IPPs received Rs967 billion in capacity payments

WEB DESK: Independent power producers (IPPs) received a staggering Rs967 billion in capacity payments from the government over the past year, Hum Investigation Team (HIT) has learnt.

Such a revelation raises questions about the financial implications of the energy sector and the economy at large.

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IPPs are private entities that generate electricity for sale to utilities and consumers. While they are essential for meeting energy demands, the reliance on IPPs can create huge financial burden for government; in particular, when the capacity payments become disproportionately high.

The payments are intended to ensure that the power plants are available to produce electricity, but this clearly ignores an glaring truth: excessive compensation can strain public resources.

The payment breakdown presented in the National Assembly revealed that Rs718 billion were allocated to the right coal-powered plants.

Similarly, Rs72 billion were disbursed to eleven gas and re-gasified liquefied natural gas (RLNG) power plants. Hydel power plants also received an overwhelming Rs106 billion.

Meanwhile, Rs81 bill8ion were paid to eleven power plants operating on furnace oil.

The steep payments shed light on the substantial financial commitments made to private entities, raising concerns about the sustainability of such arrangements.

The payments were made between July 2024 and June 2024, as documented in evidence available to HIT.

The huge sums involved begs the question about the long-term viability of such financial commitments, especially when energy prices are volatile and public funds extremely limited. Pakistan is also experiencing an inflation that has been in a free-fall for years.

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These payments could hinder investments in renewable energy initiatives and perpetuate reliance on fossil fuels, especially at a time when everyone is switching to wind and solar energy while forgoing non-renewable sources.

As the government navigates the complexities of its energy policy and financial obligations, it is the public that has to pay a steep price for the follies and decisions of those in charge.