Latest news with #IGCEP2025-35
Business Recorder
14-07-2025
- Business
- Business Recorder
KP asks centre to retain its two HPPs on IGCEP 2025-35
PESHAWAR: The KP government has asked the federal government to retain its two public sector energy projects i.e. Madyan Hydropower Project and Gabral Kalam HPP on Indicative Generation Capacity Expansion Plan (IGCEP 2025-35) prepared by the ISMO (System Operator). For this purpose, the Special Assistant to KP Government on Energy and Power Department, Tariq Saddozai has written a formal letter to the Federal Minister for Energy and Power, Sardar Owais Ahmad Leghari. The content of the letter said that the provincial government has expressed surprise over the unilateral altering of the criteria for 'committed projects' in IGCEP 2025-35 that has resulted in the exclusion of the KP government's projects. It said that as per the National Energy (NE) Plan, all projects declared committed under approved IGCEP 2021 shall be included as committed projects in subsequent iterations of the IGCEP. Therefore, the exclusion of the said projects is clearly in contravention of the NE Plan approved by the federal government pursuant to the NEPRA Act, 1997. It said that the revised criteria introduced by System Operator is contrary to the earlier prescribed approved criteria. The system operator cannot revise the criteria for committed projects during the currency of the current NE Plan. Furthermore, the retrospective application of such revised criteria is also contrary to the law as it amounts to changing the goal post during the game. Once a project is recognized and declared as committed project, it cannot be revaluated afresh through subsequent iterations and the revised criteria shall be applicable to the new projects that were not earlier present, not iterated projects or where the committed projects have been abandoned. Even the delays in the committed projects do not justify their exclusion rather the timelines for the commercial operations date are to be adjusted. It has further stated that the KP government projects have already demonstrated considerable physical and financial progress after attaining the status of 'Committed Projects' pursuant to the earlier IGCEPs. In consequence thereof, the KP government had also secured Generation Licenses from NEPRA, creating a vested right. Moreover, the provincial government also understand that once the project are declared committed, the criteria of least-cost, cannot be applied retrospectively to their further processing in their development cycle. Notwithstanding, the KP projects despite achievement of the status of 'Committed Projects' have been subjected to least-costs evaluation under the draft IGCEP 2025-35, which is contrary to the constitutional, statutory and regulatory framework. It has also highlighted that public sector projects of the federal government, previously declared as committed, namely Mohmand Dam, Dasu, Tarbela Extension-5 etc, continue to remain as committed in the draft IGCEP 2025-35. In stark contrast, the government of Khyber Pakhtunkhwa's 'Committed Projects' namely Madyan and Gabral-Kalam HPPs, have been excluded, which demonstrates discriminatory approach of the system operator which should accord equal treatment to the federal and provincial power projects developed through the public funds. On one hand the KP government projects have been approved by the federal government through the ECNEC of the Planning Commission and on the other hand, the system operator which is owned and controlled by the federal government is not recognizing the approval granted by the federal government. It further stated that the provincial government has secured concessional financing from the multilateral lender, that is, the World Bank through the Economic Affairs Division of the federal government, through multilateral lending framework, which is signed and guaranteed by the federal government in respect of loans extended by the World Bank to the province. The exclusion of KP projects would undermine this window of multilateral lending and would expose the government of Pakistan to the cancellation of loan/ lending and recovery of the financing charges, winding up costs, breakage costs, commitment fees etc. The exclusion will further prevent future lending to development projects in general and power projects in particular in KP beside giving highly negative signal to the current and potential investors in the province. Thus, the system operator being an entity of the federal government is failing to recognize the financing arrangement, for the development of the power projects, which financing has been incepted, financing and closed with the approval of the federal government. In light of the mentioned facts, grounds and circumstances, the KP government has requested the federal government to retain the projects of Madyan HPP and Gabral Kalam HPP as 'Committed Projects' in the IGCEP 2025-35; not allowing the System Operator to alter, modify, deviate or revise the criteria for inclusion of projects in the IGCEP in contravention of NE Plan, those approved unanimously by the Council of Common Interests vide its decision No. 2(8)/2021 CCI (48) dated September 13, 2021. Copyright Business Recorder, 2025
Business Recorder
10-07-2025
- Business
- Business Recorder
KHCL slams draft IGCEP revision excluding Kohala HPP
ISLAMABAD: Chinese Company, Kohala Hydropower Company Limited (KHCL) has conveyed dismay at the recent revisions proposed in the draft IGCEP 2025-35, which retrospectively alters the criteria for 'Committed Projects,' leading to the unjustified exclusion of Kohala HPP, sources told Business Recorder. In a letter to Power Division, Chief Executive Officer (CEO), KHCL, Liu Yonggang has renewed Company's urgent request for the issuance of a formal notification for the extension of the Letter of Support (LoS) for the 1124 MW Kohala HPP, as approved by the PPIB Board during its 144thmeeting held on September 18, 2024. According to the CEO, Kohala Hydropower Company Limited (KHCL) has fulfilled all the requirements, including submission of the requisite Performance Guarantee of $ 5.62 million. He stated that Kohala HPP has been consistently recognized as a 'Committed Project' under the approved IGCEP 2021-30 and 2022-31 in accordance with the Council of Common Interests (CCI) decision of September 13, 2021. This status has been reaffirmed under the National Electricity Plan 2023-27 notified by the Federal Government, which explicitly states in Clause 5(c) that all generation projects declared committed in the IGCEP 2021 shall continue as such. KHCL seeks LoS extension for $2.5bn Kohala hydropower project till Sept 2027 However, the Company is dismayed by the recent revisions proposed in the draft IGCEP 2025-35, which retrospectively alter the criteria for 'Committed Projects,' leading to the unjustified exclusion of Kohala HPP. 