Latest news with #IndicativeGenerationCapacityExpansionPlan
Business Recorder
09-05-2025
- Business
- Business Recorder
Reform or rhetoric?
EDITORIAL: That it took this long to inject merit and transparency into Pakistan's power sector is itself an indictment of decades of mismanagement. Still, Prime Minister Shehbaz Sharif's approval of the revised Indicative Generation Capacity Expansion Plan (IGCEP 2025–35) is a welcome departure from the rent-seeking, politically motivated decision-making that has long defined electricity planning in the country. By scrapping 7,967 megawatts of high-cost projects and rescheduling others, the government claims savings of USD 17 billion — a figure that underscores just how much waste was built into the old model. For years, the power sector has operated as a parallel economy — driven less by national interest and more by vested ones. The plan's pivot away from expensive, imported fuels and towards domestic and renewable sources is both logical and long overdue. It should never have required a crisis to realise that relying on costly generation while locking the state into capacity payments and sovereign guarantees was unsustainable. Yet that is precisely the legacy this reform effort must now overcome. On paper, the changes are sound. By cutting the original 14,984MW generation expansion target in half, and prioritising 7,987MW of projects based on local resources — hydro, wind, solar, and nuclear — the IGCEP marks a clear shift toward affordability, efficiency, and long-term sustainability. The commitment to ending the single-buyer model, eliminating capacity charges, and opening the door to competitive bidding are all necessary steps toward a functioning electricity market. But these steps should have been taken a decade ago. For too long, power projects were awarded on a cost-plus basis with little regard for actual need or affordability, producing a glut of idle capacity and rising tariffs for consumers. That culture of inefficiency and impunity was not a design flaw — it was the system. One can only hope that this latest attempt at reform does more than tinker at the margins. Also worth noting is the exclusion of K-Electric's renewable energy proposals from the IGCEP. While officials have justified the move by pointing to available alternatives like Thar coal and nuclear power near KE's system, it remains to be seen whether this exclusion will serve consumer interests in Karachi or simply reinforce old fault lines between the utility and federal planners. KE's instruction to set up its own time-line to access the National Grid might make technical sense, but it also reflects a persistent inability to integrate planning across jurisdictions. That the plan was revised only after a groundswell of concern — triggered by falling demand, surging net metering, and a growing stockpile of underutilised capacity — should serve as a cautionary tale. Officials now admit that previous iterations of the IGCEP were laden with projects that lacked even basic financial progress or construction benchmarks. That nearly 15,000MW of such 'committed' capacity has now been either cut or rescheduled only confirms how deeply flawed the planning process was. This is where the government's real test lies. Replacing megawatts is easy; replacing the culture that enabled poor planning and contractual exploitation is not. Corruption, inefficiency, and bureaucratic inertia continue to grease palms all the way to the top. If these reforms are to yield lasting benefits, they must be accompanied by structural discipline — regulatory clarity, professional independence, and a willingness to prosecute those who looted the sector under previous regimes. In the end, consumers want affordable, reliable power. Producers want clear rules and predictable returns. And the country needs a power sector that supports, not stifles, economic growth. The IGCEP 2025–35 offers a framework to move in that direction. Better late than never, so to speak. But if the same old habits resurface under a new cover, we may not get another chance to fix what's broken. Copyright Business Recorder, 2025
Business Recorder
02-05-2025
- Business
- Business Recorder
PM approves 10-year IGCEP 2025–35
ISLAMABAD: Prime Minister Shehbaz Sharif has approved Pakistan's long-awaited 10-year Indicative Generation Capacity Expansion Plan (IGCEP 2025–35), which is expected to save $17 billion through the rescheduling and removal of 7,967 MW worth of projects. However, renewable energy projects (solar, wind, and hybrid) proposed by K-Electric (KE) have not been included in the IGCEP 2025–35. KE has instead been instructed to establish its own tie-line (grid station) to receive electricity from the National Grid. 'Generation from Thar and nuclear power is available near KE's system, and KE can use this to meet its needs. We have done justice with everyone without any discrimination,' said an official on condition of anonymity. The primary objective of the plan is to ensure affordable and reliable electricity for the public. New projects have been selected based on a minimum-cost principle. The national economic burden is expected to reduce by Rs 474.3 billion, while a national saving of $10 billion (Rs 2,790 billion) has been achieved by rescheduling project completion dates. According to the government, an additional $7 billion (Rs 1,953 billion) in savings came from dropping 7,967 MW of planned projects. These changes are also expected to reduce electricity tariffs, with an estimated average saving of more than Rs 2 per unit. Officials claim that, for the first time, electricity projects have been selected purely on merit and with full transparency. The plan prioritizes national interest over individual or political gains, cancelling expensive and unnecessary projects. Under the original IGCEP, 14,984 MW of new projects were proposed. This has now been scaled back to 18 projects totaling 7,017 MW, including Dasu and Mohmand dams. Preference has been given to 7,987 MW of projects based on local resources such as hydro, solar, nuclear, and wind, reducing dependence on imported fuels like coal and gas — a move expected to save billions in foreign exchange annually. Future power projects will be procured through competitive bidding, with a strong emphasis on private sector participation. The government will no longer purchase surplus electricity, provide sovereign guarantees for new projects, or pay capacity charges on unused generation. 