Net Metering Drives Growth, but Capacity Payments Add Financial Pressure
Pakistan’s installed electricity generation capacity has increased to 46,605 MW during the current fiscal year (2024–25), according to the Economic Survey 2024–25 released Monday. This marks a 1.6% rise from 45,888 MW recorded during the same period last year. The government attributed this growth primarily to the addition of 2,813 MW through net metering.
While the expansion reflects progress in energy infrastructure, it has also intensified the financial burden on consumers. Annual capacity payments—compensations paid to power plants regardless of output—have reached between Rs 2.5 to Rs 2.8 trillion, much of it paid to idle plants that have not generated any electricity.
To curb these costs, the government terminated Power Purchase Agreements (PPAs) with several Independent Power Producers (IPPs), including HUB Power, Lalpir Power, Pakgen Power, Rousch Power, Saba Power, and Atlas Power, effective October 1, 2024.
Evolving Energy Mix
The breakdown of installed generation capacity by source as of March 2025 was:
- Thermal: 55.7%
- Hydel: 24.4%
- Renewable: 12.2%
- Nuclear: 7.8%
Although thermal power remains dominant, its share is gradually declining in favor of more sustainable, indigenous energy sources. During the July–March FY2025 period, total electricity generation stood at 90,145 GWh, with hydel, nuclear, and renewable sources collectively contributing 53.7%—highlighting a positive shift toward cleaner energy.
Sectoral Trends and Reforms
The household sector remained the largest consumer of electricity, accounting for nearly half of national usage. The Private Power & Infrastructure Board (PPIB) continued to enable private sector involvement in generation and transmission. As of March 2025, PPIB had facilitated 88 operational IPPs, totaling 20,726 MW in capacity.
Significant milestones included the commissioning of the 884 MW Suki Kinari Hydropower Project and ongoing progress in solar, wind, and bagasse-based energy projects. Notably, 84% of the upcoming energy project pipeline comprises clean energy initiatives, reinforcing the government’s focus on renewables and indigenous resources.
Broader Energy Landscape
Despite gains in generation capacity, Pakistan continued to face challenges in affordability, sustainability, and energy security. In the petroleum sector, limited domestic production kept the country reliant on imports, though stable global oil prices helped contain the energy import bill.
Domestic refinery utilization remained below potential, but efforts to attract investment in refinery upgrades and new facilities are ongoing.
On the natural gas front, the depletion of indigenous reserves remains a pressing issue. With no major new discoveries, Pakistan has increasingly turned to LNG imports, especially to meet industrial and power sector demand. Infrastructure development is underway to enhance LNG handling and improve energy efficiency.
Coal, particularly from Thar, continues to play a key role in electricity generation. Several Thar-based power projects are now operational and feeding the grid. However, the environmental impact of coal remains a concern, prompting calls for cleaner technologies and stricter regulation.
Conclusion
While the rise in generation capacity and the shift toward renewables mark progress, the high cost of idle capacity and reliance on imports underline the need for deeper structural reforms. A focus on clean, affordable, and secure energy remains essential for sustainable economic growth and improved quality of life in Pakistan.
