Power Demand Rises by 7% in October 2024
Surge in Electricity Consumption Fails to Offset Higher Fuel Costs as Reliance on Expensive Coal Persists
Overview of Power Demand Increase
Introduction
In October 2024, Pakistan experienced a notable rise in power demand, increasing by 7% to 10,262 gigawatt hours (GWh). This surge is attributed to a combination of factors including the slow-paced revival of industrial activities and an extended summer season.
Factors Contributing to Increased Power Demand
The demand for electricity was driven by:
- Industrial Revival: The gradual recovery of industrial activities post-pandemic has significantly contributed to the increased power demand.
- Extended Summer Season: Prolonged higher temperatures have led to extended use of cooling systems, boosting electricity consumption.
Economic and Regulatory Impact
Rising Fuel Costs
Despite the increased demand, fuel costs surged by 10% year-on-year and 9% month-on-month to Rs9.06/unit in October 2024. The primary reasons for this increase include:
- Lower Generation from Hydel and Nuclear Plants: Reduced output from these low-cost sources necessitated a reliance on more expensive alternatives.
- Increased Use of Imported Coal: There was a significant shift towards using costly imported coal to meet the power generation needs.
Analysis by Topline Research and NEPRA
According to NEPRA data, as reported by Topline Research, this surge in power demand follows a four-month decline. The rise in demand aligns with an uptick in economic activity. Notably, actual power generation exceeded the reference (estimated) generation for the first time in 13 months, rising by 0.7% in October 2024.
Monthly Comparison of Power Generation
Power generation in October saw a significant decline of 18% compared to September. This fluctuation highlights the volatility and challenges in maintaining consistent power output.
Cumulative Analysis for FY24-25
Energy Production and Cost
In the first four months of the current fiscal year (July-October 2024-25), cumulative energy production dropped by 5% to 50,808 GWh compared to the same period last year. The cost of power generation increased by 5% to Rs8.4/unit.
Subsidised Power Tariffs
A government initiative introduced subsidised power tariffs for consumers using additional electricity during the winter months (October 2024 to January 2025). This package aimed to:
- Encourage maximum utilisation of the national grid.
- Reduce capacity payments and circular debt.
Insights from SDPI Energy Economist Dr. Khalid Waleed
Dr. Khalid Waleed noted that a significant reduction in inflation and a cut in interest rates supported the recovery of economic activities. This recovery was particularly evident in the industrial sector, with improvements in the textile industry and increased export orders.
Industry and Economic Insights
Textile Industry Recovery
The textile sector, a major player in Pakistan’s economy, showed signs of recovery with increased demand in export markets such as the US and Europe. This rise was partly due to political instability in competing markets like Bangladesh.
Historical Comparison
Last October, many industries faced shutdowns due to high economic and political uncertainties. This year, with more stable economic conditions and government initiatives, there has been a notable improvement in power demand.
Climate Impact
Higher temperatures in October 2024 compared to the previous year also contributed to the increased power demand as consumers continued using cooling systems.
Future Projections and Challenges
Sustainability of Power Production Growth
Dr. Waleed expressed concerns about sustaining power production growth, especially during peak summer months. He highlighted challenges such as:
- Rising Power Prices: Due to capacity payments and circular debt.
- Increased Rooftop Solar Installations: Factories and households are increasingly adopting solar power, which may reduce reliance on the national grid.
Solar Power Adoption
Data shows a significant increase in the import of Chinese solar panels, with imports hitting a record high of $1.7 billion in the first nine months of 2024. This trend indicates a shift towards renewable energy sources.
Long-term Outlook
Dr. Waleed predicted that power generation might continue to decline in FY25, with overall production for the fiscal year expected to be lower than FY24.
FAQs
What caused the increase in power demand in October 2024?
The increase was driven by the revival of industrial activities and an extended summer season leading to higher electricity consumption.
How did fuel costs impact electricity tariffs?
Fuel costs surged due to lower generation from low-cost hydel and nuclear plants, and increased reliance on expensive imported coal.
What measures has the government taken to manage power demand?
The government introduced subsidised power tariffs for consumers using additional electricity during winter months to encourage maximum utilisation of the national grid.
How is the textile industry contributing to power demand?
The textile sector has shown improvement with increased export orders, contributing to higher industrial power consumption.
What are the future challenges for Pakistan’s power sector?
Challenges include rising power prices, capacity payments, circular debt, and increased adoption of rooftop solar panels which may reduce reliance on the national grid.
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