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The most expensive electricity in South Asia is in Pakistan. To give you a sense, Pakistan's average rate is 21 cents per kilowatt hour.
Explore Pakistan's power ecosystem, its challenges in generation, transmission, and distribution, and why electricity costs remain high.
Key Takeaways
- Pakistan's electricity is costly due to overcapacity, inefficient infrastructure, and dollar-linked contracts.
- Transmission and distribution losses significantly increase consumer costs.
- Government control via the single buyer model reduces market efficiency.
- Regional imbalances in generation and demand exacerbate supply issues.
- Improving infrastructure and market mechanisms is critical for cheaper, reliable electricity.
Summary
- Pakistan has the most expensive electricity in South Asia, averaging 21 cents per kWh compared to India and Bangladesh.
- The power ecosystem consists of generation, transmission, and distribution, with a total generation capacity of 46,000 MW.
- 46% of power capacity is government-owned, 54% by independent power producers including CPEC plants.
- Generation types include thermal (coal, gas, oil), hydel, nuclear, and renewables, with significant overcapacity in the system.
- Transmission infrastructure is inadequate and inefficient, with a capacity mismatch and regional disparities between North and South.
- Distribution faces high transmission and distribution losses (16.3%), electricity theft, and poor bill recovery rates.
- The Economic Merit Order prioritizes cheaper electricity sources like nuclear, hydel, and renewables, but inefficiencies persist.
- The single buyer model centralizes power purchase decisions with the government, limiting market-driven efficiency.
- Currency depreciation has increased costs due to dollar-denominated power purchase agreements with IPPs.
- The video sets the stage for further exploration of solutions in upcoming episodes.
Chapters
- 00:00Introduction: Pakistan's Expensive Electricity
- 00:27Why Is Electricity So Expensive?
- 01:02Overview of Pakistan's Power System
- 01:26Power Generation Capacity and Ownership
- 01:46Types of Power Plants and Generation Mix
- 02:50Challenges in Generation: Overcapacity and Currency Impact
- 04:13Transmission Systems and Infrastructure Issues
- 05:56Distribution Sector and Losses
- 07:17Economic Merit Order and Generation Mix Changes
- 09:02Government Role and Market Inefficiencies
Full Transcript — Download SRT & Markdown
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India's average rate is 8 cents and Bangladesh's average rate is 6 cents. Because of this, our industrial competitiveness has decreased.
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In the last year, textile exports have fallen by 9.3%. And the salary of the salary-paying class is going to pay 20 -25% electricity bill.
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So the question is, why is electricity so cheap? And how can it be made cheaper?
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Welcome to Pakistan Uncounted. My name is Junaid Iqbal. And today we are starting a new series in which we will cover the power sector of Pakistan comprehensively.
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And together we will understand what are the major issues and what is their solution.
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So first of all, let's understand how the power system works. There are three main parts of the power ecosystem.
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First is generation, i.e. how electricity is made. Second is transmission, i.e. how electricity reaches distribution companies from power plants.
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And third is distribution, i.e. Islamabad Electric or K-Electric, through which electricity reaches your homes, markets and factories.
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So let's start with generation. The capacity of Pakistan's power plants is 46 ,000 megawatts.
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In 2015, our capacity was only 25,000 megawatts. Since then, the capacity has increased by 83%.
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According to the ownership, 46% of the capacity is owned by the government. And this plant is operated by Wabda.
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54% of the capacity is produced by independent power producers, i.e. IPPs. 17% of these are CPEC plants.
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And 37% are other IPPs, including K -Electric. If you look at the province-wise, 42 % of the capacity is in Punjab, 34 % in Sindh, 13.6% in KP, and 8.5% in Balochistan.
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Similarly, if you break up the North and South, 56% of the capacity is in the North and 43% in the South.
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There are four different types of power plants in the generation. One is thermal, which includes oil, gas and coal.
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Hydel, i.e. TAMs, Nuclear, which includes spectacles and canoes, and Renewables, i.e. wind and solar.
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If we break up our capacity, 16% of our capacity is in coal plants, 23 % in gas, 10% in oil, 13 % in RLNG, 23% in hydel, 8 % in nuclear, and 6% in renewables.
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There are two key challenges in the generation. The first is overcapacity. Our total capacity is 46,000 MW.
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If we look at our peak summer demand, it is around 26,000 MW or 30 ,000 MW.
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Our capacity is 1.35 times that of our summer demand. If we look at our winter demand, which is even less, it is 12,000 to 17,000 MW.
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This means that our capacity is 2.7 times that of our winter demand. This means that we have 29,000 extra MW in our system.
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The issue is that whether we use this electricity or not, we still have to pay capacity payments on this capacity.
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The second issue is that the power purchase agreements of IPPs are in dollars. This is a normal practice because power equipment is imported, investors are often foreign, and the loan to install the plant is taken in dollars from outside sources.
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So this is a very normal practice. But the issue is that in 2018, the dollar rate was Rs.
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109, which increased to Rs. 306 in 2023, and today it is around Rs. 280, which is an increase of 200%.
