Energy wheeling - advantages and challenges.

• Author: Rehan, Muhammad
• Position: Transportation of electric power to electric load outside the grid

Byline: Muhammad Rehan-Muhammad Farhan-Dr. Ponum

Many long-term energy agreements have been signed in the last five years that has increased the generation capacity to almost double the country's energy demand. Most of the plants are now idle and getting the capacity payments. This situation is putting the additional burden on the end consumers. That's why we are facing a continuous increase in energy tariff. This is all happening due to lack of planning. It is required to increase the energy generation based on consumption forecast on a continuous basis rather than installing 20,000 MW in three years and then keep the plants idle for ten years.

The country faced the same situation after the installation of power plants under the 1994 Power Policy. The plants installed under that policy achieved Commercial between 1997-2000. These plants remained under-utilized till 2005-06 and received high dispatch from 2006-07. Now, after installation of new higher efficient plants, the dispatch to these plants (operating under the 1994 power policy) has reduced drastically once again. It is not good for the consumers that the plant that is designed for 30 years of operation is fully utilized only for 20 years despite of capacity payments of 30 years.

It is important to understand how it will impact the tariff and put the additional load on the public. As discussed above, some plants remain shut down due to excess electricity. But the government is paying the capacity payment for these idle plants without purchasing electricity just to keep them standby (as per the terms of the agreement). The Capacity Payment for the standby plants are putting the impact on overall electricity cost. The cost of electricity unit has already increased to compensate the capacity payments of the unutilized plants. The People of Pakistan will face this extra tariff burden for next 10 years in any case till the expiry of agreements of the 1994 power policy plants.

To avoid this type of scenario again in the future, different options are under consideration. One of them is to start a competitive market and shift on the tariff of 'Take and Pay' Basis. This will impact the investor that can be managed through other incentives like the permission of energy wheeling to other Bulk Power Consumers. Before going into detail of this model, it is important to understand the different types of the tariff.

Take or Pay Tariff: A Take or Pay tariff is a rule, the Power Purchaser either...