Power Generation: Signs of Growth – BR Research

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After remaining virtually stagnant for two years, Pakistan’s grid power generation in 2021 increased by 10.4% year-on-year. Power generation at 132 billion units for CY21 is easily the highest on record, finally breaking free from the three-year rut. That said, a 10% year-over-year growth in electricity generation is neither unprecedented nor extraordinary. It looks like demand in the economy is just getting back to the average trajectory that was apparent before 2019.

Rolling 12-month power generation at an average of 11 billion units per month is a fairer reflection that smooths out the base effects of Covid. There is certainly an organic growth in demand in an expanding economy, but this is not necessarily the result of urban consumers switching in large numbers from gas to electricity due to an additional winter consumption package.

The generation mix offers an interesting read, where nuclear power generation was the biggest gainer with an additional 6 billion units in 2021. Nuclear’s share rose to 11.4% from 7.8% l last year, and it was the first time ever that the grid generated more molecules of electricity from nuclear than from natural gas.

Coal continued to lead on the thermal side, overtaking RLNG for the second consecutive year, with a 20% share in the mix. Dwindling water supplies caused hydel production to drop by more than 2 billion units, with the share falling to 27.6%. This is the lowest hydel generation share in five years. As has often been the case, Hydel’s loss was oil’s gain. FO-based production more than doubled year-on-year as the system struggled with supply-side constraints in arranging fuel in a timely manner, among other ongoing technical issues .

The cumulative fuel bill for CY21 at Rs 923 billion exceeded the dreaded capacity payments. A combination of exorbitant international fuel prices, an inability to evacuate and produce from more efficient factories, violations of the order of merit and delays in fuel supply – all of this has contributed to increasing the fuel bill by more than 62%.

Much of the same is in store for another two to three months as oil and gas prices have yet to show signs of letting up. The ax falls on consumers in the form of monthly fuel adjustments. For the third consecutive month, the monthly FCA will be north of Rs3 per unit, despite benchmark monthly fuel prices being revised up by 50%.


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