$5.6 Million Capacity Charge Wastage

The Government of Pakistan has a power purchase law designed to attract new power plants by guaranteeing payment for 71% of their production each month, whether the power plant is utilized or not. This payment is called a capacity charge and amounts to around 4 million Rs. per MW of installed capacity per month.

According to a recent statement by Minister of Energy Mr. Awais Leghari, Pakistan’s maximum energy demand was 24,000 MW per hour during the heat wave. However, according to NEPRA, Pakistan’s current power production capacity is 45,000 MW.

For the additional 20,000 MW power plants that are not utilized and can never be utilized due to lack of demand, the Government of Pakistan is paying almost $285 million each month or $3.4 billion each year as capacity charges.

Why is the government allowing this wastage of funds? This seems like collusion between the government and independent power plants to get money for doing nothing. If NEPRA, DISCOs, or the Ministry of Energy cannot rectify this issue, then who can? Why is the Pakistan government contracting IPPs for power production that can never be used?



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