Arshad Mahmood Awan
Pakistan’s national electricity grid is sending mixed signals. After years of suppressed demand, falling industrial activity, and a generation mix tilted toward cheaper but unreliable sources, the system is beginning to show early signs of recovery. Yet the same recovery is exposing structural vulnerabilities that were always present but easier to ignore when demand was low. The months ahead will test whether the grid can absorb a returning load without passing unbearable costs onto consumers and industry alike.
The numbers over the first eight months of the current fiscal year tell a story of gradual but uneven improvement. Total generation of roughly 81 billion kilowatt hours remains about eight percent below the peak recorded in the same period of fiscal year 2022. It also trails levels achieved in both 2023 and 2024, and has risen only marginally compared to last year. By those measures, the recovery appears modest and incomplete. But within that broader picture, January 2026 stands apart. It became only the fifth month in the past eighteen months where actual generation exceeded reference levels, and it did something more remarkable still: it posted the highest January generation ever recorded. It was also the first time since May 2022 that any single month set an all-time high. That is not a trivial distinction. It marks a structural break in what had been a long and dispiriting downward drift.
February, however, was a reminder that momentum is fragile. Generation moderated again and fell below the levels of fiscal years 2022 and 2023. The January spike did not sustain itself into the following month, raising the question of whether it represented a genuine turning point or an isolated episode. The honest answer is that it is probably both: a genuine signal of recovery that has not yet found its footing and remains vulnerable to disruption.
The engine behind this tentative improvement is the return of industrial consumers to the national grid. For years, large industrial users had turned their backs on the grid, investing in captive generation to escape unreliable supply and uncompetitive tariffs. That calculation is shifting. As base tariffs for industry have been reduced, the economics of captive generation have weakened, and factories are reconnecting to the grid in meaningful numbers. Industrial electricity demand has risen by an estimated 35 to 40 percent year on year, a substantial increase that speaks directly to the scale of the exit that preceded it. With tariff reductions deepening further, the impact of this migration is expected to become more visible from March onward, potentially sustaining the recovery into the second half of the year in a way that January’s single-month performance could not on its own.
The changing shape of generation, however, raises serious concerns about the cost of that recovery. The fuel mix has undergone a visible shift, and not in a direction that favours affordability. Seasonal hydroelectric output has declined from its reference levels, even though it still remains about fifteen percent above those benchmarks. The more significant development is the extraordinary rise in imported coal generation. For the second consecutive month, coal-based output reached 1.1 billion units against a reference level of just 232 million units. That is not a marginal deviation. It reflects a system that has been forced to lean heavily on one of its costlier and more logistically demanding sources to compensate for sharp declines elsewhere, particularly in liquefied natural gas and nuclear generation. When cheaper baseload capacity recedes and imported coal fills the gap, the consequences show up directly in fuel costs.
The result has been a fuel cost adjustment of Rs1.64 per unit, the third consecutive positive adjustment. This is not an isolated fluctuation. It is symptomatic of a structural change in how Pakistan generates electricity, one in which progressively more expensive fuels are being called upon to keep the lights on. Consumers and industry will absorb these costs either through direct adjustments or through the broader fiscal pressures that follow when the government attempts to shield them.
The grid’s operational challenges are compounding at the same time. Daily generation and demand curves are increasingly taking the shape of what engineers call the duck curve: a pronounced dip in the middle of the day followed by a sharp and steep climb toward the evening peak. This pattern has become more pronounced compared to previous years, and as overall demand edges back toward 2022 levels, the evening ramp-up requirement has intensified considerably. The system must now accelerate generation sharply after sunset to meet a demand spike that solar energy, by its nature, cannot address.
The rapid expansion of rooftop and behind-the-meter solar has offered some relief during daylight hours. Pakistan’s off-grid solar installations have grown significantly, cushioning pressure on the grid during peak generation hours and providing insulation from some of the volatility created by the ongoing conflict between the United States, Israel, and Iran, which has disrupted global energy markets and introduced new uncertainties into fuel supply chains. But that same solar expansion is the source of the midday trough that makes the evening ramp so steep. Solar relieves the grid by day and strains it by night, and grid managers must navigate that tension with limited flexible capacity.
The outlook for RLNG, which would ordinarily provide much of that flexible capacity, is constrained. Domestic gas-based generation, the most readily available alternative, can provide only a fraction of the dependable output that RLNG supplies, roughly one quarter by available estimates. Even running domestic gas plants at full capacity would not close the gap that RLNG currently fills. That arithmetic points toward a difficult set of trade-offs in the months ahead. Either the system dispatches higher-cost generation to meet peak evening demand, or it reverts to load shedding as a balancing tool. Neither outcome is acceptable, but the current configuration offers limited room to avoid one or the other.
Pakistan’s electricity grid is, in essence, recovering and straining simultaneously. The return of industrial demand is real and welcome. The structural costs of sustaining that recovery, however, are rising in parallel, and the fiscal and operational buffers available to absorb them are thin. Managing this moment well will require decisions that are honest about trade-offs rather than postponed in hope of conditions that may not arrive.