'This IGCEP will ensure a cheap, sustainable, and merit-based electricity supply, which will ultimately bring down prices and benefit the country,' said official sources. They added that strategic projects may be allowed provided their additional costs (Least Cost Violation or LCV) are calculated and borne by the sponsoring agency. For example, Chashma-5 (C-5) was evaluated using the LCV methodology and selected with an LCV of $0.079 billion in FY 2032. However, it was later optimized for commissioning in FY 2038 without any LCV payment. As per the National Electricity Plan 2023–27, LCV costs will apply only for the first six years of operation (FY 2032–37), totaling Rs 14 billion (including financing costs), to be paid in 12 semi-annual installments of Rs 1.17 billion each. Sources confirmed that the IGCEP will continue to be refined before its final submission to NEPRA, with savings and LCV calculations subject to further review and stakeholder consultation. The System Operator (NPCC) submitted the draft IGCEP to NEPRA in April 2024. The plan came under significant scrutiny due to emerging sectoral dynamics — including falling electricity demand, increasing net metering, and a backlog of committed capacity additions — all of which raised concerns about the future cost burden on consumers. The draft IGCEP 2024–34 included 25,973 MW of new capacity, of which 25,573 MW (98.5%) was classified as committed, leaving only 400 MW (1.5%) as candidate capacity open for optimization. The plan had a Net Present Value (NPV) of $64.30 billion, comprising $42.61 billion in fixed costs and $21.69 billion in generation costs. Given the heavy reliance on committed projects and declining demand, a detailed review of the criteria for committed capacity was conducted. Of the 73 projects initially classified as committed in the IGCEP 2021–31 (totaling 22,418 MW), 7,434 MW had been commissioned by end-2024. The remaining 14,984 MW were re-evaluated based on updated criteria, which include: (i) for private power producers: achieving financial close and; (ii) For public projects: (a) financial commitments secured: (b) construction progress above 10%, and (c) financial progress exceeding 10%. Copyright Business Recorder, 2025
Business Recorder
01-05-2025
- Business
- Business Recorder
Pakistan plans to save $17bn by removing high-cost energy projects under revised IGCEP
The government intends to save Rs4,743 billion (USD17 billion) by excluding 7,967MW of high-cost energy projects and adjusting project completion timelines under the upcoming Indicative Generation Capacity Expansion Plan (IGCEP) 2024-2034, the Prime Minister's Office (PMO) said on Thursday. According to a press release issued by the PMO, the decision was made during a meeting chaired by Prime Minister Shehbaz Sharif in Islamabad to discuss the reduction of electricity tariffs and implementing sustainable reforms in the energy sector, focusing on the IGCEP. Under the IGCEP, the government aims to prioritise local resources and alternative energy sources like solar, nuclear, and hydropower over imported fuels, which is expected to save Pakistan several billion dollars in foreign exchange reserves. The government also aims to gradually phase out capacity payments to power generation companies, added the statement. During the meeting, PM Shehbaz noted that after a recent reduction of approximately Rs7.50 per unit in electricity rates, the government is committed to pursuing an effective strategy for sustainable energy sector reforms to provide further relief to the public. Small renewable energy projects in IGCEP: HEPA seeks PM's support for inclusion The prime minister directed relevant authorities to expedite the completion of key projects, including the Diamer Bhasha Dam, to ensure effective systems for energy production and water storage in the country. 'Any delay in the completion of energy projects is unacceptable,' he emphasised. The prime minister also announced that a free market for electricity generation will be established in the near future. 'The creation of this market will enable competitive power supply, leading to more sustainable electricity availability and further reduction in tariffs,' PM Shehbaz was quoted as saying in the statement. During the meeting, the prime minister was briefed on ongoing reforms in the energy sector. Upon the PM's instruction, a re-evaluation of the IGCEP revealed that there was room for further improvement. The Task Force subsequently revised the plan to better align with ground realities and future needs. The briefing added that for the next ten years, the IGCEP paves the way for power projects to be awarded through competitive bidding and electricity to be sold at the lowest possible price. The meeting was attended by Minister for Power Sardar Awais Leghari, Minister for Economic Affairs Ahad Khan Cheema, Minister for Information Attaullah Tarar, Minister for Petroleum Ali Pervaiz Malik, and senior officials from relevant institutions.
