Ensuring Karachi's stake in national energy planning

Business Recorder

07-05-2025

It is often said — and increasingly heard in conversations with residents, business leaders, and industrial stakeholders — that Karachi does not receive the focus it deserves in national policymaking. While I have consistently defended the commitment of the Federal Government and policy institutions towards the city's development, recent developments call for a closer, more balanced examination.
The Federal Cabinet's approval of the Integrated Generation Capacity Enhancement Plan (IGCEP) 2025–2035, under the leadership of Prime Minister Shehbaz Sharif, is a pivotal step for Pakistan's energy future. However, the exclusion of K-Electric's 640MW of competitively bid, investor-backed solar energy projects from the plan have raised valid concerns among stakeholders and residents of Karachi. This omission risks undermining years of coordinated work between regulators, investors, and the utility to diversify the city's energy mix and reduce dependence on the expensive fossil fuels as well as on the national grid — an objective previously encouraged by the federal government itself.
Previously, K-Electric was asked to advance renewable energy generation under defined timelines. In response, the utility fully complied with the government's instructions and moved swiftly with competitive processes and regulatory compliance, submitting projects that promised clean, cost-effective power at scale. These included a 200MW solar project in Jhimpir, a 150MW hybrid site in Vinder Bela, and additional initiatives in collaboration with the Sindh Government. This move was backed by serious investor-backed proposals, Nepra approvals, and competitive bidding. But now, suddenly, everything has changed. In the strange logic of Pakistan's energy planning, spending hundreds of billions in subsidies is perfectly acceptable, so long as no one dares to bring cheaper electricity to the table.
Take aside for a moment Karachi's interest and the rights of its residents, these renewable energy projects promise electricity at a fraction of current fuel costs. If implemented, they could save the government Rs. 10 to 15 billion annually in tariff differential subsidies and offer massive relief to Karachi's consumers through reduced fuel adjustment charges.
A logical question asked by various decision makers: why should K-Electric be allowed to install more (cheaper generation) when the southern region of the country is already flooded with local coal, nuclear, wind, and solar? A simple answer would be transmission constraints. Even after the new interconnection at KKI Grid, the transmission capacity remains limited, and demand is expected to rise on the industrial side as well as domestic consumption will rise — but constraints will remain. This solar will exclusively benefit Karachi consumers without depending on national grid and transmission bottlenecks. This is something decision makers need to take into account. In addition to this, idle generation is mostly based on imported coal like Port Qasim, lucky, CPHGC, etc. if we compare 640MW renewables energy price with imported coal generation, renewables are cheaper even on EPP which will not just save foreign exchange but also reduce overall energy price basket.
These projects were simply left out of the IGCEP, the national power development plan. Without IGCEP inclusion, NEPRA cannot approve them, and without approval, nothing gets built. Meanwhile, grid-based electricity continues to get more expensive, partly due to the unchecked spread of distributed rooftop solar and the rising fixed costs of maintaining a grid that fewer consumers are fully paying for. As a result, the government keeps issuing subsidy cheques, and consumers continue to receive inflated bills.
This, despite the fact that Nepra already issued the RFPs, and KE successfully conducted Pakistan's first smoothly executed competitive bidding process, a landmark achievement in a sector where delays and cancellations are routine. If this process is now derailed, it will discourage future investment and damage the credibility of the government's own reform agenda.
But then again, this isn't new for Karachi. In 2018, KE's proposal for a local coal-based plant was rejected. Instead, they were told to construct BQPS-III entirely on RLNG, one of the world's most volatile and relatively expensive fuels. That same year, their allocation of cheap indigenous gas was withdrawn, in direct violation of the Gas Allocation Policy of 2005 and its 2015 and 2018 amendments. That Cheap Indigenous gas was redirected to powerful captive power producers, forcing KE to rely exclusively on imported RLNG.
The result? After the dollar spiralled out of control, KE's fuel cost per unit rose to Rs 26 to 28, while the same electricity could have been produced at Rs 7 per unit with domestic gas. The difference didn't disappear. It showed up as ballooning fuel adjustments for consumers and ever-growing subsidies. In fact, way above Rs 800 billion has been paid to KE in tariff differential subsidies from 2006 to 2025.
To spur the city's social and economic growth now when KE is trying to shift to clean, local solar generation to bring down costs and reduce import dependence, the doors are quietly shut at the federal level. These projects should be part of the solution to the circular debt and foreign fuel addiction, yet they've been left out of the plan.
Meanwhile, the government is directly or indirectly facilitating Net Metering, purchasing rooftop solar power at Rs. 27 per unit and even more costly, netting off units at retail rates. This means rooftop prosumers not only avoid buying power, they also bypass distribution margins, capacity payments, taxes, and other grid charges. The actual system loss per unit exceeds Rs. 27. But this gets a green light, while utility-scale solar that could serve millions of customers is sidelined. If rooftop solar is a revolution, then why is utility-scale solar somehow a threat? While being at this, K Electric has sufficient small plants to back up the impact of utility scale solar as baseload when the sun is not available.
Credit must also be passed where it is due. The Minister for Power and his team have taken tangible steps to reduce industrial tariffs and streamline regulation, and they deserve appreciation. But ignoring KE's solar projects undermines their goal of supporting electricity customers of Karachi. The local leadership in Karachi clearly sees that these are not just solar driven clean energy power plants; they are in fact long-term investments in infrastructure for Karachi's sustainability, growth and resilience.
It took three years to bring these projects from concept to competitive bidding. Investors placed aggressive bids. The resulting tariffs are a win for the government, KE, and most importantly the citizens and industries of Karachi. NEPRA has already gone through detailed documentation and issued RFPs. Backing out now will not do any favour to the government and decision makers but will send a message that Pakistan is open for window shopping, and not for serious investment and serious business.
You would be forgiven for asking whether KE simply stepped on the wrong toes. Competitive bidding and low prices seem to threaten an ecosystem built on inefficiency. But what needed to be understood has already been understood. People of Karachi would believe that they are being penalized for proposing affordable solar power in a system that doesn't know what to do with it. Even the government's own 600 MW solar tender failed to attract a single bid. KE's investor-backed, technically sound projects stand ready, and yet they are being blocked not for being flawed, but for being too reasonable.
And so, Karachi, the industrial engine of the country and the hub of the country's economic activities, is once again expected to survive but without access to its own cheaper electricity. If NTDC supply dips or gas allocations tighten again, as they often do, the city will return to high-cost generation. Fuel adjustments will skyrocket, and consumers of Karachi will pay the price for decisions made far from Karachi, and without a fair representation of Karachi.
If rooftop solar at Rs. 27 per unit is reform, and unit-to-unit netting is somehow the future, then what exactly is Rs. 10 per unit utility-scale solar? Apparently, it's a problem. It seems that while America built a Department of Efficiency, we might be better served by establishing a Department of Common Sense.
(The writer is an avid power sector expert and a leading industrialist from Karachi. He can be reached at [email protected])
Copyright Business Recorder, 2025