Previously we discussed the ingredients of Grid Defection and how all these are available in Pakistan. Resultantly, the demand is on the decline. In this part we will discuss some fundamental issues and propose potential solutions.

Traditional utility model, its drawbacks in context of evolving energy landscape

The traditional utility model, created in the early 20th century, was designed to provide reliable electricity to the maximum number of customers at the lowest feasible cost using the single grid. This vertically-integrated model, where public sector utilities handled generation, transmission, distribution, and retail, relied on large-scale centralised systems, economies of scale, and stable demand growth with predictive revenue stream. Regulators assured cost recovery for utilities, enabling long-term investments in physical assets like power plants and transmission networks. This model remains prevalent in Pakistan today.

Grid defection: a looming challenge for Pakistan’s utilities–I

However, modern technological innovations, such as distributed energy resources like solar and wind, and microgrids, challenge the foundations of this model. These innovations reduce the need for centralized systems, break down economies of scale, and empower consumers with more control over their energy use.

Digital technologies further enable greater consumer choice and decentralization, eroding the monopolistic market boundaries that utilities rely on for revenue. Thus, the intersection of technological innovation and shifting customer preferences is now driving a transformative shift, with the potential to disrupt the traditional utility business model entirely. Thus, the fundamental issue is that traditional utility model and rise of Distributed Energy Resources (DERs) cannot go hand in hand.

Think of this transformation as a game. Over time, some players, empowered by new tools and strategies, have gained undue advantage, tipping the balance of the system. The rules that once governed the game no longer ensure fair play. As a result, the system faces instability, with some players benefiting disproportionately while others bear the costs. To restore balance and sustain the system, the rules must evolve.

Thus, utilities must continue recovering costs for their long-lived assets, even if those assets lose value in the face of these disruptive technologies. This creates a growing tension between the traditional regulatory framework and the evolving energy landscape.

To adapt, we need to rethink the regulatory model that underpins the utility business model. Regulation must evolve to accommodate decentralized energy, incentivize innovation, and balance cost recovery with consumer benefits in a digital distributed energy future. The challenge is not just about utilities adapting but about transforming the rules that govern them........

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