Pakistan achieved a record high power production level in a month at 16,078 Gigawatt hours (GWh) during the month of August. An analyst at Arif Habib Limited Rao Aamir Ali explained that these figures are around 10% higher than the 14,630 GWh produced during August of the year 2020 based off of data from the National Electric Power Regulatory Authority (NEPRA).
A rising demand for energy from various industrial sectors working on expansion and the use of additional home appliances and electric gadgets in households has contributed to the growth in power generation.
Ali elaborated that residential consumers have continued to upgrade their homes with electrical and electronic goods including high power consuming splits, other home appliances and gadgets. The higher generation of electricity was achieved through taking additional production from power plants on furnace oil, nuclear, wind, bagasse, solar and hydel. Major contributors during August 2021 were hydel (having 35% share in the total production), RLNG (share: 18%), coal (share: 14%), nuclear (share: 10%), furnace oil (share: 10%), gas (share: 8%), wind (share: 3%) and solar (share: 0.4%),”.
The furnace oil-based generation was up by 105% in August compared to the same month of last year. Nuclear power production increased by 100%, wind by77%, bagasse by 20%, solar by 12%, while hydel generation increased by 2% in the month. However, the generation based on high-speed diesel declined by 80%, coal by 9%, gas by 6% and RLNG-based generation dropped by 5% in the month compared to the same month last year, he added. During August 2021, however, fuel cost for power generation increased by 57% to Rs6.41/Kilowatt hours (kWh) mainly due to rise in RLNG, coal, furnace oil and gas-based cost of generation. RLNG-based cost of generation increased by 91% to Rs13.44/kWh said Ali.
The government has implemented a policy to utilize the surplus power production capacity that is available in the existing infrastructure in Pakistan in the wake of rising circular debt caused by the excessive installed capacity.
However, positive development comes with a higher price tag. The country has seen a substantial rise in fuel prices used for the generation of electricity, increasing power tariffs and the monthly bills for end-consumers.
CEO OF Reon Energy Mujtaba Haider Khan commented, “Power production has apparently surged on additional demand coming from increased industrial output, setting up of new industrial units and expansion of the existing ones,”.
He further elaborated that the shift from self-generation through gas-based captive power plants to the national grid station under the government directed policy has also contributed towards the spike in power generation.
Similar to the industrial sector, the two major components of the domestic economy; agriculture and services sectors are also benefiting from the business friendly and pro-growth policies implemented by the current government. Growth in these sectors has further increased electricity demand in Pakistan.
The State Bank of Pakistan stated that as a result of rapid growth in most high frequency domestic demand indicators such as automobiles, POL (petroleum, oil and lubricants) sales, cement sales and electricity generation economic recovery has surpassed expectations.
According to the Central Bank, “The services sector is also rebounding strongly; latest Google Community Mobility Reports show that activity across grocery stores, restaurants, and shopping centers during July and August rose above pre-COVID levels. In agriculture, the decline in the area under cultivation of cotton is expected to be compensated by an increase in area for rice, maize, and sugarcane,”.
