Pakistan Could Save Rs. 3.5 Trillion Annually Through Smarter Energy Planning, Experts Say

Pakistan spends an estimated Rs. 3.5 trillion every year on energy imports that could largely be avoided through improved planning, greater energy efficiency and revived domestic manufacturing, according to research presented at an energy security conference organized by the LUMS Energy Institute (LEI).

The research points to a persistent mismatch between the country's energy supply and its actual seasonal needs. Although Pakistan has more than 36,000 megawatts of installed electricity generation capacity, baseline electricity demand remained at roughly 8,000 megawatts between 2015 and 2023, even as the population continued to grow. National Grid Pakistan Chairman Dr. Fiaz Chaudhry explained that much of the additional capacity was built to handle summer cooling demand, leaving a large share of plants idle for most of the year. The resulting capacity payments have pushed up electricity costs and contributed to the circular debt problem.

At the same time, Pakistan imports approximately $2.7 billion worth of liquefied natural gas (LNG) to meet space and water heating needs during the four winter months. Chaudhry said this contrast between underused generation capacity and heavy reliance on imported gas for heating reflects a deepening flaw in the country's energy planning.

The LEI research also flagged the delayed adoption of energy conservation building codes as a major source of avoidable electricity use. The federal government approved the codes in 2023, and full implementation could cut cooling demand by 51 percent. However, Punjab, Sindh and Balochistan have yet to adopt the regulations, while the Capital Development Authority and the Khyber Pakhtunkhwa government have adopted them and are at various stages of rollout. According to the findings, improving energy efficiency in just a quarter of residential buildings could lower peak electricity demand by around 3,000 megawatts and save an estimated Rs. 442.6 billion in annual energy costs.

Researchers also identified substantial opportunities in domestic manufacturing. A power sector indigenization assessment estimated that about Rs. 1.1 trillion worth of equipment demand across transmission and distribution could be met through local production, against projected demand of Rs. 1.9 trillion. The assessment reviewed the manufacturing readiness of roughly 49 local companies and proposed a framework for a national indigenization roadmap. Experts noted that Pakistan previously produced several types of power plants, equipment and spare parts locally before WAPDA's unbundling in 1998, but domestic capacity was later underutilized as the country shifted toward imported conductors, switches and other components.

The researchers further noted that an Engineering Development Board-led team was required to announce an electricity equipment indigenization plan by June 2026 under the National Electricity Policy 2023, but the deadline passed without the plan being introduced. LEI urged relevant government institutions to accelerate the long-delayed Power Sector Indigenization Plan to revive domestic manufacturing and reduce foreign exchange spending.