- With policy reforms and investment, Pakistan can shift toward sustainable, secure, and affordable energy
Pakistan’s energy sector is at a critical juncture. Despite possessing enormous potential of renewable energy, the country continues to deal with systemic policy misalignments, inefficiencies, and infrastructural challenges. At the same time, the national electricity demand of the country is even declining. The sector’s trajectory is increasingly transformed by global volatility, climate emergency, and domestic economic constraints. This article outlines a comprehensive analysis of the current status of Pakistan’s energy landscape, the loopholes in planning frameworks like IGCEP 2025–2035, and the urgent need for a strategic transition toward decentralisation, resilience, and sustainability.
The current state of Pakistan’s energy sector is marked by intense uncertainty. Circular debt has surged past PKR 2.6 trillion, while capacity payments to Independent Power Producers (IPPs) continue to strain public finances. Despite an installed capacity exceeding 41,000 MW, actual power generation remains significantly lower due to seasonal variability, poor infrastructure, and fuel shortages. Load shedding continues, tariffs are rising, and underutilized generation plants reflect a sector in distress. The overdependence on imported fuels, particularly RLNG and coal exposes the country to external shocks, making energy costs unpredictable and unaffordable for the consumers.
Pakistan’s energy outlook, as envisioned in the Vision-2025 framework, focuses to double power generation and expand electricity availability to over 90% of the population. However, the reality is far more complex. Hydropower, which contributes significantly to the energy mix, drops to critically low levels during winters. Gas shortages further limit generation, while industrial demand remains stagnant due to economic slowdown and increasing energy costs. Meanwhile, rooftop solar PV adoption is growing, reducing grid dependency and revenue. In the absence of a robust demand-side strategy and advancement of grid, even efficient generation risks becoming stranded.
The Indicative Generation Capacity Expansion Plan (IGCEP) 2025–2035, developed by the National Grid Company (NGC), represents a commendable effort to rationalize future capacity additions. It excludes over 8,000 MW of high-cost projects and promises savings of Rs 4,743 billion. However, the plan undergoes critical flaws. It assumes that adding megawatts will resolve the crisis, without incorporating demand-side analysis, financial risk analysis, or carbon cost projections. Industrial demand is not expected to grow that much significantly, and residential consumers are increasingly shifting to off-grid and net metering. Similarly, it remains silent on the plight of millions who still cannot afford expensive electricity.
Moreover, the plan lacks exit strategies for fossil systems, many of which are dispatched sub-optimally yet receive foreign-currency capacity payments. With the EU’s Carbon Border Adjustment Mechanism (CBAM) looming, Pakistan’s high-carbon exports face penalties, yet IGCEP does not account for these transition risks. Without incorporating early retirement mechanisms like the ADB’s Energy Transition Mechanism (ETM) or Rockefeller’s Climate Change Challenge Initiative (CCCI), IGCEP risks becoming a passive projection rather than a dynamic roadmap.
One of the most concerning trends in Pakistan’s energy mix is the decline of renewables. Despite abundant bio, solar and wind potential, utility-scale renewables remain underrepresented. In FY24, their contribution grew marginally from 6% to 7%, but total generation stagnated at 5%, that is far below the 30% target set for 2030. Despite its abundant resource base, bioenergy remains underutilized due to inadequate conversion technologies and limited capacity building. Wind energy, once an effective frontier, saw an 11% decline in generation due to curtailment. This decline is not due to resource scarcity but systemic neglect. Transmission obstructions prevent dispatch from low-cost renewable plants, while policy inconsistency and lack of incentives deter investment. Grid instability and outdated infrastructure further inhibit integration, leaving renewable projects stranded and investors disappointed.
Wind curtailment, particularly in Sindh, has become a pressing issue. Despite being designated as must-run projects, wind power plants face enhanced curtailment due to grid constraints and dispatch priorities. This has led to significant revenue losses, inability to service debt, and deterioration of investor confidence. The financial instability of wind power projects threatens expanded renewable ambitions. Compensation mechanisms like Non-Project-Missed-Volume are inadequate, and high Use of System Charges under the Competitive Trading Bilateral Contract Market (CTBCM) further demoralize participation. The disorientation between wind power generation and peak demand remains unresolved, despite the potential for hybrid solutions.
Pakistan’s energy transition is both crucial and critical. The country faces mounting pressure to decarbonize, reduce reliance on imported fossils, and improve energy availability. However, challenges are excessive. Infrastructure limitations, political instability, and limited public awareness restrict progress. Advancement of grid is lagging, and frequent policy shifts discourage long-term investment. Yet, abundant opportunities are available. Pakistan possesses some of the highest solar irradiance levels in the region, and wind corridors in Balochistan and Sindh remain underutilized. Being an agricultural country, biomass potential is also ignored. According to IRENA, the transition to renewables could create over one million job opportunities by 2030. Energy independence, reduced carbon emissions, and improved resilience are reachable, if the right policies and investments are established.
The instability of Pakistan’s national grid exacerbates the energy crisis instead of higher generation capacity. Seasonal variability, particularly in winter, leads to brownouts and blackouts due to reduced hydro-power and gas supply. Operational constraints such as minimum dispatch levels for coal and RLNG plants, result in inefficiencies and high capacity payments. The rise of net metering and off-grid solar has created a two-tier system: solar adopters reduce grid reliance, while remaining consumers bear extra fixed costs. Without grid stabilization and predictive demand forecasting, instability will intensify, undermining both reliability and affordability.
A sustainable energy roadmap for Pakistan must prioritize decentralization, integration of renewables, and grid resilience. Decentralization is no longer optional but it is imperative. Microgrids offer localized generation for rural and remote areas, reduce transmission losses, and improve reliability. Pakistan’s off-grid solar boom is reshaping energy availability, but without strategic planning, it risks deepening inequality. Battery Energy Storage Systems (BESS) are pivotal for grid stabilization and renewable energy integration. They enable peak control, backup during outages, and voltage regulation. The industrial sector is increasingly adopting BESS for optimization of energy cost and resilience, but broader deployment requires financial incentives and policy support.
It is becoming increasingly difficult to navigate the energy trilemma comprises of balancing affordability, reliability, and sustainability. Continuous increase in tariffs due to inefficiencies and capacity payments, grid outages persist, and fossil dominance undermines climate goals. Tariffs continue to rise due to inefficiencies and capacity payments, while persistent grid outages and the dominance of fossil fuels hinder progress toward climate goals. Resolving this trilemma requires exceptional reforms, technological advancement, and inclusive policy frameworks. ESCAP’s SDG-7 roadmap emphasizes scenario modeling, integrated planning, and emissions reduction targets, offering a robust template for Pakistan’s transition.
One of a promising development area for Pakistan’s energy landscape is the adoption of renewable energy on a business-to-business (B2B) basis. Sindh’s launch of the country’s first B2B wind-solar hybrid project one of a good steps. This model ultimately enhances energy independence, attracts private investment, and reduces carbon footprint. With over 36 renewable energy power plants active in wind corridor of Sindh, B2B models could redefine Pakistan’s energy landscape, fostering innovation, competition, and sustainability.
In conclusion, Pakistan’s energy sector is at a crossroads. The way forward demands a comprehensive approach that embraces decentralization, renewables integration, infrastructural advancement, and policy reforms. Challenges are significant but opportunities are there. With integrated strategic planning, stakeholder collaboration, and inevitable changes, Pakistan can transform its energy crisis into an opportunity for sustainable growth and resilience.
Engr. Syed Wamiq Ali is a seasoned energy and environmental specialist, currently serving as a Lecturer at the Department of Development Studies, HANDS-Institute of Development Studies.