The case of structural energy security

Pakistan’s energy system has undergone a transformation that has quietly been so consequential that its architects cannot quite name it. In FY21, imported fuels supplied exactly one-third of national generation. A 30-day Strait of Hormuz blockade then would have cost 2.87 terawatt-hour (TWh), enough to collapse demand-side and trigger load-shedding cascades of over six hours a day.

Today, the same blockade costs much less, with barely any load shedding, driven by a reduced dependency on imported fuel. The risk has been cut in half, not through redundancy or policy luck, but through three sequential structural shifts that enhanced energy security, providing an organic hedge to geopolitical shifts.

The policy narrative credits nuclear expansion, the ramp-up of Thar coal, and the emergence of behind-the-meter (BTM) solar. Following the commissioning of the K-2 reactor in 2021, our nuclear generation supply doubled, providing low-cost, clean power and displacing some RLNG in the process. However, long-term RLNG contracts remained a drag, keeping overall generation costs elevated.

Nuclear generation was further supported by the rapid ramp-up of electricity generated through indigenous Thar coal. Pakistan has 175 billion tonnes of proven coal in Thar. Yet between 2010 and 2020, coal generation stagnated at roughly 37 TWh. Since power plants were commissioned in the Thar coal fields, as part of the early harvest of the China-Pakistan Economic Corridor, low-cost electricity generation further increased, swapping out more expensive RLNG and furnace oil in the process.

An increase in indigenous generation and energy independence have cushioned the crisis and made it more of a policy problem

Currently, the variable cost of electricity generated from Thar coal is around Rs5 per kWh. As the mines expand further, the economies of scale will start kicking in, and overall costs will continue to decline.

The surge in solar installations further accelerated indigenisation. Although there has been a lot of debate about solar, it is important to understand the different mechanisms by which pricing is done. Power generation through solar in a decentralised manner can be either net-metered or behind-the-meter. In net metering, the consumer is connected to the grid and sells surplus electricity back to the grid. There are about 450,000 net metering users in the country.

However, the real growth was happening BTM — consumers who are not connected to the grid, including rural areas, agricultural tubewells, and so on. There are more than three million households in the country that have some form of solar capacity installed on their rooftops, and they have contributed massively to enhancing the country’s energy security

Between 2022 and 2024, Pakistan imported roughly 30GW of solar modules. More than 90 per cent of these went to factory roofs, fields, terraces, a generation that never passes through a Disco metre, never enters national statistics, and has rarely been considered while formulating a policy response.

By mid-2025, cumulative BTM capacity reached 20 GW, leading to the emergence of a duck curve, in which grid power demand drops significantly during the day, reducing reliance on imported fuels.

This was not planned.

As electricity tariffs increased due to a free-fall of the rupee, payback periods for rooftop solar fell to three to four years. Rational economic actors, such as factories, farms, and households, exited the grid. Agricultural grid offtake collapsed 4.6 TWh in three years, as they moved away from the grid and diesel to solar. The decentralised revolution was bottom-up, not bureaucratic. It happened because the economic signal was sharp.

If RLNG dispatch collapsed, the pipeline capacity freed would allow more domestic gas to flow without infrastructure expenses

Together, these three shifts moved the needle; total indigenous generation increased, while energy independence (reliance on indigenous sources for generation of electricity) increased from 66pc to 85pc.

In May 2021, a potential Strait of Hormuz blockade was crisis-level arithmetic. Today, it is a policy problem. A blockade today would unlock capacity. Pakistan produces 28 billion cubic meters of natural gas annually; much of it is curtailed because RLNG plants are contractually mandated to run first.

If RLNG dispatch collapsed, the pipeline capacity freed up would allow additional domestic gas to flow without infrastructure expenses. The system, effectively, would not break, but it would reconfigure toward domestic resources as if by design.

This provides an opportunity to renegotiate RLNG contracts on spot terms and increase local gas production to replace them. More importantly, it is time to bring BTM solar into formal grid accounting rather than pretending they do not exist. There exists significant stranded BTM capacity that can be brought on the grid and sold at the margin. This would require dynamic pricing, moving away from an archaic and distortionary net-metering buyback regime.

Pakistan’s energy system was quietly rebuilt, not through a five-year plan but through economic signalling, to be self-stabilising under stress. This is a structural reform that needs to be further supplemented by tariff reform and, more importantly, by eliminating theft and other distribution inefficiencies that plague Discos. A lot more needs to be done, and continuation on the reform path is the only way to unlock industrial growth for the country, lest we be stuck in a perpetual low-growth trap.

The writer is an assistant professor of practice at IBA, member of the Thar Coal Energy Board, and CEO of NCGCL.

Published in Dawn, The Business and Finance Weekly, March 16th, 2026