In August 2024, Pakistan saw a significant 17.4% reduction in electricity demand from the national grid compared to the same period last year. The total consumption fell to 13,179 gigawatt-hours (GWh), driven by increasing electricity prices, lower industrial output, and cooler temperatures after the summer heatwave.

This reduction in demand may lead to higher capacity charges in upcoming bills, further increasing electricity costs for consumers. During the first two months of the current fiscal year (July-August 2024-25), power generation dropped nearly 9%, from 30,798 GWh last year to 28,059 GWh.

A growing number of residential users are switching to affordable rooftop solar systems, reducing dependence on the expensive national grid.

Fuel Costs Decrease Due to Shift in Energy Sources

The average fuel cost for electricity generation decreased by 9.3% in August 2024 compared to the same time last year, reaching Rs7.49 per unit. This was largely due to the greater use of cheaper energy sources like nuclear, coal, and hydroelectric power, which have low or no fuel costs.

Despite this, the government continued using costly re-gasified liquefied natural gas (RLNG) for electricity generation, which could have been avoided by relying more on coal. The excess supply of RLNG in the market, due to reduced industrial demand, led the government to use it for power production, according to experts.

Consumer Shift to Solar Power

Many households and small businesses have begun adopting solar energy systems in response to the rising electricity costs, particularly after a Rs7 per unit increase in the base electricity price in July. This shift has further reduced demand for grid electricity, as consumers look for cost-effective ways to manage their energy expenses.

Decline in Industrial Demand

Industrial consumption has also fallen due to the ongoing slowdown in large-scale manufacturing (LSM) sectors. The decrease in industrial activity has contributed significantly to the overall drop in electricity consumption.

The transition to off-grid solar systems has been especially popular among businesses in the informal sector, helping them reduce dependence on the costly national grid.

Experts anticipate that electricity demand will remain low in the coming months but could recover in early 2025, when large-scale manufacturing activity is expected to pick up again.

Economic Factors and Industrial Recovery

With inflation easing into single digits in August 2024, and expected further reductions in the coming months, the central bank recently lowered its policy rate by 450 basis points, bringing it down to 17.5%. This reduction in interest rates is expected to encourage more business activity and industrial production, leading to a recovery in electricity demand around March or April 2025.

Hydropower Leads Electricity Generation

Hydroelectric power was the largest contributor to electricity generation in August 2024, producing 5,362 GWh, which accounted for nearly 41% of the total output. Other significant contributors included nuclear power (2,190 GWh or 16.5%), RLNG (2,106 GWh or 16%), and local coal (1,306 GWh or 10%).

Electricity generation from sources such as local gas, imported coal, solar, and wind made up smaller portions of the total energy mix, ranging from 0.7% to 7.2%.

Rising Fuel Costs for Some Sources

Fuel costs for some energy sources have surged despite an overall decline. Bagasse prices rose by 109% to Rs12.40 per unit, and local coal increased by 75% to Rs12.3 per unit. Nuclear fuel costs climbed 27% to Rs1.5 per unit, while RLNG rose 9% to Rs25.8 per unit. In contrast, imported coal costs dropped by 21% to Rs15.8 per unit.

Conclusion

As electricity demand falls, the shift to solar energy and industrial changes are reshaping Pakistan’s energy landscape, with consumers seeking alternative solutions amid rising costs.