By Raza Khan ISLAMABAD, Oct. 27 (INP-WealthPK)- Pakistan is all set to increase the share of its installed capacity of hydropower and renewable energy by 2030 in a bid to cut the cost of electricity production. Over a period of time, dependency on the imported fuel (furnace oil, Regasified Liquefied Natural Gas (RLNG)) to produce electricity has hiked up the cost of energy for the consumers. The government now has come up with a plan to carry out a major reshuffle in the sources of electricity to reduce its dependency on imported fuel and to maximize the share of hydroelectric and other renewable energy in energy mix. Recently, the National Electric Power Regularity Authority (NEPRA) has released through the National Transmission and Dispatch Company, Pakistan (NTDC) a 10-year power production expansion plan namely ‘Indicative Generation Capacity Expansion Plan (IGCEP) 2021-30’. According to the IGCEP 2021-30 report, electricity production in Pakistan still depends on expensive fuels like oil and gas, which account for 48% of the total. Among them, gas takes up 10%, furnace oil 19%, and RLNG 17%. On the other hand, hydropower, which is a cheap and clean means of producing electricity, contributes only 29% to the total volume. Other sources of electricity production are: bagasse 1%, solar 1%, wind 3%, domestic coal 2%, imported coal 11%, and nuclear 7%. If we examine the price, which the government pays to buy electricity from the power producing companies, hydropower is the cheapest, costing Rs2.7 per unit; while the electricity produced by furnace oil is the most expensive, costing Rs25 per unit. The difference shows the need to improve the capacity of hydropower. The electricity produced by the power plants running on RLNG costs Rs12 per unit, while the cost of electricity produced by the gas power plants is Rs8 per unit. Solar-based electricity costs around Rs4 to 5, while coal-based electricity costs Rs5 per unit. These rates are determined by the National Electric Power Regularity Authority (NEPRA). However, they vary from time to time depending on various circumstances and fluctuations of oil and gas prices in the global market. A domestic consumer in Pakistan has to pay Rs7.74 per unit if he uses up to 100 units. From 101 to 200 units, the consumer pays Rs10.06, and from 201 to 300 units, the price goes up to Rs12.15 per unit. The cost further goes up drastically if the consumer consumes more electricity. These prices are high because of imbalance in the energy mix. According to the new plan (IGCEP 2021-30), the overall generation capacity in the system would be increased from 34,100 Mega Watt (MW) in 2021 to 53,315MW in 2030 to meet the estimated demand of 34,377MW at that time. A major increase in capacity is planned in the hydropower and wind plants. Around 6,447MW of existing power generation capacity would be retired during the decade. With the passage of time, the share of installed hydropower capacity would be increased from 29% to 33% by 2025 and then to 49% by 2030, while the share of furnace oil would be taken to zero, eliminating the costliest source of electricity generation. Although a few furnace oil power plants would be there, these would not be used unless the situation demands. The share of RLNG would also be taken to zero while the share of gas would be reduced from 10% to 3%. It will certainly decrease the cost of electricity production in Pakistan. A similar trend is there for the imported coal-based plants whose contribution to the overall generation mix will fall from 22% in 2021 to only 10% by 2030. According to the proposed plan, the share of solar and wind in the overall energy mix would be increased from about 3% in 2021 to 10% in 2030. This would result in the capacity addition of 1,083MW of solar and 2,000MW of wind till 2030. Statistics show that the government is set to increase the share of nuclear energy from 7% to 13% by 2030. Source: National Transmission and Dispatch Company, Pakistan It is hard to estimate how much capital the government would save by shifting towards the cheaper energy, decreasing and gradually eliminating dependency on the imported fuel for production of electricity by 2030. However, the benefit would be huge in terms of reduction in import bill of fuel (gas and oil), which is the major cause of outflow of foreign exchange reserves. Production of cheap electricity will also encourage industrialists to shift their factories from gas to electricity that would also help the government to reduce the import of LNG. The resultant impact would be in billions. Cheaper electricity would also reduce the cost of production in the industrial sector that will make the Pakistani goods competitive in the global market. This would ultimately boost exports and help reduce the current trade deficit.