Govt comes up with hybrid plan to tackle power crisis

ISLAMABAD: While the focus currently remains on managing petroleum supplies and prices, the government is expected to adopt a hybrid arrangement of load-shedding, compulsory conservation and tariff hikes in the power sector to meet summer demand amid the ongoing Middle East crisis.

Officials said there would be virtually zero availability of LNG from next month and beyond — a fuel that accounts for more than one-fifth (over 21pc) of total power generation — even if the US-Israel war on Iran ends immediately. Avai­lability of imported and local coal would also be on the lower side. Together, the two fuels acc­ou­nt for close to 30pc of power supply to the national grid.

The key replacement fuel is furnace oil, which is seldom used otherwise in normal conditions, except in the case of peak summer demand. The cost differential is enormous, although furnace oil stocks at present are more than 360,000 tonnes, sufficient for more than 25 days of full requirement, and the government has restricted the domestic oil industry from exports as a contingency measure.

Giving an example, an official said the fuel cost of power generation on imported LNG and coal was around Rs20 and Rs13.50 per unit, respectively, in February. Local gas and local coal-based fuel cost is around Rs12-14 per unit. In comparison, the cost of furnace oil-based generation amounted to about Rs35 per unit and the furnace oil price had more than doubled following disruptions in the Strait of Hormuz and attacks on Middle Eastern refineries.

While actual cost calculations could not be worked out in advance, an off-the-cuff estimate suggests the fuel cost adjustment could be on the higher side of Rs10-12 per unit given non-utilisation of about 5,000 megawatts of four LNG power plants — among the most efficient and economic generation facilities. Such a big difference could not be passed on to any consumer category, particularly the industry, an official said.

The cost of high-speed diesel (HSD)-based generation, which previously exceeded Rs45 per unit before the US-Israel strikes on Iran, may now have risen beyond Rs80 per unit, the official said. However, he added that HSD would not be considered for power generation due to both its high cost and its critical demand in transport and agriculture, especially with the crop harvest season approaching.

Summer peak demand typically rises to 27,000 to 28,000MW, compared to the current average of less than 14,000 MW during peak hours and below 9,000 MW in daytime, partly due to increasing reliance on solar power, which has helped reduce grid demand. Officials said furnace oil-based plants could be utilised during peak hours due to their ability to ramp up generation quickly.

Given these constraints, the government is expected to go for two to three hours of daily load-shedding on average, depending on fuel supplies, along with strict electricity conservation measures and passing on fuel costs to consumers through the existing automatic adjustment mechanism. The final strategy will depend on the availability of natural gas.

Gas companies have already indicated that no more than 80 million cubic feet per day (mmcfd) of gas would be available for power generation. About 150mmcfd of gas and LNG supplied to power plants in March will no longer be available from April onwards. Supplies to the CNG sector, already reduced to 50pc of demand, may be fully suspended to free up 25-30mmcfd, while partially curtailed gas to fertiliser plants could also be diverted to the power sector.

As if the exogenous challenges were not enough, domestic mismanagement and bureaucratic wrangling also appear to be problematic, power sector officials said. They said that about 1,500-1,800MW of coal-based generation also appeared to be unreliable when it was needed the most in view of unnecessary disputes between the managements of Pakistan Railways and two coal power plants, and could only be streamlined if the prime minister took strict action.

This meant that 10-15pc of the electricity generation was being jeopardised in this tug of war and non-cooperative relationship. Firstly, the railways’ high-ups were not allowing coal loading from the Khanewal Sahiwal power plant. On top of that, waggons were not being made available to the Jamshoro plant.

Both plants are critical for grid stability, particularly Sahiwal, due to its proximity to major load centres.

At present, Sahiwal and Jamshoro plants together generate about 1,500-2,000MW out of the total national generation of around 14,000MW. Officials warned that depletion of their fuel stocks, currently at just three to seven days, could result in an additional 2.5 to 3 hours of load-shedding.

The situation also has financial implications for Pakistan Railways, as the two plants contribute over 30pc of its freight revenue. While Jamshoro has secured regulatory approval from the National Electric Power Regulatory Authority (Nepra) to transport coal via road, Sahiwal is still in the tendering process for trucking, which would increase generation costs and ultimately consumer tariffs.

Officials said the matter had been taken up with Power Minister Awais Leghari for resolution through Railways Minister Hanif Abbasi or the Prime Minister’s Office.