By Staff Reporter
KARACHI: Pakistan’s electricity generation costs fell to the lowest level in a year as cheaper coal and increased hydropower output offset lower demand amid high tariff and economic slowdown.
The average cost of producing electricity dropped 35 percent to Rs9.63 per kilowatt-hour in June from Rs14.72 a year earlier, according to a report by Arif Habib Ltd., a Karachi-based brokerage.
The decline was driven by a 32 percent decrease in coal prices and a 23 percent increase in hydropower generation, which together accounted for almost half of the country’s energy mix.
The lower costs may ease the pressure on Pakistan’s cash-strapped power sector, which has been struggling with mounting circular debt and rising tariffs that have eroded consumer demand. The government has been trying to reduce its reliance on expensive imported fuels such as furnace oil and liquefied natural gas, and boost domestic sources such as coal, hydropower and renewables.
“The significant decline in power generation cost is a positive development for the power sector, which can help improve its financial viability and reduce the burden on consumers and the government,” said Muhammad Saad Ali, an analyst at Arif Habib.
Pakistan’s power generation fell 1 percent to 13.7 terawatt-hours in June from a year earlier, as lower demand from industrial and residential users outweighed higher consumption from agricultural users. For the fiscal year that ended June 30, power generation dropped 9.5 percent to 129.6 terawatt-hours, the lowest level since fiscal 2017.
Hydropower was the largest source of electricity in June, with a 30.1 percent share of the total output, followed by LNG with 18.6 percent and coal with 17.8 percent. Nuclear energy contributed 13.5 percent, while wind, solar and bagasse accounted for 5.7 percent. Furnace oil and gas had a combined share of 14.3 percent, down from 25.4 percent a year earlier.
The government plans to increase the share of renewable energy to 30 percent by 2030, while reducing the share of fossil fuels to 50 percent. It also aims to add more than 10 gigawatts of hydropower capacity by 2028, which would make it the dominant source of electricity in the country.
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