PAKISTAN’S grid is quietly reversing. Nepra’s state of industry reports for 2024 and 2025 show that electricity sales from the grid fell for two straight years. They dropped three per cent in 2023-24 and another 2.8pc in 2024-25, even while the economy grew. This is the paradox we now face: even as economic activity increases, the amount of power drawn from the national grid is falling.
This shrinking grid marks a historic reversal. For decades, Pakistan’s energy story was one of rising demand and crippling shortages. The policy response was a wave of large thermal IPPs. At the time the IPPs under CPEC were planned nobody could foresee a 90pc collapse in solar panel prices — from two dollars to 20 cents per watt. That black swan event triggered one of the world’s most spectacular solar booms, rendering the legacy thermal fleet of power plants a costly albatross. It’s nobody’s fault. It was a timing mismatch. But we are living with the consequences.
How we got here is the first half of the story. Now to get out of this hole we need to reimagine a grid for the future. The old system was built for the last century. It assumed power would always flow one way, from large central plants to passive consumers, and that demand would keep rising. That world is gone. In the new system most of the generation is decentralised, vast amounts of power can be stored and exchanged at the local level and the grid is democratised — a true network for electrons. The footprint of electric vehicles will grow larger, with every 3kWh of EV charging displacing one litre of gasoline.
Yet, our regulatory framework stubbornly clings to the past. Nepra’s recent Prosumer Regulations of 2025 explicitly prohibit selling power to anyone but the utility, banning peer-to-peer energy exchange and blocking ‘wheeling’ — the essential mechanism that allows generators to sell power directly to any chosen consumer across the grid, using the utility’s lines as a common carrier for a fee. This is a deliberate and regressive policy to protect the revenue of a dying system. It attempts to suppress the very innovation — local storage, smart exchanges, microgrids — that could solve the crisis of unaffordable energy. We are trying to force a 21st-century technological revolution into a 20th-century regulatory box, and the economy is paying the price.
Our regulatory framework stubbornly clings to the past.
The question now is how to manage the transition so that the old system does not drag the economy down while the new one takes its place. And so if we imagine our economic objective to be to provide Rs20 per unit electricity to everyone then the sensible way forward is to retire the remaining high-cost legacy plants through negotiated settlements. Two exercises need to be done: 1) Prepare a phased retirement schedule for the legacy IPPs. 2) On a blank whiteboard sketch out the reimagined grid Pakistan needs for this century.
Here is a hypothesis I have not seen tested: what if high power costs are silently shaving 2pc off Pakistan’s GDP each year, through lost output, weak aggregate demand and eroded competitiveness? Consider the corollary. If average tariffs fell to Rs20 per unit, could annual growth rise from 3pc to 5pc?
Run a simple back-of-the-envelope calculation. Assume early IPP retirement costs Rs500 billion. Pakistan’s GDP is roughly Rs110 trillion. An extra 2pc growth yields Rs2.2tr in additional output annually. Of that, roughly 9pc flows to the government as tax revenue, about Rs200bn per year.
That is a two-and-a-half-year payback on the buyout cost. The numbers are indicative; the direction is not. The question is not whether we can afford to retire the old system. It is whether we can afford not to.
In finance there is a clear rule: the investment decision and the financing decision are separate. First decide whether the move makes economic sense. Only then worry about how to pay for it.
Such terminations have been done elsewhere. Some years ago Malaysia retired a significant portion of its aging IPP fleet through negotiated buyouts, lowering tariffs and accelerating its renewable transition. Germany tackled its stranded coal assets through a structured phase-out with compensation and freeing the grid for renewables. These weren’t painless exercises, but they recognised a fundamental truth: clinging to legacy infrastructure for fear of near-term costs can inflict far greater long-term damage.
I have not yet seen a white paper that sets out this trade-off clearly. Yet the choice is simple. We can let the old system linger and bleed the economy, or we can manage its orderly exit and unshackle the economy for higher growth. It is time to take the decision on economic logic alone.
The writer is a business strategist and entrepreneur.
Published in Dawn, February 14th, 2026
