased by 11% to Rs 24.30 per unit.

The production cost of local gas rose 43.3% to Rs 13.75 per unit after the government hiked the price of the fuel for the first time in November 2023. Local gas became more expensive for different users for the second time in February of 2024.

The cost of generation through local coal-fired units rose a staggering 72.3% to Rs 11.92 per unit in January compared to Rs 6.92 per unit in January 2023.

Nuclear power became costlier by nearly 24% at Rs 1.33 per unit compared to Rs 1.07 per unit this time last year.

Published in The Express Tribune, February 21^St2024.

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