Pakistan’s energy sector faces significant challenges such as frequent power outages, high transmission losses, reliance on imported fuels, prompting the introduction of IPPs to bridge the electricity gap.

The rising costs of global energy, coupled with the depreciation of the Pakistani rupee and domestic political instability, are pushing the country towards a severe energy crisis. Pakistan’s energy generated by fossil fuels, which account for 60% of total energy production, primarily relying on imported LNG, domestic natural gas, and coal.

Hydropower contributes 25% and nuclear energy makes up 8%. Renewable energy (RE) sources (wind and solar) constitute 7% while India and Afghanistan relying on RE 10% and 13%, respectively.

In the 1990s Pakistan faced severe energy shortfalls, with demand far exceeding supply and the concept of (IPPs) was first introduced in the early 1990s under the Power Policy of 1994. That policy allowed private companies to establish power plants and sell electricity to the national grid under long-term agreements, primarily through the “take-or-pay” model.

As a result of which several thermal plants commissioned, most of which relied on imported furnace oil, significantly increasing electricity generation costs. To overcome the generation cost Power Policy 2002 introduced, and the purpose of this policy was to focus on hydropower and indigenous coal to reduce reliance on imported fuels. However, despite these efforts, Pakistan remained dependent on fossil fuels.

Pakistan’s........

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