Examining the future direction of electricity market in Pakistan: The case of Competitive Trading Bilateral Contracts Market (CTBCM)

Examining the future direction of electricity market in Pakistan: The case of Competitive Trading Bilateral Contracts Market (CTBCM)

Donor

TARA Foundation

Duration

September 2021 to May 2022.

Introduction

Since 2019, Pakistan’s Energy sector has appeared to undergo a documented shift in its policies and plans by introduction of Pakistan’s Alternate and Renewable Energy Policy 2019, Indicative Generation Capacity Expansion Plan (2047 and 2021), Pakistan’s Electric Vehicle Policy, National Electricity Plan, and Competitive Trading Bilateral Contracts Market (CTBCM) which is to be rolled out by NEPRA in 2022. These policies and plans are targeted towards a shift to clean energy and addressing the constantly rising circular debt (PKR 2.47 trillion) by lowering the consumer tariffs.

However, the current governance and structural issues of the power sector pose significant challenges that may outweigh the potential benefits. This discussion will be mainly focused on analyzing the future directions of electricity market via CTBCM model. Under this model, Pakistan aims to make a transition from a single buyer model to a wholesale market where electricity will be traded like a commodity. This could potentially lead to reducing power tariffs and inefficiencies in the system, industrial growth, risk sharing between stakeholders, and a flexible power market by introducing competition in the system. Further, it could increase transparency, accountability and provide an enabling environment for the private sector to ensure return on their investments through a market competition.

While CTBCM has been proposed as a solution for market reforms in Pakistan, it is critical to address the forthcoming challenges in the initial phase where only a small quantity of electricity will be traded. This includes analyzing how CTBCM would get in line with IGCEP where 88% of upcoming projects till 2030 are already committed, addressing the existing T&D losses, and a very limited number of Engineering, Procurement and Construction (EPC) contractors which still might decide the bidder that wins the project. For a way forward with CTBCM, some of these major challenges must be addressed along with an in-depth analysis on how this model in Pakistan compares to that of global models.

Objectives

The main objectives of the project are

· To perform a comparative assessment of competitive market in Pakistan with global models and best practices.

· To map the role of relevant stakeholders in Pakistan under the CTBCM model.

· To discuss the opportunities, threats, and challenges for CTBCM as an electricity market reform in Pakistan.

Research Outcomes

The outcomes of the project include

1. A “Working Paper” on “Role of private sector in Clean Energy Transition of Pakistan: A case of Competitive Trading Bilateral Contracts Market (CTBCM)”.

Status

On-Going