Express Tribune
03-03-2025
- Business
- Express Tribune
Govt denies forced revision of IPP contracts
Pakistan on Monday dispelled the impression that independent power producers (IPPs) were being forced to revise agreements and conveyed to international development partners that they had the option of either walking away from negotiations or resorting to arbitration and forensic audit. There has been a widespread perception that the IPPs have been coerced into revising agreements. The government has taken an initiative to amend the agreements in a bid to slash capacity payments to the IPPs, which caused a hike in electricity tariffs. Consumers are paying Rs2.5 trillion to Rs2.8 trillion every year to those IPPs that do not generate even a single unit but receive hefty payments due to faulty agreements. There are several flaws in the IPP contracts which the government is trying to rectify. In a meeting with the international development partners, Federal Minister for Power Awais Ahmed Khan Leghari informed them that negotiations with the IPPs were free, fair and transparent with the option of walking away or resorting to arbitration and a forensic audit. Leghari attended a detailed session with the development partners on power sector reforms and the way forward. The development partners were led by World Bank Country Director Najy Benhassine and included representatives of the International Monetary Fund, Asian Development Bank, International Finance Corporation, KFW, German embassy, Foreign, Commonwealth & Development Office (FCOD), United Nations Development Programme (UNDP) and Asian Infrastructure Investment Bank. While underscoring the importance of efforts to rationalise electricity tariffs for the economy, the power minister assured session participants that all negotiations with the IPPs were being held in a free, fair and transparent manner, as per terms of their agreements. He apprised them of the reforms that the Power Division had undertaken to bring efficiency and discipline to meet targets, adding that electricity prices were being pushed to more competitive and affordable levels for all consumers, particularly the industry. The reforms include transition from "take-or-pay" to "take-and-pay" clause, elimination of furnace oil-based plants and conversion from imported coal into local coal in power generation. Leghari said an extensive and detailed study of power generation was being conducted, which revealed "we had not adopted the least-cost policy in the past but now it will be the least cost". He stressed that the government was taking steps to engage all development partners and in that regard it had adopted an inclusive approach in policy formulation and execution. Owing to transparency, the government has been able to slash around 7,000 megawatts from the Indicative Generation Capacity Expansion Plan (IGCEP) from the total committed quantity of 17,000MW, saving a huge amount of money in terms of expensive power. The minister also pointed to the removal of transmission constraints through constructing Matiari Moro RYK lines, Ghazi Barotha FSD lines, putting in place reactive power compensation devices and battery storage systems. He highlighted the process of splitting National Transmission and Despatch Company (NTDC) into Energy Infrastructure and Development Company and National Grid Company, provision of electricity to Special Economic Zones (SEZs) by developing a regulatory and contractual framework, service-level agreements with industries having captive power generation, installation of advanced metering infrastructure (AMI) and Asset Protection Management System (APMS) on 100% feeders. Regarding the elimination of circular debt, the minister told the audience that the government wanted to create clear visibility and finish the task in five to eight years. Elimination of electricity duties and rationalisation of subsidies are other steps towards the rationalisation of electricity tariff. The rationalisation of net metering is also on the cards, which is adding a burden of Rs150 billion on the rest of the consumers. Additionally, inducing incremental demand through marginal pricing and long-term packages for long-term planning are the need of the hour since surplus power is not being used by anyone, which is adding to capacity charges. Leghari apprised session participants of the wholesale electricity market, adding that the government was not going to buy any further electricity.
