Pakistan’s energy landscape is undergoing one of the most significant transitions in decades. A recent statement by Power Minister Awais Leghari highlights how the country’s increasing reliance on domestic electricity sources is helping shield the economy from disruptions in global liquefied natural gas (LNG) markets.
The shift is part of a broader reform agenda launched since March 2024, aimed at improving energy security, reducing import dependence and stabilizing Pakistan’s troubled power sector.
Domestic Energy Now Dominates Pakistan’s Power Mix
According to the power ministry, around 74% of Pakistan’s electricity is now generated from domestic sources, including hydropower, nuclear energy, coal and renewables. The government plans to raise that figure to more than 96% by 2034, significantly reducing reliance on imported fuels.
Imported LNG currently accounts for roughly 10% of electricity generation, primarily used to meet evening demand peaks when solar output drops.
This shift has become particularly important during periods of global supply uncertainty, as disruptions in the Middle East can affect shipments from Qatar, Pakistan’s primary LNG supplier.
The increasing share of domestic energy means Pakistan is now far less vulnerable to sudden price spikes or supply interruptions in global gas markets.
The Solar Boom Reshaping Pakistan’s Electricity Demand
One of the most transformative developments in Pakistan’s power sector is the rapid growth of rooftop solar.
Solar installations across the country now exceed 20 gigawatts of capacity, with a large portion installed “behind the meter” by households and businesses.
This surge in distributed solar generation is reducing daytime electricity demand on the national grid, sometimes even pushing demand below available supply in major urban centers.
The phenomenon has been described by policymakers as a “people-led solar revolution.”
Hydropower also plays a critical role during summer months, when river flows increase and add thousands of megawatts to the system, helping meet air-conditioning demand.
Cancelled LNG Cargoes Reflect Falling Import Dependence
The rapid expansion of domestic power capacity is already affecting Pakistan’s fuel import strategy.
Pakistan has cancelled 21 LNG cargoes scheduled for delivery in 2026–27 as rising solar generation and slower electricity demand growth reduce the need for imported gas.
This move signals a structural shift in the country’s energy mix.
Rather than expanding LNG capacity, the government’s long-term strategy now prioritizes local and renewable power generation.
Major Power Sector Reforms Since March 2024
The changes in Pakistan’s energy mix are closely tied to a broader reform program implemented by the Power Division under Awais Leghari.
These reforms aim to address long-standing problems in the sector, including high electricity tariffs, circular debt and inefficient distribution companies.
1. Renegotiation of Expensive Power Contracts
One of the most important initiatives has been the renegotiation of legacy power agreements with independent power producers (IPPs).
These contracts had long been criticized for locking Pakistan into high capacity payments, contributing to the country’s massive circular debt problem.
The government has sought to revise these agreements to reduce electricity costs and improve competitiveness, especially for industry and exports.
Lower tariffs are considered essential for economic growth and manufacturing expansion.
2. Transition Toward a Competitive Electricity Market
Another major reform involves introducing a competitive electricity market in Pakistan.
The goal is to gradually move away from the current single-buyer model toward a system where large consumers can purchase electricity directly from generators.
This market-based system is expected to:
- Improve efficiency
- Encourage investment
- Reduce costs for consumers
Government officials say this transition will make electricity more affordable and transparent over time.
3. Reforming Solar Net-Metering Rules
The rapid growth of rooftop solar has created new challenges for Pakistan’s power grid and tariff system.
Under existing policies, solar producers could sell excess electricity back to the grid at relatively high prices. As adoption accelerated, officials warned the policy risked creating financial imbalances.
The government has therefore begun reviewing and adjusting net-metering regulations to ensure fair pricing and sustainability.
At the same time, authorities have reassured existing solar users that their rights and credits will be protected.
4. Privatization of Distribution Companies
Pakistan’s electricity distribution companies (DISCOs) have historically suffered from:
- High transmission losses
- Electricity theft
- Weak financial management
To address these issues, the government has launched plans to privatize or restructure several DISCOs, aiming to improve operational efficiency and service delivery.
Private sector participation is expected to modernize infrastructure and reduce losses across the system.
5. Tackling Circular Debt
Circular debt — the accumulation of unpaid bills across the power sector — has been one of Pakistan’s biggest economic challenges.
To address this issue, the government secured a $4.5 billion Islamic financing facility from commercial banks to help stabilize the sector and manage existing liabilities.
This initiative aims to restore financial stability while creating space for long-term structural reforms.
The Long-Term Vision: A Self-Reliant Power System
Pakistan’s energy policy is increasingly focused on local, renewable and secure power generation.
According to the government’s roadmap:
- Clean energy already accounts for around 55% of electricity generation.
- The target is to increase this share to over 90% by 2034.
This strategy includes:
- Expanding hydropower capacity
- Increasing solar and wind installations
- Strengthening nuclear generation
- Developing battery storage to manage solar power at night
What This Means for Pakistan’s Economy
The shift toward domestic power generation could have several major economic benefits:
Greater Energy Security
Reduced reliance on imported fuel lowers exposure to global market volatility.
Lower Electricity Costs
Reforms and increased competition could gradually bring tariffs down.
Increased Renewable Adoption
Pakistan is becoming one of the fastest-growing solar markets in the world.
Stronger Industrial Competitiveness
Reliable and affordable electricity is critical for exports and manufacturing.
Conclusion
Pakistan’s power sector is undergoing a profound transformation.
By expanding domestic energy production and implementing structural reforms, the government is attempting to move the country toward a more secure, sustainable and efficient electricity system.
While challenges remain — including grid losses, financial constraints and policy adjustments — the combination of solar growth, domestic generation and market reforms could redefine Pakistan’s energy future over the next decade.
If the reform agenda continues at its current pace, Pakistan may finally overcome the energy shortages and instability that have long constrained its economic development.