Islamabad - Pakistan Institute of Development Economics (PIDE) has said that the country’s switching to electricity generation from cheaper indigenous sources is impossible in the short to medium term owing to long term agreements with IPPs.
Due to long-term agreements with guaranteed capacity payments to thermal generation companies, switching to cheaper indigenous energy sources is impossible in the short to medium term. Therefore, the complex tariff mechanism needs to be revised to reduce electricity prices in Pakistan, said PIDE here on Sunday.
Pakistan’s power sector has been in crisis for years, there are too many players in the system confuse each other to cumulate losses and give subsidies while at the same, the circular debt is rising continually, PIDE said. Surprisingly, no government has taken the power sector with the urgency it deserves, and no serious research has gone into understanding the issues, said a statement issued here by PIDE. Whatever decisions are made are at the advice of international financial institutions, who do not understand the local dynamics of the problem.
PIDE further said that energy is a chronic problem that eight governments have not been able to solve. Due to mismanagement and weak governance in the power sector, massive transmission and distribution losses occurred (Rs473 billion during 2021, out of which Rs402 recovered through tariff and Rs71 billion was added to circular debt). “Our decision-makers’ lack of informed long-term vision has led to distribution inefficiencies, expensive fuel mix, and rising capacity payments,” it said. The results are unreliable electricity supplies, unaffordable electricity, and increasing business costs. The demand-supply gap has evolved over the years from deficits to excess installed capacity. Still, there is a shortage of cash flows to import fuel and supporting infrastructure to run it, leading to power outages.
Country’s switching to electricity generation from cheaper indigenous sources in short time is impossible owing to long term agreements with IPPs, says PIDE
Pakistan Institute of Development Economics (PIDE) has formed a ‘PIDE Power Commission’. The commission comprises power sector experts with decades-long experience in the sector. With contributions from the experts in the commission, a major study is underway at PIDE. This soon-to-be-launched study would provide deep insights into various segments of the power sector, providing workable, sustainable, and integrated solutions to the power sector woes. According to PIDE, more than 60 percent of electricity is produced by thermal sources providing costly electricity in Pakistan. Further, the tariff mechanism adopted provides electricity charges across categories, time of use and sanctioned load, etc, creating inefficiencies and making electricity expensive for productive sectors (industry and businesses) of the economy. Additionally, Pakistan is among the top thirty countries globally with relatively high tariff rates. The sector is about to implement a wholesale market model (CTBCM), demanding significant tariff reforms. There should be fair pricing, where each consumer pays according to their consumption on a progressive trend, i.e. the more per unit energy is consumed, the more consumer pays on average.
Due to long-term agreements with guaranteed capacity payments to thermal generation companies, switching to cheaper indigenous energy sources is impossible in the short to medium term. Therefore, the complex tariff mechanism needs to be revised to reduce electricity prices in Pakistan, said PIDE here on Sunday.
Pakistan’s power sector has been in crisis for years, there are too many players in the system confuse each other to cumulate losses and give subsidies while at the same, the circular debt is rising continually, PIDE said. Surprisingly, no government has taken the power sector with the urgency it deserves, and no serious research has gone into understanding the issues, said a statement issued here by PIDE. Whatever decisions are made are at the advice of international financial institutions, who do not understand the local dynamics of the problem.
PIDE further said that energy is a chronic problem that eight governments have not been able to solve. Due to mismanagement and weak governance in the power sector, massive transmission and distribution losses occurred (Rs473 billion during 2021, out of which Rs402 recovered through tariff and Rs71 billion was added to circular debt). “Our decision-makers’ lack of informed long-term vision has led to distribution inefficiencies, expensive fuel mix, and rising capacity payments,” it said. The results are unreliable electricity supplies, unaffordable electricity, and increasing business costs. The demand-supply gap has evolved over the years from deficits to excess installed capacity. Still, there is a shortage of cash flows to import fuel and supporting infrastructure to run it, leading to power outages.
Country’s switching to electricity generation from cheaper indigenous sources in short time is impossible owing to long term agreements with IPPs, says PIDE
Pakistan Institute of Development Economics (PIDE) has formed a ‘PIDE Power Commission’. The commission comprises power sector experts with decades-long experience in the sector. With contributions from the experts in the commission, a major study is underway at PIDE. This soon-to-be-launched study would provide deep insights into various segments of the power sector, providing workable, sustainable, and integrated solutions to the power sector woes. According to PIDE, more than 60 percent of electricity is produced by thermal sources providing costly electricity in Pakistan. Further, the tariff mechanism adopted provides electricity charges across categories, time of use and sanctioned load, etc, creating inefficiencies and making electricity expensive for productive sectors (industry and businesses) of the economy. Additionally, Pakistan is among the top thirty countries globally with relatively high tariff rates. The sector is about to implement a wholesale market model (CTBCM), demanding significant tariff reforms. There should be fair pricing, where each consumer pays according to their consumption on a progressive trend, i.e. the more per unit energy is consumed, the more consumer pays on average.
