The transition of CPPs to the grid is crucial for the power sector, say experts.

ISLAMABAD: Energy experts have urged the government to facilitate immediate transfer of Captive Power Plants (CPPs) to the grid system.

He emphasized that this would not only increase the demand for electricity but also provide ample amount of natural gas for the power sector. This will align it with the National Gas Allocation Policy of 2005 and the Economic Coordination Committee (ECC) gas supply priority in 2024.

These recommendations have been made by energy experts in “Energy Priorities in Crisis: Reducing Gas Supply to Captive Power Plants in Pakistan” organized by the Institute of Policy Studies (IPS). The meeting was held to analyze the government’s commitment to the International Monetary Fund (IMF) to phase out gas supply to CPPs to improve energy resources.

IPS Research Officer Wali Farooqui pointed out that an estimated 1,180 captive units were consuming around 358 MMCFD of natural gas while 400,000 industrial consumers were dependent on the grid. He further highlighted that if industries with captive power plants shift to the grid, they will benefit from reduction in electricity rates due to redistribution of natural gas, and stimulate national electricity demand. Capacity payments will decrease, and income of DISCOs will increase, thereby reducing power generation. Revolving Debt Burden Bilal A Shaikh – Director of Energy Business, a technology solutions provider noted that gas utilization efficiency was on the low side in most captive power plants. He said that gas would be diverted to gas-based power plants in the grid system, which would bring more stability without any loss of revenue. Shaikh warned that if we continue to supply gas to these captive units, we will harm the stability of the grid system.

Abubakar, head of energy and sustainability at Amreli Steels, said that unfortunately policy makers introduce policies but do not amend them in time, which later becomes a challenge. He lamented that the policy makers did not create a proper market for either gas or electricity which added to these challenges. Abubakar added that the biggest challenge facing the industry is the high cost of the grid and if the grid had gas supply instead of captive units, the price of electricity would have been balanced to some extent. He suggested that firstly grid costs need to be reduced and secondly proper markets for energy at the right price should be established. Rehan Javed, a prominent industrialist, praised Pakistan’s grid code, which allows only 5 percent fluctuation compared to Germany, where the allowed fluctuation can reach 10 percent. Javed noted that CPPs consume excessive resources despite their low efficiency. Javed also highlighted the financial burden of CPPs on the industrial sector leading to capacity charges of up to Rs. 5 per unit borne by all unprotected grid users thereby increasing their cost and incurring capacity charges of Rs 295 billion annually by grid users. To address these inefficiencies, Javed proposed incentivizing CPPs to migrate to the grid through temporary concessions and scale-up of capacity-efficient plants, ensuring optimal utilization of resources. Javed also said that while calculating overall efficiency, some captive owners were taking into account both steam and electricity, which was a wrong approach. He stressed that such claims are misleading, as Pakistan’s main problem is excess electricity, and there are many alternative methods such as biomass and coal to generate cheap steam. Energy expert Asad Mehmood highlighted the importance of improving linkages between government departments to enhance energy management and policies reflective of ground realities. Mehmood emphasized that if industries are assured of uninterrupted, high-quality power, they will prefer the grid, which will help address high capacity costs. He also highlighted the need for timely energy audits, better data collection, and production handbooks to improve efficiency and attract favorable tariffs for industries.

Asim Riaz, Energy Adviser, All Pakistan Textile Mills Association (APTMA) called for a transparent and free gas market where the most efficient plants are prioritized. He argued that scarce and valuable commodities cannot be arbitrarily allocated without ensuring market equilibrium. He believed that the shift to the grid should be economically viable. Amina Sohail, Senior IPS Associate and Energy Advocate, highlighted the need for integrated planning in the energy sector, underpinned by equitable policies. He stressed that gas distribution should be in national interest rather than lobbying efforts, advocating evaluation of captive power plants based on performance criteria to eliminate idle units. Sohail stressed the need to establish a fair standard to promote a competitive and sustainable market. The session concluded with a consensus among experts on the urgent need for policy reforms that prioritize efficient use of energy and equitable distribution of resources.