Pakistan’s electricity sector is entering a period of structural change. For years, the country has struggled with imported fuel dependence, volatile international energy prices, exchange-rate pressures, circular debt, and the high cost of maintaining an oversized electricity system. At the same time, consumers are increasingly turning to solar energy to protect themselves from rising electricity bills. The next phase of Pakistan’s energy journey, therefore, is unlikely to be dominated by a single technology. Instead, the country’s energy landscape is likely to be shaped by a combination of hydropower, Thar coal, biomass, and battery energy storage. Hydropower will remain an important pillar of the national electricity system. However, most large hydropower projects are long-gestation, capital-intensive developments requiring substantial public-sector involvement. The more immediate opportunities for private-sector participation therefore lie in indigenous fuels, industrial captive generation, distributed renewable energy, and electricity storage.
Thar coal: an indigenous energy resource
Thar coal has the potential to become one of Pakistan’s most important domestic energy resources. 2,640 MW of power projects are already operating on Thar coal, while industrial consumers are increasingly examining indigenous coal as an alternative to imported coal, furnace oil, and natural gas. The 2029 mine-mouth price of Thar coal, as determined, is projected at PKR 1,005/MMBTU (LHV based), assuming an exchange rate of PKR 280 per USD. The actual delivered cost will be around PKR 1,500 per MMBTU, including rail logistics, for distances of up to around 1,000 km from Thar. This is broadly comparable with the lower end of gas prices available to power generation in Pakistan. The real strategic opportunity is therefore larger than the mine-mouth price alone. Pakistan needs to develop an efficient domestic coal supply chain capable of moving Thar coal economically to power plants and industrial centers. Rail transportation can play a particularly important role here. Once rail-based coal evacuation expands, transportation costs can be reduced compared with reliance on road haulage. Over time, this could make Thar coal a more competitive fuel for industries located far from the mine.
Biomass: converting agricultural waste into energy
The second major opportunity is biomass. Pakistan produces enormous quantities of agricultural residues, much of which has traditionally been burned in fields. Agricultural waste, however, is increasingly being recognized as a commercial energy resource. Studies of Pakistan’s agricultural sector indicate very large quantities of potentially available biomass residues, particularly in Punjab. A biomass market is already developing around industries that require both heat and electricity. Sugar mills are perhaps the most established example, but rice mills, textile units, food-processing plants, steel mills, paper mills, and other industrial consumers are also starting to use agricultural residues in boilers and cogeneration systems. The fertilizer plants are currently receiving relatively low-cost gas and have yet to transition to biomass and Thar coal for electricity and steam generation. As major industrial consumers, their adoption of these indigenous fuels could represent a significant and commercially attractive market opportunity. There is potential for around 50 million ton of biomass residue, equivalent to 10 million ton of oil, which could generate the equivalent of 7,000 MW of electricity. This can create multiple economic benefits. Farmers can earn from material that previously had little commercial value, industries can reduce their dependence on expensive fossil fuels, and Pakistan can reduce the environmental damage associated with open-field burning. This would also help Pakistan meet future international environmental compliance targets. Biomass should therefore be treated not merely as a waste-management issue, but as part of the country’s indigenous energy strategy. The price of Thar Coal is cheapest in the country and that could be the base target for the pricing of biomass. The price of biomass is not regulated and is determined entirely by market forces. If biomass can be made available at around a 20% discount to the cost of Thar coal, it would provide an attractive opportunity for industries to access a low-cost indigenous energy source at their doorstep. Farmers and other stakeholders involved in the biomass supply chain should be educated about energy pricing and market dynamics. Maintaining biomass prices below the equivalent cost of Thar coal will be essential to keeping biomass competitive and ensuring its sustained adoption by industry.
Battery Storage: the next major change in the consumer market
The third and perhaps fastest-moving development is battery storage. Since 2017–18, solar consumers using net metering have effectively treated the national grid as a form of battery. Electricity generated during the day could be exported to the grid, while electricity could be drawn back from the grid when solar generation was unavailable. That model is now changing. Under the new prosumer/net-billing framework, the economics of exporting surplus solar electricity has shifted. This raises an important economic question: can a battery be cheaper than purchasing electricity from the grid during expensive hours? Suppose a consumer effectively avoids purchasing electricity at around PKR 55 per kWh including duties and taxes during non-solar periods, while the electricity that would otherwise be exported to the grid has an opportunity value of only around PKR 10 per kWh. The economic advantage of storing that electricity for later consumption would therefore be approximately PKR 45 per kWh. This gap of PKR 45/kWh is too significant to ignore. A 16 kWh lithium battery is currently available in Pakistan for around PKR 650,000, with a claimed lifespan of 15 years and a ten-year warranty. If we conservatively assume that only 80% of a 16 kWh battery’s nominal capacity is effectively utilized each day, the annual usable energy would be approximately 4,672 kWh. At a saving of PKR 45 per kWh, this would produce annual gross savings of approximately PKR 210,000. On this simplified basis, a battery storage could have a simple payback period of around three years that is very attractive return for any investment. This trend could become particularly strong as existing net-metering arrangements reach renewal points, prompting consumers to reassess whether exporting surplus electricity to the grid remains as attractive as storing it for their own evening use.
The Future Energy landscape
These developments represent three very different but complementary parts of Pakistan’s future energy system. Thar coal can provide a large-scale indigenous source of energy. Biomass can convert agricultural residues into useful heat and electricity while creating a new rural supply chain. Batteries can allow households and businesses to shift solar or wind energy from daytime to evening use and reduce their dependence on grid electricity. The government now needs to develop policies that recognize these changing economics, rather than treating each technology separately. For Thar coal, priority should be given to railway infrastructure, reliable coal quality, efficient mine-to-market logistics, and environmentally responsible combustion technologies. For biomass, Pakistan needs organized collection systems and soft-loan mechanisms so that industries can rely on biomass as a dependable fuel rather than a seasonal commodity. For batteries, priority should be given to a stable regulatory framework, transparent electricity tariffs, and standards for battery safety, recycling, and performance.
Most importantly, Pakistan must avoid another cycle of uncontrolled and unplanned generation expansion. Building generation capacity without considering demand, transmission capability, fuel availability, and consumer economics can create expensive stranded assets. The country is moving towards a fundamentally different electricity model. Over the next five years, households may increasingly combine rooftop solar with batteries and substantially reduce their dependence on the distribution grid during expensive hours. Industries may increasingly shift towards Thar coal and biomass where these fuels offer a competitive delivered cost. The opportunity is significant. The CTBCM will play a pivotal role by enabling these developments to make use of the national grid and distribution network, while avoiding scattered, stranded generation. What Pakistan needs now is not another race to add generation capacity, but a coherent policy that makes the cheapest available indigenous energy accessible to consumers while maintaining the reliability of the national grid. Pakistan’s energy landscape in five years could be fundamentally different that will be less dependent on imported fuels, more reliant on indigenous resources, and increasingly supported by batteries.
Corresponding Author: Dr. Muhammad Farhan is an engineer by profession with nearly two decades of experience in the energy and power sector.