Over commitment to energy projects might prove to be very expensive

Over commitment to energy projects might prove to be very expensive: LUMS

A report on Pakistan’s Electricity Outlook 2020-25 prepared by Lahore University of Management Sciences Energy Institute suggests that average per kWh electricity generation cost in the country will increase from Rs10.87 in FY2018-19 to Rs12 in FY2024-25, showing a 10 percent increase in just six years and a 67 percent increase since FY2015-16.

Director LUMS Energy Institute Dr Faiaz Ahmed Chaudhry while explaining the situation said that the Outlook estimates that capacity surplus will exceed 15 percent annual average against the projected demand in the country as a result of over-commitment of generation projects – translating into more than 4,000 MW annually on average.

The study finds that though the energy component (variable cost) of the generation cost will decrease gradually with new lower-cost generation additions and rising demand, the capacity component (fixed cost) will continue to rise significantly and become more than 60 percent of the generation cost by 2025.

He was of the view that during the last four years the government has taken many ad hoc decisions to bridge the generation shortfall. Ten GW of capacity was added and another 17 GW is under development. The Outlook intends to identify the potential financial implications of past decisions. Using a production simulation model, it analyses the sector’s health from 2019-20 to 2024-25.