'This revision undermines legally established rights and contractual obligations, and retroactively applies new benchmarks that were never part of the framework under which the Project was planned, approved, and executed,' Yonggang said adding that once a project is recognized and admitted as a committed project, it cannot be revaluated afresh through subsequent iterations and the revised criteria shall be applicable to the new projects that were not earlier present, not iterated as committed projects or where the committed projects have been abandoned. Even the delays in the committed projects do not justify their exclusion rather the timelines for the commercial operations date are to be adjusted. Notwithstanding, without any consultation with the KHCL, or evaluation of progress thereof, the NTDC has irrationally and illegally, excluded the Kohala HPP without due regard to the financial or physical progress achieved,' he continued. Moreover, the Company further understands that once the projects are declared committed, the criteria of least-cost criteria, cannot be applied retrospectively to their further processing in their development cycle. Nevertheless, the Kohala HPP despite achievement of the status of 'Committed Projects' have been subjected to least-cost evaluation under the draft IGCEP 2025-35, which is contrary to the constitutional, statutory and regulatory framework. He further claimed that Kohala HPP has satisfied all development milestones under the original criteria, including: (i) signing of all core project agreements: Implementation Agreement with the Government of Pakistan (May 6, 2021); and Tripartite Power Purchase Agreement with CPPA-G and NTDC (June 25, 2020);(ii) Water Use Agreement and AJ&K Implementation Agreement (April 23, 2020); and Tripartite Agreement between the Company, GoP, and GOAJK (June 25, 2020);(iii) procurement of a Generation Licence from NEPRA; (iv) acquisition of approximately 4,607 Kanals of land and payment of compensation in accordance with applicable laws; and (v) hiring of world reputed EPC Contractor and Owner Engineer. Chinese firm contended that Kohala HPP is a flagship CPEC Priority Energy Project and a strategic bilateral undertaking between the Governments of China and Pakistan. The Project's continued development is not only vital for sustainable energy transition but also critical for securing Pakistan's riparian rights under the Indus Waters Treaty (IWT). 'As established by the Court of Arbitration in the Kishenganga dispute, only 'existing uses' of water at the time of upstream development are protected. Any delays in progressing Kohala HPP and maintaining its committed status risk undermining Pakistan's rights over Jhelum tributary waters. The IWT, as well as customary international law, require prompt and demonstrable establishment of hydroelectric use to secure national interests,' Yonggang maintained. Copyright Business Recorder, 2025
Business Recorder
10-07-2025
- Business
- Business Recorder
IGCEP and illusion of long-term planning
In a recent session of Parliament, the Minister for Power, while responding to a question about the energy sector planning, quoted an old Chinese saying: 'You cannot discuss the ocean with a well frog.' It was meant to dismiss the criticism by opposition; suggesting that those raising concerns do not see the bigger picture. But sometimes, the frog inside the well genuinely believes that the well is the ocean, or he might have jumped into a swimming pool considering it as an ocean. And that is exactly our problem. We think we are planning, seeing the full energy landscape, making data-driven decisions. But the truth is, we are still stuck inside the same old planning mindset. And the well we have mistaken for the ocean is built around one comfortable but misleading idea: the Levelized Cost of Electricity (LCOE). The IGCEP 2025-35 is an approval away to be submitted to NEPRA and as per publicly available information, it is coming with the same old methodology i.e., LCOE. Every time a new IGCEP is announced, the hope returns that maybe this time it will be different. That it will be based on better data, sharper modelling, and a more realistic understanding of demand and generation needs. But the same core mistake keeps repeating itself. In this article we shall discuss why this IGCEP is also likely to misguide investment decisions, and what are simplistic workable solutions which can make this document an accurate and reliable planning tool. LCOE looks neat on paper. One number that tells you the cost of electricity from any project, no matter the technology. It feels scientific. But that is the problem, it only feels that way. In reality, LCOE ignores the most critical parts of our power system. It does not care when electricity is produced, whether it is during peak summer hours or chilly winter nights. It does not care where the plant is located, whether near a load centre or hundreds of kilometres away, where expensive transmission lines will be needed. And it does not care how the plant contributes, whether it is flexible, dispatchable, seasonal, or completely dependent on weather. It treats all kilowatt-hours as equal, even when the grid does not. On top of that, it hides the real impact of financing terms. A slight change in interest rate can make a project appear cheap or expensive overnight. So, when we say LCOE is misleading, it is not an overstatement, it simply was not designed to answer the kinds of questions we need to ask today. Yet it remains at the centre of our planning documents, giving a false sense of clarity where thoughtful analysis is needed. One of the biggest flaws in using LCOE is that it ignores the timing of generation. In a country with growing reliance on