By Muhammad Mudassar ISLAMABAD, March 30 (INP-WealthPK): Power generation surged by 8.9pc year over year (YoY) to 8,797 GWh (11,824 MW) during January 2022 compared to 8,079 GWh (10,859 MW) during January 2021, according to Arif Habib Limited. The major contributors to the higher generation were high-speed diesel (HSD), nuclear, wind, furnace oil (FO), and coal. In January 2022, with 33 percent share, coal was the largest contributor to power generation followed by nuclear (14.4pc), gas (14.4pc), FO (14.1pc), RLNG (7pc), HSD (7pc), hydel (6pc), wind (2pc), bagasse (1pc) and solar (1pc). Coal-based power generation increased by 39% MoM due to the resumption of the China Power Hub Generation Unit-1, which was offline due to transformer failure. The YoY fuel cost for electricity generation rose by 102 percent to Rs12.22/KWh in January 2022 due to the high prices of FO, HSD, and RLNG on the international market and increase in the generation of electricity through these sources. Moreover, power generation through hydel and solar decreased by 52pc and 3pc respectively. [caption id="attachment_65416" align="aligncenter" width="618"] Source: NEPRA[/caption] The rise in fuel cost by 102% YoY to PKR 12.22/KWh during January 2022 was due to a 97pc YoY surge in coal prices. The coal-based power generation cost increased by 118pc YoY to Rs14.1 per kWh during January 2022. Owing to the rise in the RLNG price by 71 percent to Rs2,395 per MMBtu ($13.57 per MMBtu), power generation [through the RLNG] increased by 101% YoY to Rs16.7 per kWh. The cost of power generation through the furnace oil surged by 85 pc YoY to Rs22.81 kWh. HSD-based cost of power generation also increased by 37% YoY to PKR25.98/kWh. Moreover, hydel-based generation and solar-based generation decreased by 52% and 3% YoY respectively. Thermal is the largest contributor to Pakistan’s electricity system. The energy generation cost is affected due to volatility in the fuel prices. The spike in electricity prices leads to an increase in the prices of products, which in turn hurts exports. When the government subsidizes the energy-generating fuels, the volatility in international prices is transmitted to volatility in the actual government spending. This situation leads to difficulties in managing fiscal programs, which tend to be planned a year ahead and are based on estimates of average fuel price. There is a positive relationship between the energy-generating fuel prices and inflation because fuel is used to produce products (in terms of electricity). So, any increase in fuel prices on the international market increases the commodity prices. Pakistan consumes a considerable amount of diesel and furnace oil for power generation. Focusing on renewable sources of energy such as solar, wind, and hydro and promoting the use of hybrid and electric vehicles will not only reduce the oil import bill, but also prevent imported inflation.