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So along with the falling currency, electricity is also becoming more expensive. Now let's come to transmission.
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There are two main transmission systems in Pakistan. One is National Grid, which operates NTDC, and the other is Karachi Electric's own transmission.
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Now there are two key challenges in this. First, there is a massive design mismatch in the infrastructure.
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First, Pakistan's electricity production capacity is 46,000 MW, but the maximum capacity of the transmission is 26,000 MW, which means that it is completely inadequate.
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Apart from this, the power generation capacity is 56% in the North, and 43% in the South.
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But the demand for consumption is 77% in the North, and 23% in the South.
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On one hand, we have excess generation capacity, and on the other hand, 20-30% of Pakistan does not have electricity access because the generation infrastructure does not reach there.
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If we look at one more element of generation, the marginal cost of generation in the South is Rs.
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16, and the marginal cost of generation in the North is Rs. 35. But because the transmission infrastructure is inadequate, the cheap electricity produced in the South is not able to reach the North.
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Particularly, the nuclear plants that have been installed in the South in recent times, their electricity is not able to reach the grid.
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So it is clear that the transmission infrastructure is poorly designed and inadequate. And secondly, the transmission infrastructure is old and inefficient.
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2.5% of electricity is wasted in transmission. Now coming to distribution, Pakistan has a total of 10 DISCOs, which means distribution companies.
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One of them is private, K-Electric. And apart from this, the other 9, which include Peshawar Electric, Islamabad Electric, Lahore Electric, are all government-owned.
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Pakistan has a total of 3.8 crore electricity consumers. According to the consumers, Multan Electric is the largest distribution, which has approximately 80 lakh customers.
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And the smallest is again, SEPCO. The biggest challenge of the distribution sector is its transmission and distribution losses.
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Because of the old wires, some electricity is subject to transmission loss. To some extent, electricity is stolen, and a lot of electricity bills are not paid.
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Our system-wide loss is 16.3%, which amounts to Rs. 509 billion. Because of this, your bill costs Rs.
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5 per unit extra. The lowest losses are of Islamabad Electric, which is at 8%.
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And percentage-wise, the highest losses are of Peshawar Electric, at 37%. According to the bill recovery, only Islamabad Electric and Gujranwala Electric have a 100% recovery.
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The recovery rate of Goetha Electric is 37%. Because in a country, every slab has the same rate, the one who doesn't steal, has to bear the loss of T&D losses.
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Now, we have understood the ecosystem. On one hand, the capacity is of 46 ,000 MW, and on the other hand, the demand is of 26,000 MW.
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So, how is it decided which power plants will be switched on? This is decided according to the Economic Merit Order, which is set up by the National Power Control Centre.
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Its purpose is to provide the cheapest electricity in the system. According to the generation cost, nuclear, hydel and renewables are the cheapest, followed by local gas, expensive coal, imported gas, and then oil.
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The actual generation according to the Merit Order is called the Generation Mix. For example, in the summer of 2021, we produced 39% electricity through hydel, 35% gas, 4% nuclear, 12% coal, 6 % renewable, and 14% through oil.
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If we look at the generation mix of the summer of 2024, 36% hydel, 28 % gas, 13% nuclear, 18% coal, 4% renewable, and 1% oil.
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So, the generation mix keeps changing. There is a seasonal factor in this. In the summer, the availability of hydel increases annually.
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There are some contractual obligations. For example, we have long-term RLNG contracts, due to which we have to run expensive gas plants because we have already committed the fuel supply.
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Or as we discussed earlier, despite having cheap plants, due to the lack of transmission infrastructure, we still have to run expensive plants.
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Despite the fact that we have improved our generation mix over time, due to many factors, it is still quite inefficient.
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There are two other crucial elements. The first is the single buyer model. All the electricity that is produced in the country, according to Wabda, CPEC, or other IPPs, is purchased by the government.
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The challenge is that the government decides when, who, and how much power generation capacity is needed.
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The government also guarantees the price. Instead of relying on free markets, where the market forces study demand and supply and come up with the best strategy, the government makes every decision on its own, and the result is right in front of you.
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On the other hand, apart from K-Electric, the government is operating a single seller model in which any consumer can only buy electricity from the government.
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Its challenges are also right in front of you. T&D losses are skyrocketing. Customer service is bad.
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Electricity is expensive and unreliable. Think about the time when the government was a single seller of telecom and was just a PTCL.
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It took 5 years to connect people. On the other hand, when telecom was deregulated, there was competition in the market and today in Pakistan, the cheapest telecom services are available.
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We have discussed the power ecosystem. Now you must be wondering how did electricity become so expensive?
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We will answer this question in the next video. Thank you and Khuda Hafiz. One last question.
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In your opinion, what is the biggest reason for electricity becoming expensive? Generation, transmission, distribution, or any other reason?
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Post your answer in the comments and do subscribe to our channel.
Topics:Pakistan electricitypower ecosystemenergy generationtransmission lossesdistribution companiesindependent power producerseconomic merit orderelectricity pricingenergy infrastructurepower sector challenges
