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Pakistan’s power sector has long been a story of overcorrection. For years, the debate centred on supply shortages, with policymakers rushing to add generation at any cost. Today, the pendulum has swung the other way: surplus capacity, idle plants, and consumers crushed by capacity payments.

The key requirement for ensuring a stable electricity supply nationwide under all circumstances is effective system planning. The Indicative Generation Capacity Expansion Plan (IGCEP) provides a roadmap to enhance energy security, sustainability, and affordability while considering policy and macroeconomic factors. Since 2021, the System Operator (SO) under the National Transmission and Despatch Company (NTDC) has diligently prepared annual updates to this plan.

By design, the IGCEP is a least-cost plan. Each year, the SO prepared the 10-year generation roadmap using the PLEXOS software under the assumptions specified in the Grid Code 2023. It is guided by the National Electricity Policy 2021 and the National Electricity Plan 2023– 2027. The IGCEP determines which plants will be built over the next decade based on economics and system needs.

The recent IGCEP (2025-35) prepared by an Independent System and Market Operator (ISMO) has been released by National Electric Power Regulatory Authority (Nepra) for stakeholder input and comment. Its main strength lies in its transition from quantity to quality in capacity planning. Only projects already under construction or those meeting strict criteria are treated as ‘committed’ while all other candidate plants must justify their inclusion based on economic merit. This distinction is what separates affordability from insolvency.

Unlike previous plans, IGCEP 2025–35 is more integrated in its approach. It brings K-Electric into national planning, designs the South–North transmission corridor to shift Sindh’s cheap generation to the north, and includes battery storage systems for flexibility. The energy mix signals a change. By 2035, capacity will reach 63,000 MW, with hydro and renewables (solar, wind, and bagasse) delivering more than half (61 per cent), while nuclear (7.5pc) and Thar coal (5.3pc) ensure a firm supply for the baseload. Furnace oil disappears, imported fuels are capped, and carbon intensity falls from 0.278 kg/kWh to 0.105 kg/kWh.

However, contrary to the Alternative and Renewable Energy (ARE) Policy 2019, which pledged 30pc of installed capacity from non-hydro renewables by 2030, IGCEP 2025–35 falls well short. Even by 2035, five years after the ARE target, solar, wind, and bagasse together will make up only about 27pc of capacity. The gap highlights the growing disconnect between policy ambition and actual planning.

For the first time, the IGCEP highlights the costs of policy deviations. The unconstrained scenario, the model’s pure least-cost build, produces the lowest system expense ($39.1 billion). The rationalised case trims this to projects already under construction or justified on merit, keeping the bill around $47.1bn. By contrast, the forced case, which accommodates every announced scheme, swells costs to $54.8bn by 2035. The difference, over $7bn, is the price of indiscipline.

Hydropower dominates all futures, but here, too, choices matter. Most dams are classed as committed regardless of economics; the Diamer-Bhasha project alone adds an extra $3bn when forced into the plan. Policy-driven solar blocks, tested as sensitivities, impose smaller but still measurable premiums. Making these trade-offs visible is progress, but the warning is clear: once one exception is allowed, others follow, and the least-cost principle unravels.

Suppose a project is added for strategic or policy reasons; it should be limited in scope, capped in cost, and tested for broader environmental risks. Otherwise, Pakistan risks reverting to a pattern where planning discipline gives way to special cases, and affordability is sacrificed.

In Pakistan, the most urgent challenge is demand, which is decreasing. Grid sales fell by around 3.6pc in FY25, with daytime consumption hollowing out as rooftop and commercial solar spread. Net-metered capacity has already exceeded 5.3 GW, while Pakistan imported nearly 22 GW worth of panels in just 18 months. Officials now estimate an annual 10 TWh reduction in daytime demand, even as evening peaks persist.

This mismatch leaves utilities selling fewer units while carrying the burden of contracted plants, a classic ‘utility death spiral’. The risk grows as households and businesses adopt batteries, shifting solar into night-time hours and further eroding grid sales while fixed costs remain. Without a pivot to a demand-driven strategy, the grid will continue to lose relevance.

The IGCEP assumes electricity demand will grow about 4.4pc a year to 2035, assuming GDP growth of 3pc. Given the past grid sales, rooftop solar expansion, and the GDP growth rates, which remained even less than 3pc, the demand may fall short of projections, and plants could remain under-utilised, locking in higher capacity payments.

IGCEP should prioritise a demand-driven growth model. The focus should be on revitalising export industries through marginal cost pricing, shifting captive loads back to the grid through fair wheeling charges under the competitive trading bilateral contract market, and generating new demand through electrified transport, cold chains, and industrial parks. These efforts must align with the Transmission System Expansion Plan for the South–North backbone and K-Electric interconnections. Without timely implementation, low-cost southern power will remain stranded, while expensive plants dictate dispatch.

Mohammad Aslam Uqaili is Professor Emeritus and ex-vice chancellor at MUET. Afia Malik is a senior researcher and energy policy expert based in Islamabad. Shafqat Hussain Memon is an academic researcher in energy based in Jamshoro.

Published in Dawn, The Business and Finance Weekly, October 27th, 2025

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