Power Sector Inside Out (Part-5)

Energy Mix and Generation Cost

Electricity tariff for end consumer depends on many factors and divided into many categories for example, domestic users, commercial, industrial, peak time and off peak time rates etc. Moreover tariff also varies according to units of electricity consumed by a user. There are different tariff plans for different consumer categories. The tariff also varies depending upon the Disco, as different Discos have different cost of electricity. The average price charged to each consumer by DISCOs during year 2013-14 was PKR 13/KWh.

The generation cost of electricity depends also upon the technology and fuel used by power producers. For example electricity produced using High Speed Diesel (HSD) as fuel is most expensive one while public sector hydropower projects generally being the least expensive. The electricity generation cost can be managed by managing the energy mix i.e. how much to produce from which fuel. If more electricity is produced by less expensive fuel, the lesser the average cost of generation and vice versa.

The average tariff of electricity also depends on the efficiency of generation equipment, quality of fuel and the location of the power project. If plants are not maintained and overhauled as and when needed, the efficiency of the equipment degrade considerably, thus consuming more quantity of fuel to produce the same units of electricity. Similarly if the heat value of the fuel is below standards, more fuel will be consumed to produce the same level of electricity. Transportation charges of fuel also contribute towards the cost of generation. If the plant location is far from the point of delivery of fuel, the transportation cost increase and therefore the cost/KWh generated increases.

During year 2013-14, the largest portion of electricity i.e. 39.06% is produced by consuming Residual Furnace Oil (RFO) in combination with High Speed Diesel (HSD). There are 15 projects in the country, which are operating solely on RFO. The average cost of generation of projects running on RFO averaged to PKR 18.46 per kilowatt-hour with one participant, Saba Power’s overall cost of generation up to PKR 24.03 per kilowatt-hour. There are 7 projects which use RFO as secondary fuel and Gas as primary fuel. Together these 7 projects generate 13.43% of total generation in the country and overall cost of generation for such projects ranged between PKR 6.71/ KWh and PKR 18.43/ KWh with average to PKR 15.51/ KWh.

Table 13: Generation Cost of Projects Operating Solely on RFO

The electricity produced from hydropower projects made 30.95% of total generation. Except for a minor participation of private sector projects, all the generation is made by public sector projects under the leadership of Wapda. NEPRA’s State of Industry Report did not provide any generation cost details of hydropower projects, however power system statistics provided this data for 17 projects out of total 19 projects owned, operated and maintained by Wapda. The average cost is applied to remaining two projects and resultantly a weighted average total generation cost of all public sector hydropower projects is calculated as PKR 1.01 per kilowatt-hour.

Table 14: Generation Cost of Hydropower Projects

Natural gas consuming projects contributed 25.37% of total electricity produced in the country. Out of this group, 18 projects are operated purely on natural gas and the weighted average overall generation cost ended up to PKR 6.38/ KWh. Surprisingly, TNB Liberty Power behaved differently from the average generation cost of the group and resulted into PKR 22.52/ KWh.

Table 15: Generation Cost of Solely Gas Based Projects

There are 13 projects which used Gas as primary fuel but also used some other secondary fuel (RFO or HSD) to produce electricity when gas was not available to them. The overall generation by such projects is equivalent to 23.32% of total generation in the country, however most of them used the alternate fuel to generate electricity and therefore the weighted average overall generation cost resulted on higher side i.e. PKR 16.68 per kilowatt-hour during year 2013-14.

Table 16: Generation Cost of Dual Fuel Projects

We could find the generation cost details of 69 power projects only, however as they generate 94.37% of total generation in the country, therefore they represent almost accurate weighted average cost of generation. The weighted average cost of all the generation in country is close to PKR 9.94 per kilowatt-hour. Generation cost over the years is increasing due to expensive energy mix present in the country. Hydropower projects has the lowest cost of generation as presented in this section and therefore more hydropower projects are required to bring the total generation cost down.