In Pakistan’s power sector, there has been overinvestment in baseload power plants, while matching investment in transmission and distribution networks has lagged. This mismatch hinders the integration of renewables into the system, as they require a robust and dynamic grid infrastructure.
Cognizant of this fact, multi-laterals like The World Bank, Asian Development Bank, and Islamic Development Bank have reportedly pledged about$1 billion for critical power infrastructure. This includes high-voltage transmission lines which will probably address the grid-level bottlenecks preventing electricity from being effectively channeled from the generation centers to the supply hubs
These organizations continue to encourage private sector participation to amplify their impact, likely because private sector players can deploy capital with greater flexibility and agility.
A recent example of effective private sector involvement is the quick turnaround by K-Electric with its 500 kV KKI grid completion. The groundbreaking was done in December 2022, and the first electrons were transmitted from the national grid during the inaugural test recently.
The project was completed through collaboration among lenders, investors, technicians, and government stakeholders. More importantly, it demonstrates how privatization can drive progress. The grid is part of a larger $2 billion investment plan by K-Electric to expand transmission and distribution infrastructure by 2030, aimed at improving service for its customers. Meanwhile, NTDC has submitted its own $8 billion transmission system expansion plan to NEPRA for approval. Once approvals are in place, the focus will shift to finding the right partners to execute these projects on time.
Recall that last month, the same private company also received the bid for the country’s lowest solar tariff for its renewable projects, that too from a major international player in the green energy space. These milestones are very encouraging and necessary for the longevity of the power sector.
Building momentum that encourages further investment under stable and predictable conditions is crucial. Investors are more likely to take risks when they have policy clarity about the future. This was evident in how ongoing discussions and negotiations with IPPs influenced the bidding process for renewable projects.
Long-term planning, clarity, and consensus are essential not only for addressing current challenges but also for paving the way to a sustainable future.
The good news is that KE recently received approval from NEPRA on its generation tariff petition submitted in 2022. Approval of the remaining components of the multi-year tariff is anticipated soon, which would further boost the company’s investments across all fronts.
Achieving these milestones can trigger a positive feedback loop, attracting more investment from other players. The government appears committed to bringing lasting positive reforms, and the focus now is on creating an enabling environment for these critical investments to bear fruit quickly.