Power Grid Crisis
Power Grid Crisis: Pakistan’s electricity grid is shrinking. Nepra’s 2024 and 2025 reports show that grid electricity sales have fallen for two straight years. Sales dropped by 3 percent in 2023–24 and by 2.8 percent in 2024–25. This happened even though the economy grew. Businesses and households now use less grid electricity while economic activity rises.
Costly Legacy
This marks a major shift. For years, Pakistan saw rising demand and frequent power shortages. To fix this, the government promoted large thermal power plants, including many IPPs under CPEC. At that time, no one expected solar panel prices to fall by about 90 percent, from two dollars per watt to 20 cents. This sharp price drop triggered a solar boom. Many consumers installed solar panels. As a result, expensive thermal plants now sit underused and create financial pressure. Poor timing, not bad intent, caused this problem.
Rise of EVs
Pakistan must now manage the consequences. The old power system was built for another era. It assumed that large central plants would send electricity one way to consumers. It also assumed that demand would always grow. Today, people generate electricity on rooftops. They store and share power locally. Electric vehicles are also increasing. Every 3 kWh of EV charging can replace one litre of petrol.
Economic Cost
Regulators have not kept pace. Nepra’s Prosumer Regulations of 2025 allow people to sell electricity only to the utility. They ban peer-to-peer trading. They also block “wheeling,” which would let producers sell power directly to customers through the grid for a fee. These rules protect the old system’s revenue. They discourage local storage, smart trading, and microgrids. Policymakers are forcing modern technology into outdated rules. This approach hurts the economy.
Managed Transition
Pakistan must now shift to a new system without harming growth. If the goal is to supply electricity at Rs20 per unit, policymakers should retire expensive old plants through negotiated deals. They should take two steps. First, they should create a clear schedule to phase out high-cost IPPs. Second, they should design a modern grid that supports new technology and future demand.
High power prices may already reduce GDP by about 2 percent each year. They raise production costs, weaken demand, and reduce competitiveness. If tariffs fall to Rs20 per unit, growth could rise from 3 percent to 5 percent.
Growth Impact
Consider a simple estimate. Suppose the government spends Rs500 billion to retire old IPPs. Pakistan’s GDP stands at about Rs110 trillion. An extra 2 percent growth would add Rs2.2 trillion in output each year. The government would collect about 9 percent of that as taxes, or roughly Rs200 billion annually. The state could recover the retirement cost in about two and a half years. These figures are rough, but they show the potential gain.
Investment First
Pakistan must ask a simple question. Can it afford to keep the old plants running? In finance, leaders separate investment decisions from financing decisions. They first decide whether an action makes economic sense. Then they decide how to fund it.
Long-Term Gains
Other countries have made similar choices. Malaysia negotiated buyouts and retired many aging IPPs. It lowered tariffs and sped up its renewable transition. Germany phased out coal plants in a structured way. It offered compensation and cleared space for renewables. These reforms were difficult, but leaders chose long-term benefits over short-term fear.
Critical Choice
Pakistan now faces a clear choice. It can protect the old system and slow growth. Or it can manage a smooth transition and build a modern, affordable energy system. Leaders should base this decision on economic logic and national interest.
Published in Dawn,14th February 2026
