Pakistan is conducting a comprehensive review of its existing and upcoming power projects, including hydropower and nuclear plants, in response to growing concerns over energy overcapacity and inflated electricity prices. This move comes amidst a period of financial strain, with the country facing high capacity payments to Independent Power Producers (IPPs) for unused power.
The review, which encompasses both operational and planned projects, is aimed at assessing their viability and efficiency. The Pakistani government is prioritizing the optimization of power generation to align with current demand, with the ultimate goal of achieving economic sustainability.
According to The News International, the review comes in the wake of reports that Pakistan has disbursed approximately Rs1 trillion in capacity payments to 26 IPPs over the past decade, starting from 2015. These IPPs utilize various energy sources, including gas, regasified liquefied natural gas (RLNG), and residual furnace oil (RFO).
During a recent meeting of the Senate Standing Committee on Power, Minister for Power Awais Leghari confirmed the review, stating that even committed projects, including the Diamer-Bhasha Dam and Chashma Nuclear Power Plant Unit 5, are being scrutinized. Leghari reassured the committee that a task force is meticulously evaluating the IPPs and is expected to provide a detailed report, outlining a realistic timeframe, within the next two weeks.
The Minister cautioned against hasty or unilateral actions against the IPPs, highlighting the potential for severe financial repercussions. Leghari cited the Reko Diq case, where Pakistan faced substantial fines due to contract violations, as a stark example of the risks involved.
Under the Integrated Generation Capacity Expansion Plan (IGCEP), Pakistan is projected to add approximately 18,000 MW of new power generation capacity over the next decade, with a significant portion sourced from hydropower. Despite this, Leghari emphasized the government’s commitment to exploring cost-effective solutions, acknowledging the difficulties in unilaterally altering IPP agreements due to their sovereign guarantees.
The Economic Survey of Pakistan 2024 reports an installed electricity generation capacity of 42,131 MW for Fiscal Year 2024. The Senate Standing Committee on Power, expressing concerns about the perceived flaws and high pricing of IPP agreements, has requested a comprehensive regional comparison of electricity production costs, a heat audit of projects, and an analysis of their Return on Equity (RoIs). The committee has also requested copies of all agreements signed with IPPs since 1992.
This review of Pakistan’s power projects signifies a critical step toward addressing the country’s energy challenges. The government’s focus on optimizing power generation and ensuring the financial viability of projects is vital for ensuring energy security and achieving sustainable economic growth.
