Capacity charges hit PKR 1.8 trillion in Pakistan, driving 61% of power costs

Pakistan’s power sector paid PKR 1.806 trillion in capacity charges during fiscal year 2024-25, accounting for about 61% of the total power purchase cost, according to a performance evaluation report released by the National Electric Power Regulatory Authority (NEPRA).

The regulator said the Capacity Purchase Price (CPP) within the CPPA-G system — excluding electricity imports from Iran — stood at approximately PKR 1,806.18 billion, out of a total power purchase cost of PKR 2,943.21 billion.

With total electricity generation, including renewable energy, reaching 126,705 gigawatt-hours during the year, the per-unit CPP was calculated at about PKR 14.3 per kilowatt-hour.

NEPRA described the per-unit CPP as “notably high,” saying it remains a key factor behind elevated electricity tariffs in the country.

Thermal plants account for bulk of capacity payments

According to the report, thermal power plants accounted for PKR 1,241.49 billion in capacity payments. Renewable energy plants, including hydropower, wind, solar and bagasse, received PKR 564.69 billion.

Nuclear power plants were paid PKR 362.70 billion in capacity charges. Plants operating on local gas received PKR 36.16 billion.

Among fuel-based plants, those running on Thar coal received PKR 256 billion, while imported coal plants were paid PKR 413 billion. Imported LNG-based plants received PKR 143.78 billion, and furnace oil plants were paid PKR 28.87 billion.

The total Energy Purchase Price (EPP) for FY2024-25 stood at PKR 1,103.7 billion, the report said.

Low utilization drives higher costs

NEPRA said the main reason for the high per-unit CPP was excessive installed generation capacity combined with low utilization of power plants.

Thermal power plants in the CPPA-G system operated at an average utilization factor of just 43.4% during the fiscal year.

Utilization rates varied by fuel type. Nuclear plants recorded a utilization factor of 78.5%, while plants running on local gas operated at 57.4%. Thar coal plants posted 72.9% utilization.

In contrast, imported coal plants operated at only 22.9%, imported LNG plants at 41.4%, and furnace oil plants at just 1.9%.

Renewable energy plants collectively recorded an average utilization rate of 36.7%, while WAPDA hydropower projects operated at 45.6%.

The regulator noted that underutilization of renewable plants — despite their “must-run” status — contributed to higher capacity payments and energy purchase costs. Limited hydrology, inconsistent wind patterns and insufficient sunlight were cited as key reasons.

Thermal plants also suffered from low dispatch due to reduced electricity demand, aggregate technical and commercial (AT&C) loss-based load shedding and the high cost of electricity, the report said.

NEPRA said improving plant utilization could help lower per-unit capacity charges by spreading fixed costs over higher electricity output. However, it cautioned that relying more on expensive fuel-based plants could raise the energy purchase price, underscoring the need for an optimal balance between utilization and fuel costs to ensure affordability and sustainability.

The report also highlighted that the 969-megawatt Neelum-Jhelum hydropower plant remained non-operational during the year due to plant outages, recording zero utilization.