Overview of Pakistan Power Sector

The power sector in Pakistan is a mix of hydel and thermal units dominated by two vertically integrated
public sector utilities that are Water and Power Development Authority (WAPDA) for all of Pakistan
except Karachi, and the Karachi Electric Supply Corporation (KESC) for the City of Karachi and its
surrounding areas. There are a number of independent power producers that contributes significantly in
electricity generation in Pakistan.

These 10 DISCOs are responsible for distribution to the end users. KESC meet its overall demand with its
own generation plus purchase from NTDC, IPPs and from Karachi Nuclear Power Plant. The Current
structure of the power sector is shown below.

Pakistan's installed capacity to generate electricity has surged up to 36,690 MW by August 2019 which
stood at 23,337 MW in 2014, showing the growth of around 50 percent in five years.

Furnace Natural Coal Hydro Nuclear Wind Solar Total

oil Gas power Energy Energy Energy

7925 10498 4998 10127 1405 1299 438 36690 MW

Electricity – generation by source (2019)

Grey Areas

1) Future Energy Demand Forecast

Under a medium GDP growth scenario of 5.5 percent, a power peak demand of 80,425 MW has
been predicted for the year 2040, to meet which 98,000 MW of generation capacity is to be there,
as about 10,000 MW of existing capacity would be retired in the meantime and 5000 MW is for
spinning reserves. Installed capacity by the end of 2019 has been taken as 37,000 MW. This means
that 43000 MW of new capacity is to be installed in 22 years.

2) Inappropriate Fuel Mix – High Cost of Power Generation

High reliance on most expensive imported fuel source - Oil (21%) with 14% power generation
from coal (vs. 41% world average). Pakistan’s Oil and LNG import totaling US$ 11BN in FY2017
(22% of entire import bill)

3) Minimal Growth in Net Power Generation Capacity

Only minimal 4000 MW Power Capacity added during 2004 – 2013 coupled with continuous
capacity de rating of existing public sector power plants which were supposed to be privatized. A
shortfall of 5,000 to 7,000 MW experienced in the years 2013 to 2016; Growth in power sector
installed capacity has been significant after 2013 with an addition of approx. 10,000 MW by
2018 and a total of approx. 24,000 MW by 2025

4) Energy T&D Losses and Inadequate Recoveries

Pakistan’s energy sector has been marred by transmission and distribution losses mainly due to:
1. Leakages
2. Theft
3. Poor Maintenance
Discos experienced a huge shortfall of ~PKR 80 Billion in recoveries in FY 2015-16 vs the billed
amount. Around 2% of distribution losses not allowed by NEPRA to Discos resulting in additional
revenue shortfall of around PKR 30 Billion/Annum
 5) Circular debts
Pakistan's 207 million people and its industries need 15,000 megawatts (MW) of electricity generation
capacity, according to power ministry data.

That number will increase as demand rises in the peak summer months. But the demand could easily be
met using the country's installed generation capacity of roughly 36,000MW from plants running on coal,
oil, gas, hydroelectric and nuclear power. But users across the country still experience a shortfall of
roughly 2,000MW,, resulting in outages of up to eight hours a day in some areas. That is because, while
the capacity to generate the required electricity exists, there is no money to pay for it.

The Senate Standing Committee on Power was informed on 8 th October 2019 that the energy sector’s
active circular debt had surged to Rs860 billion and efforts were being made to curtail it.

How to Reduce Circular Debts:

The government is planning a multi-pronged approach to tackle its power issues.

a. Tariff

Government has to change our tariffs to at least recover the costs. It is clear that customers should not
be paying for theft of others or inefficiencies of the system. But it is equally clear that customers should
be paying for the cost of delivery of services.

b. Reducing Transmission and distribution losses

The government should also be working on reducing transmission and distribution losses – long cited as
a structural obstacle by analysts – in order to stem the financial losses in the sector. Nearly a third of all
power generated is lost through theft or rickety transmission lines

Last fiscal year, losses due to theft or transmission system inefficiency stood at 29 percent of power
generated, amounting to roughly 140 billion Pakistani rupees ($990 million) in electricity that was
generated but never paid for because it never reached consumers.

The government should target these losses through both arrests of those found to be stealing electricity
and by attempting to address the infrastructure problems that lead to transmission losses in the first
place.

c. Smart Meters

Government is investing in a $100 million pilot project to install 'smart' meters – which would make
theft more difficult - in the northern city of Rawalpindi, with a view to expanding the project to cover the
entire country. The total cost of the countrywide replacement of meters would stand at roughly $3.5
billion.
d. Transmission line infrastructure overhaul

Long a demand of power sector analysts will be the next step. For an illustration of the extent of the
problem on that front, consider this: in June 2018, power ministry data shows that there was a day
when the system faced 3,700MW in transmission constraints.

"We had the demand, we had the supply, but we could not move 3,700MW,"

The government has now identified 19 major transmission constraint issues, and says it will address all
of them, including the building of new transmission lines and overhauling old systems and transformers,
by January 2020.

e. Cost of generation

Finally, longer term, the government should be aiming to reduce the cost of generation of electricity by
shifting the fuel mix from the current reliance on imported fuels such as furnace oil, LNG and imported
coal towards domestic sources.