Pakistan's Heavy Capacity Payments to IPPs: A Deep Dive into FY2024-25 Financial Commitments
In the fiscal year 2024-25, Pakistan is set to disburse a staggering Rs2,091 billion in capacity payments to Independent Power Producers (IPPs). This hefty financial commitment highlights the ongoing challenges and intricacies within the country’s energy sector. Understanding the implications of these payments, their origins, and their impact on Pakistan's economy is crucial for both policymakers and the general public. What Are Capacity Payments? Capacity payments are fees paid to IPPs to ensure that they maintain the availability of electricity supply, regardless of actual power generation. These payments are crucial for maintaining the stability and reliability of the national grid, especially during peak demand periods. However, they can also place a significant financial burden on the country's economy, particularly when the payments are as high as those projected for FY2024-25. The Historical Context The concept of capacity payments emerged as part of the agreements ma...