Pakistan Reviews Power Projects Amid Energy Overcapacity

Islamabad, Aug 31 (PTI) Pakistan is conducting a review of existing and upcoming power projects, including hydropower and nuclear plants, in response to concerns over energy overcapacity and pricing, which have led to financial strain, including high capacity payments to IPPs for unused power, media reports said on Saturday.

Maintaining that the review is aimed at assessing the viability and efficiency of these power projects as the country faces surplus energy production, the need to optimise power generation was stressed to align with current demand and ensure economic sustainability, newspaper The News International said.

The development comes amid reports that Pakistan government has “reportedly disbursed approximately Rs1 trillion in capacity payments to 26 independent power producers (IPPs) using gas, regasified liquefied natural gas (RLNG), and residual furnace oil-based (RFO) over the past decade, starting from 2015,” as per a report by the Business Recorder.

The News International quoted Minister for Power Awais Leghari as telling the Senate Standing Committee on Power during a meeting chaired by Senator Mohsin Aziz on Friday: “We are also reviewing the committed projects, even Bhasha and C5, for which we are committed and already have issued letters of support.”

The C5 project refers to the 1,200 MW Chashma Nuclear Power Plant Unit 5 while the under-construction Diamer-Bhasha Dam on the Indus river will irrigate 1.23 million acres of land and generate 4,500 MW electricity every year.

Leghari added that a task force is currently assessing the IPPs, and said he expected to provide the Senate Standing Committee with a detailed outcome and realistic timeframe within the next two weeks, the newspaper said.

The Minister also warned that any hasty or unilateral moves against IPPs could result in severe financial repercussions, referencing past experiences like the Reko Diq case, where Pakistan faced significant fines for contract violations, another media portal Profit said.

Under the Integrated Generation Capacity Expansion Plan (IGCEP), about 18,000 MW of new capacity is expected over the next 10 years, with the majority from hydropower.

“But we are also challenging them. We want to go towards least cost,” Leghari said, adding, these IPP agreements are under sovereign guarantees, making unilateral changes difficult.

According to the Economic Survey of Pakistan 2024, the installed capacity of electric generation for FY 2024 is 42,131 MW.

The panel, while expressing concern on the IPPs agreements what it called faulty and overpriced, asked the Power Division to provide the regional comparison, heat audit and Return on Equity (RoIs) of projects which have been burdening the power consumers.

In the meeting, several critical issues related to IPPs were discussed. The committee has requested copies of all agreements signed with IPPs since 1992.

It also asked for a briefing on the per-unit electricity production costs from these IPPs, as well as a comparison of these costs with those in other regional countries, the newspaper said.