August tells a more uncomfortable story for Pakistan’s power sector. Generation is growing again, but the cost and composition of that growth are becoming increasingly difficult to ignore.
National grid generation reached 14.9 billion units in August, 3 percent above reference and 5.5 percent higher year on year. The 12-month moving average, however, tells a more subdued story, with generation growth at just 2.6 percent and average monthly generation at around 10.5 billion units.
The stronger monthly output is therefore not a broad acceleration in demand. It is increasingly about how the system is meeting a higher evening load.
Hydel remained steady at around 5.6 billion units, contributing 38 percent of total generation. The real movement was elsewhere.
RLNG’s share slipped to just 9 percent, with generation of 1.3 billion units, 26 percent below reference. August marked the sixth consecutive month in which actual RLNG generation fell short of planned levels, dating back to the onset of the war.
Pakistan has managed to secure one or two cargoes along the way, but not enough to run RLNG plants anywhere close to full throttle. The prolonged disruption in LNG markets has made the availability of cheaper cargoes increasingly uncertain, leaving the system more dependent on expensive spot purchases.
That is already showing up in the generation cost. For the second consecutive month, RLNG-based electricity cost more than Rs45 per unit on average.
The gap was once again filled by imported coal.
Imported coal accounted for 16 percent of August generation, its highest monthly share on record. Generation reached 2.3 billion units, also the highest ever recorded from imported coal in a single month.
This is becoming a familiar pattern. As the daytime solar curve gets deeper and the evening ramp gets steeper, the system needs thermal generation that can be brought in when demand returns. With RLNG constrained and expensive, imported coal is increasingly carrying that burden.
And the cost of meeting that peak is rising sharply.
The marginal cost of generation reached as high as Rs55 per unit during peak demand in August. That is well above the levels seen in the previous three years and points to a widening gap between the cost of average generation and the cost of serving the last unit of evening demand.
The result is another positive fuel cost adjustment. The overall cost of generation remained above reference levels, with around Rs1.7 per unit sought through the FCA. The final allowed adjustment is expected to settle closer to Rs1.5 per unit.
There is, however, an interesting wrinkle in local coal costs.
The reported generation cost of local coal fell to an all-time low of around Rs5.5 per unit, against an average of roughly Rs12.5 per unit over the preceding three months. The sharp decline appears linked to a nearly Rs10 billion adjustment booked almost entirely against Thar Coal Block-1’s power generation company, effectively cutting its fuel charge almost in half.
The granular details behind the adjustment are still awaited. Until those are available, it would be premature to treat the latest local coal cost as a new structural benchmark.
The broader fuel mix remains the bigger concern. Nuclear’s share has also slipped to around 10 percent, its lowest level in almost four years, with delayed maintenance adding another constraint to the system just as peak demand season gets underway.
Meanwhile, the daytime curve keeps getting steeper.
Solar continues to suppress grid demand through the middle of the day, only for demand to return sharply after sunset. This is creating a system where the challenge is increasingly not generating enough electricity over the course of a day, but having the right generation available at the right hour.
For now, keeping the system supplied is the priority. But that is becoming harder and more expensive. LNG vessels are unlikely to become readily available in the near term, while continued reliance on imported coal leaves the system exposed to high fuel costs.
August therefore offers little comfort despite the headline generation growth. Hydel is doing its part. Demand is recovering. But RLNG remains constrained, nuclear availability has weakened, and imported coal is filling an increasingly large hole.
The deeper the daytime solar curve gets, the steeper the evening ramp becomes. And the more expensive that last unit of electricity gets, the more consumers will feel the cost through the FCA
