As per the Government of Pakistan officials, energy is inarguably one of the most important inputs for economic growth that can sustain industrial and commercial activities. The energy sector has progressed since 2013 in terms of power generation and reducing power outages. The initiation of China-Pakistan Economic Corridor (CPEC) power projects has addressed historical gaps in electricity production and enhanced the reliability of the supply chain.
However, the reliance on imported and costly fossil fuels for electricity generation underscores the need for a shift in the fuel mix. The government is taking steps towards meeting its energy demand and reducing greenhouse gas emissions. The government is actively pursuing large-scale renewable energy investments to attain its clean energy goals. Pakistan has developed a wind power energy corridor along the southern coastal regions of Sindh and Balochistan.
Solar power entered Pakistan’s energy mix in 2013 after the government launched a set of support strategies to foster renewable energy development. Nuclear power plants (NPPs) are a reliable source of energy. They can run for up to 18 months without refueling and store enough fuel for another 18 months on-site. This makes them immune to short-term changes in fuel prices or availability and permits them to attain high-capacity factors. Statistics showed that the nuclear fleet, comprising six NPPs with a total installed capacity of 3,545 MW, contributed approximately 18.2 per cent of the total electricity generation in the national grid, during July-March FY 2024 (NEPRA).
In Pakistan, the transport sector is the major consumer of petroleum products, covering 79 per cent of total demand. However, during the fiscal year 2024, the demand for Motor Spirit (MS) and High-Speed Diesel (HSD) declined chiefly because of the high prices of these products; thus, the total consumption for petroleum products declined by 7.2 per cent during July-March FY 2024, as against to the corresponding period of the last fiscal year. In the gas sector, the total gas consumption was registered at 3,207 MMCFD from July-March FY 2024, which includes natural gas consumption of 2,512 MMCFD and 695 for RLNG. During FY2024 (July-March), total electricity consumption was recorded at 68,559 GWh.
The household sector is the largest consumer of electricity, consuming 33,737 GWh, followed by the industrial sector with 18,022 GWh. Moreover, agriculture and commercial sectors consume 6,905 GWh and 5,365 GWh, respectively, whereas the electricity consumption in other sectors is 4,530 GWh.
In Pakistan sources presently recorded that foreign direct investment (FDI) in the energy sector, counting power and oil and gas exploration, stood at $585.6 million during July-September 2024-25 (Q1FY2025), a significant rise from $266.3 million in the corresponding period last year. It is said that the energy sector stayed the largest recipient, followed closely by financial services and oil and gas exploration, showcasing 119.9 percent growth over the first quarter as against to the previous fiscal year. Furthermore, Pakistan’s heavy reliance on a few sectors and a single dominant financier, urging the need for a diversified FDI policy.
Meanwhile, the State Bank of Pakistan (SBP) registered a 48 per cent rise in FDI, with inflows standing at $771 million in Q1FY2025. Although growth in FDI is evident, experts noted that this reliance on limited financiers and sectors may hinder long-term stability.
Statistics showed that China led the investment charge with $404 million in Q1FY2025, accounting for 52 per cent of Pakistan’s total FDI, counting $244.8 million in September alone. Other contributors included Hong Kong ($99 million), the UK ($72 million), and the US ($29 million), showing some diversification. Despite the potential, structural problems like political unrest, security concerns, and regulatory obstacles continue to constrain FDI. CPEC has positioned Pakistan as a critical trade hub, but recent geopolitical shifts, including the US-China trade conflict, have launched new complexities. Global economic factors, such as rising interest rates and exchange rate volatility, also impact capital availability and investor confidence.
However, in our country FDI remains inconsistent, fluctuating between $1.5 billion and $2.5 billion over the last decade, with a present fall because of economic and political unrest. The Government of Pakistan officials also recorded that attaining self-reliance in energy production is crucial to reducing economic vulnerabilities, lowering production costs, and enhancing global competitiveness. As such, Pakistan’s energy sector is paving the way towards transitioning from imported fossil fuel to renewable energy sources, as demonstrated through substantial investments in solar and wind power.
Furthermore, the Government of Pakistan accepted the Framework Guidelines for Fast Track Solar Initiatives 2022 to promote and develop cost-effective, climate-friendly, and local renewable energy sources.
According to IGCEP-2022, no new power plants based on imported fossil fuels will be inducted. By 2030, the share of electricity from hydel, wind, and solar sources is projected to rise from 28 per cent, 4 per cent, and 1 per cent, respectively, to 39 per cent, 10 per cent, growing the total share of green electricity in the generation mix to about 59 per cent.
Accordingly, our government has been focusing on strengthening the regulatory framework and incentivising the private sector investment in renewable energy that will assist in ensuring energy security and climate change mitigation. The Private Power Infrastructure Board is facilitating 24 power generation projects (including 22 renewable projects), having an installed capacity of 7,460 MW, which will be completed by 2032.