ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) has criticised the government’s indicative generation plans, citing overinvestment in peak demand capacity, delays in expanding Thar coal projects and discouraging rooftop solar adoption as key contributors to rising consumer tariffs and a burden on government finances.

In its special report on generation sector challenges, the regulator has noted on top of the list “overinvestment in generation capacity to meet peak demand”. It advised the government and power companies to consider rooftop solar systems as a solution rather than a challenge, noting their benefits, including zero losses and no capacity payments.

“Despite the fact that existing installed electric power generation capacity often remains underutilised in Pakistan, the IGCEP (long-term Indi­cative Generation Capacity Expansion Plan) is developed with the aim to meet the peak demands that occur for less than few hours annually,” Nepra said.

It added that this planning approach raised concerns regarding its economic efficiency. Overinvesting in electric power generation capacity that is occasionally used can lead to increased overall costs and worsen the issue of high electricity costs within the power sector.

Regulator notes how ‘overinvestment’ in peak electricity capacity is burdening users

At the close of the fiscal year 2024, the installed generation capacity in the national grid system was 42,512 MW when the system experienced a maximum demand of 30,150 MW, while minimum demand stood at 7,015 MW, but the system could serve a maximum load of only 25,516 MW, and that too just for a limited duration. The average annual load served was 18,463 MW.

“If the supply side — i.e., generation capacity — is planned to meet the maximum peak demand, which lasts only for a few hours annually, it adversely affects the economics of the power sector. This approach results in higher electricity costs for consumers due to the underutilisation of capacity during low demand periods”, it said.

It observed that the presence of excess generation capacity, combined with fluctuating demand and the system’s inability to consistently meet maximum demand, posed a significant challenge and the imbalance between capacity and actual demand amid inadequate transmission and distribution capacity was “a key factor driving high electricity costs and imposing a financial burden on the sector”.

‘Persistent load-shedding’

The regulator deplored that despite an installed generation capacity of 45,888 MW as of June 30, 2024, persistent load-shedding occurred in many distribution companies. “This paradox of the power sector is rooted in high Aggregate Technical and Commercial (AT&C) losses, which are both unacceptably high and unjustifiable” and stem from inefficiencies and governance challenges within the distribution network.

“High AT&C losses are primarily driven by widespread electricity theft, often facilitated by weaknesses in oversight and local operational practices, along with poor infrastructure maintenance and inadequate billing and revenue collection systems,” it said, adding that despite regulator’s legal proceedings and punishments, the menace continued, resulting in negative sale growth, impact on net-metering and shift to off-grid solutions.

The regulator observed that the commissioning of coal power plants at Thar was a national ambition aimed at achieving energy independence through indigenous resources. In this effort, significant power generation capacity has been added, operating on local Thar coal. The energy purchase price from these power plants is cost-effective, and they provide a source of electricity generated from local primary energy resources.

However, “over the past five years, the average utilisation of the available generation capacity from local coal-based power plants has been relatively low”.

Rooftop solar

Regarding rooftop solar, the regulator said the net-metering initiative in Pakistan had demonstrated significant benefits, including, but not limited to, improved voltage stability and reduced technical and distribution (T&D) losses.

The country has been rapidly embracing net metering owing to drastically reduced prices of solar panels and financial benefits for consumers. By June 30, 2024, over 156,372 distributed generation solar facilities with more than 2,200 MW of capacity, including K-Electric, had been installed with the net-metering arrangement.

It said that if Discos do not hinder net metering, the roof-top solarisation will help achieve the government target of further expansion of this renewable sourced energy by an additional 3,420 MW by 2031.

Published in Dawn, January 4th, 2025