solar generation, where demand can swing sharply between hours, days, and seasons, timing is everything. A project that generates reliably during peak summer afternoons has a much higher value than one that delivers most of its energy at night or during the winter. But LCOE treats them the same. It averages everything out without asking when that electricity will be needed. A simple fix exists: instead of counting all units equally, we should assign weights to generation based on monthly or even hourly demand profiles. A unit delivered during peak summer should count more than one in low-demand winter months. This is not complex modelling; it is just a more honest way to value electricity. Another critical blind spot is location. LCOE does not include the cost of transmitting electricity from the project site to where the demand is. A project with a low LCOE built in a remote valley may end up being far more expensive once transmission lines, grid losses, and system upgrades are added in. But none of this shows up in the LCOE figure. As a result, such projects look attractive in planning documents, until transmission costs and losses make those savings vanish. The solution is again straightforward: calculate the delivered cost of electricity, not just the generation cost. If NEPRA can assess the full tariff of each project, including transmission and net delivered energy, during planning, the IGCEP will automatically become more accurate and aligned with system needs. Then there is the question of function. Not all power plants serve the same role. Some are base-load, designed to run around the clock. Others are peaking plants, called in only during the highest demand hours. Some are flexible, adjusting output based on real-time grid conditions. Comparing all of them on one flat metric like LCOE is fundamentally wrong. A base-load plant cannot be expected to perform the job of a peaking plant, and vice versa. What is needed is clear segmentation. Projects should be grouped according to their operational role, base-load, load-following, or peaking, and only compared within those categories. This simple adjustment would prevent apples-to-oranges comparisons and allow planners to select the most suitable technology for each type of grid requirement. LCOE also fails to account for flexibility and system value. A project that can ramp up or down quickly, respond to frequency changes, or provide backup support during grid stress has a quite different value than a project that just injects fixed power into the system. But LCOE does not see that. It assumes all generation is equal, regardless of system services provided. To fix this, we need to introduce system-adjusted evaluation tools. These do not need to be overly technical, simply basic metrics that reflect a project's ability to support grid stability. Even assigning flexibility scores or adding a simple adjustment factor in tariff calculations would go a long way in capturing this missing piece. There is another issue that often goes unnoticed. It is the quality and validity of the data being used to calculate LCOE. For the IGCEP 2025–35, project sponsors were asked to submit their cost and generation details back in 2023. That data, already outdated by now, is still being used to decide which projects are considered 'affordable.' In some cases, especially for public sector projects, updated numbers from 2025 have quietly been accepted. Meanwhile, all other projects, mostly from the private sector, are still being evaluated based on the original data submitted back in 2023. They were not allowed to revisit their assumptions or submit revised costs. Instead, an arbitrary inflation index was applied to update their figures, which does not truly reflect market conditions or financing realities. This selective flexibility creates a clear bias in favour of a few while sidelining others. The fair and transparent approach would be for NEPRA to first determine tariffs based on verified and current data, across the board. Only then should projects be shortlisted as candidates for inclusion in IGCEP. That is the only way to ensure equal treatment and build confidence in the planning process. Lastly, LCOE is overly sensitive to financing assumptions, especially the discount rate. A slight change in interest rate can dramatically shift the final number, making one project look cheaper than another purely because of how it is financed, not how it performs. In Pakistan, where financing terms vary widely and risks are high, this creates a distorted picture. The better approach is to standardise tariff calculations using real, project-specific financing structures. If a project expects concessional financing, reflect that. If it carries risk premiums, add them in. Avoid hiding those differences behind one average discount rate. Only then can we get a real sense of what each project will cost the country. We do not need to follow the world blindly. We have our own grid realities, demand patterns, financial limitations, and seasonal challenges. The idea that only foreign consultants or global models can guide our planning has already caused enough damage. It is time we start listening to our own experts, people who have worked within this system, who understand the practical issues, and who can offer grounded solutions. The continued reliance on outdated metrics like LCOE is not just a technical oversight, it is a habit. Even the U.S. Energy Information Administration, in its 2025 Annual Energy Outlook, clearly states that using LCOE individually is not suitable for system planning. If they are acknowledging the limitations, why are we still using it as the backbone of our national planning? We have the talent, the institutions, and the data to do better. The only thing missing is the willingness to move beyond shortcuts and start planning like a country that actually wants to fix its energy future. It is time to acknowledge that LCOE has served its purpose but is no longer fit to lead our investment planning. The cost of repeating the same mistake is too high. If we want a power system that is affordable, reliable, and aligned with actual national needs, then our planning methodology must evolve. And that begins by asking more from the models we use, and more from those who design them. Copyright Business Recorder, 2025
