Pakistan’s energy transition without markets

Fragmented regulation, shifting incentives, and institutional incoherence are shaping Pakistan’s energy transformation—not markets or the philosophy of sustainability. Pakistan’s energy transition is often portrayed as a shift toward renewables, improved efficiency, and sustainability. Yet, in reality, the country’s trajectory is dictated less by market dynamics or environmental philosophy, and more by fragmented state interventions, regulatory reversals, and competing institutional mandates. What emerges is not a coherent transition pathway, but a system where uncertainty, rather than strategy, determines outcomes. Transition paradox The result is an increasingly complex energy landscape where policy ambiguity and administrative inertia shape direction, rendering sustainability ideals more aspirational than operational. Renewable energy, in its true sense, is not merely a policy choice—it is a philosophy of protecting planetary and societal well-being. Yet, when filtered through inconsistent governance, even this philosophy loses coherence. The debate around net-billing and distributed solar illustrates this tension. What began as a policy to promote decentralized generation has become a site of regulatory ambiguity. Frequent tariff revisions, inconsistent treatment of consumers, and concerns around grid stability have created uncertainty for investors and households alike. Instead of enabling a predictable transition, policy signals have oscillated—undermining confidence in long-term planning and participation. Policy without markets Markets are not leading the transition—policy distortions are. Regulatory bodies, ministries, and distribution companies operate within overlapping and often conflicting mandates. Tariff structures remain misaligned with cost realities, circular debt persists, and incentives are frequently withdrawn without warning. Even well-intentioned initiatives struggle to deliver predictable outcomes, reinforcing a cycle of instability. Architecture and administrative bottlenecks The institutional architecture compounds these challenges. WAPDA, the Ministry of Energy, distribution companies, the Alternative Energy Development Board, the Private Power Infrastructure Board, and provincial departments overlap in responsibilities, creating fragmentation rather than coordination. Administrative inefficiencies, high overheads, outdated transmission systems, theft, and preferential access to electricity increase costs while reducing service quality. Pakistan’s electricity mix—coal, thermal, furnace oil and nuclear, alongside an emerging share of renewables—remains exposed to global fuel price volatility. Infrastructure planning often overlooks actual usage patterns and cultural realities, resulting in inefficient consumption structures. The purpose of state infrastructure should be to enhance citizens’ quality of life, not to implement reforms without evidence, coordination, or consideration of socio-economic impact. When governance fails, even well-designed reforms lose effectiveness. Distributed solar: opportunity or policy contradiction? The shift from net metering to net billing aimed to correct cross-subsidization and grid burden. Yet, the underlying question remains unresolved: is the state proactively managing the transition, or merely reacting to emerging pressures? Continued policy oscillation creates uncertainty for consumers and investors, slowing renewable adoption. Investor signal problem Policy reversals, contract uncertainty, and shifting regulatory positions send weak signals to investors. Even renewable energy—globally a driver of sustainable growth—is perceived domestically as high-risk. Inconsistent policy, rather than resource constraints, becomes the primary barrier to long-term investment and sectoral stability. Market-oriented reforms: the CTBCM Pakistan’s transition from a single-buyer model to a competitive framework through the Competitive Trading Bilateral Contract Market (CTBCM) represents a significant structural reform. Designed to introduce competition, reduce monopolies, and address circular debt, CTBCM allows bulk consumers to choose suppliers, theoretically improving efficiency and transparency. Intended outcomes included open access to transmission through an Independent System & Market Operator (ISMO), reduced reliance on public distribution companies, and competitive pricing through direct contracting. Policy frameworks such as the Alternative and Renewable Energy Policy 2019 and the National Electricity Plan 2023–2027 further reinforced this direction. Early realities, however, present a more cautious picture. Adoption remains limited, infrastructure constraints restrict market functionality, and smaller consumers see little tangible benefit. The reform, while conceptually sound, highlights a familiar gap between policy intent and implementation capacity—raising questions about what the country has substantively gained so far. Consequences for consumers and businesses The system designed to serve citizens increasingly imposes costs across all segments—though in different ways. For households, the issue is affordability and reliability. For businesses and SMEs, it is operational disruption and rising costs. For commercial and elite segments, the concern shifts toward quality and continuity of supply. Yet across all categories, inefficiency remains the common denominator. Small manufacturers lose hours of production due to voltage instability. Machinery fails, refrigeration units spoil, and offices endure repeated outages. Households pay more for less reliable service. Meanwhile, consumption patterns—such as extensive daytime cooling in high-rises and offices—reflect infrastructure and planning misaligned with actual needs. The broader economic consequences are far more serious: • Rising cost of doing business • Loss of industrial competitiveness • Weakening of the external sector • Missed trade opportunities and exclusion from global value chains Off-grid solutions are no longer innovation—they are survival mechanisms. Internet disruptions, ad hoc power allocation, and uneven service delivery reinforce systemic inefficiencies. Deeper structural issues Elite capture persists, but the deeper issue is structural: different segments experience the crisis differently, yet all contribute to an economy where energy inefficiency translates into macroeconomic vulnerability. In this context, external pressures—including IMF-driven reforms—often operate as short-term correctives rather than long-term solutions, creating a cycle that resembles policy quicksand rather than sustained economic stability. Global lessons: where policy meets market Energy transitions succeed where states design responsive and accountable regulatory architecture aligned with market dynamics. India’s transparent renewable auctions reduced costs and attracted sustained investment. Chile’s predictable regulatory framework enabled rapid solar and wind expansion. Vietnam’s feed-in tariff policy accelerated industrial and distributed solar adoption. China, perhaps most significantly, demonstrates how centralized planning aligned with market incentives can achieve scale—ensuring grid stability, cost efficiency, and rapid renewable deployment. These examples underline a critical lesson: renewable energy is not merely a policy tool, but a governance philosophy—one that requires consistency, credibility, and alignment between state intent and market response. Closing: governance as the core challenge Pakistan’s energy transformation is not merely a technical or resource issue—it is fundamentally a governance challenge. Without regulatory coherence, institutional coordination, credible policy signals, and alignment with market imperatives, even well-intentioned reforms risk fragmentation and diminished impact. The question is not whether the state or the market should lead, but whether interventions are structured, evidence-based, and oriented toward citizen welfare and economic efficiency. Until that distinction is internalized, Pakistan’s energy transition will remain uncertain—defined more by policy reversals than by measurable progress—and the philosophy of renewables will remain an aspiration rather than an achieved reality. Copyright Business Recorder, 2026

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