The National Electric Power Regulatory Authority’s State of the Industry Report 2025, released in January 2026, has once again exposed the deep structural weaknesses of Pakistan’s power sector. The report presents a comprehensive assessment of the industry for the year ending June 30, 2025, highlighting persistent challenges such as inadequate planning, weak governance, underutilisation of assets, lack of reliable and digitised data, shifting demand patterns, and the ever-growing burden of circular debt. Despite decades of reforms and policy interventions, the sector continues to struggle with inefficiencies that undermine economic growth and impose a heavy financial burden on consumers and the government.
ENERGY SECTOR
The National Electric Power Regulatory Authority’s State of the Industry Report 2025, released in January 2026, has once again exposed the deep structural weaknesses of Pakistan’s power sector. The report presents a comprehensive assessment of the industry for the year ending June 30, 2025, highlighting persistent challenges such as inadequate planning, weak governance, underutilisation of assets, lack of reliable and digitised data, shifting demand patterns, and the ever-growing burden of circular debt. Despite decades of reforms and policy interventions, the sector continues to struggle with inefficiencies that undermine economic growth and impose a heavy financial burden on consumers and the government.
Regrettably, many of the concerns identified by the regulator do not appear to have been adequately reflected in long-term planning documents such as the revised Indicative Generation Capacity Expansion Plan (IGCEP) 2025-2035 issued in April 2026. While NEPRA has repeatedly pointed to structural and operational shortcomings, meaningful progress on strategic reforms remains limited. Consequently, the goal of providing affordable, reliable and sustainable electricity remains elusive.
One of the most significant findings of the report is the widening gap between installed generation capacity and actual electricity demand. Pakistan today possesses a generation capacity substantially larger than its current requirements, yet demand growth on the national grid remains sluggish. The rapid spread of rooftop solar systems and other decentralised energy solutions has further altered consumption patterns, reducing dependence on grid electricity.
Another notable observation is the under-utilisation of several efficient generating assets. Although nuclear power plants continue to provide low-cost and reliable electricity, overall system constraints and demand limitations have restricted optimal utilisation of available capacity. Likewise, while renewable energy projects have expanded considerably in recent years, their actual contribution to electricity generation remains below expectations because of intermittency, grid limitations, and lower capacity utilisation factors.
The report also highlights continuing delays in major hydropower projects. Commercial operation dates for several strategically important schemes have been repeatedly revised due to financial constraints, security concerns, implementation challenges and cost overruns. As a result, consumers continue to bear the burden of expensive capacity payments while awaiting the benefits of low-cost indigenous hydropower.
At present, Pakistan’s total installed generation capacity, including the K-Electric system, stands at 41,121MW after the retirement and decommissioning of more than 2,800MW of older plants during the year. Dependable capacity is reported at 38,474MW. Despite successive policy commitments to increase private-sector participation, the public sector still accounts for roughly 53 per cent of installed capacity.
The demand profile, however, paints a very different picture. In the national grid system, excluding K-Electric, dependable generation capacity reached 33,281MW during the June 2025 peak-demand period, yet the utilisation factor was only around 74 per cent and only for a limited duration too. Consequently, nearly one-quarter of available dependable capacity remained unutilised even during peak conditions. During the annual low-demand period in March 2025, electricity demand reportedly fell to just 6,106MW, resulting in a capacity utilisation factor of barely 18 per cent.
Studies by energy researchers further underscore the changing nature of electricity consumption in Pakistan. According to Renewables First, a Pakistani think-tank, electricity supplied through the national grid has declined substantially over the past three years despite continued growth in overall electricity consumption. The increasing adoption of distributed solar generation has reduced demand for grid-supplied electricity, with rooftop solar emerging as a major source of power for households and businesses.
The revised IGCEP 2025-2035 appears to require further review in the light of changing consumption patterns, rapid solarisation and persistent underutilisation of existing capacity
Similarly, the US-based Global Energy Monitor estimates that decentralised and off-grid electricity now accounts for a significant share of national electricity consumption. These developments raise important questions regarding future demand projections and generation planning. NEPRA’s Report shows that total net electricity generation declined from 154,056 GWh in 2021-22 to 138,539 GWh in 2022-23, further decreasing to 137,078 GWh in 2023-24 and 135,078 GWh in 2024-25. These figures indicate a persistent downward trend in grid-based electricity generation despite substantial additions to installed capacity.
The report also notes that wind, solar and bagasse-based plants continue to account for a relatively modest share of total electricity generation, despite their growing share of installed capacity. This reflects the inherent difference between installed capacity and actual energy output, an issue that must be carefully considered in future expansion planning.
Another alarming aspect of the sector’s performance is the loss of low-cost hydropower generation. According to Nepra, hydropower generation losses reached 6,520 GWh owing to the non-availability of several Wapda power stations in 2025. The 969-MW Neelum-Jhelum Hydropower Project alone accounted for an estimated loss of 5,126 GWh after it remained shut down throughout the year due to structural damage and ongoing investigations. Since its shutdown in May 2024, progress on repair and rehabilitation has remained slow, and reports suggest that the project may not resume operations before 2029. Consumers, meanwhile, continue to bear a substantial financial burden through past project-related surcharges and current replacement power costs.
The revised IGCEP 2025-2035 remains heavily focused on meeting projected peak demand through large additions of renewable and hydropower capacity. The plan envisages the addition of approximately 21,400MW of hydropower, 13,200MW of solar power, and 11,500MW of wind power by 2035. Under these projections, hydropower would account for about 34 per cent of installed capacity, while solar and wind together would contribute around 27 per cent.
However, the timely completion of major hydropower projects remains uncertain. Strategic schemes such as the 4,500MW Diamer-Basha Dam, 2,160MW Dasu Dam & Hydropower Project, 1,530MW Tarbela 5th Extension Project and the 800MW Mohmand Dam have all experienced delays and cost escalations. Given Pakistan’s historical record in executing mega infrastructure projects, estimations regarding their completion schedules require careful scrutiny.
Against this backdrop, the revised IGCEP projects total installed capacity rising to 62,657MW by 2027 under the low-growth scenario and to 70,720MW by 2035 under the high-growth scenario. Yet projected peak demand under these scenarios remains substantially lower, at around 35,521MW and 43,069MW, respectively. This large gap between installed capacity and projected demand reinforces NEPRA’s observation that Pakistan’s core challenge is not merely capacity expansion but rather the efficient utilisation of existing assets and the development of realistic demand forecasts. The regulator has repeatedly warned that excessively optimistic demand projections can lead to undue capacity additions, rising capacity payments, and ultimately higher consumer tariffs. The current power sector situation provides ample evidence of these risks.
In conclusion, the revised IGCEP 2025-2035 appears to require further review in the light of changing consumption patterns, rapid solarisation, and persistent underutilisation of existing capacity. Future planning must be based on realistic demand projections, improved system efficiency, better utilisation of available assets and accelerated reforms in governance and distribution. Unless these structural issues are addressed, Pakistan may continue to add generation capacity while affordable and reliable electricity remains out of reach for consumers. Equally important is that policymakers ensure that future expansion plans do not result in even higher electricity tariffs, which already impose a heavy burden on households, agriculture, commerce and industry.
The writer is a retired chairman of the State Engineering Corporation.
