Imported coal offsets sharp decline in LNG-based electricity generation as demand remains subdued
KARACHI: Pakistan’s power generation increased 1.2% year-on-year (YoY) to 128,699 gigawatt-hours (GWh) in fiscal year 2025-26 (FY26), as higher output from imported coal-fired plants helped offset a steep decline in electricity generated from liquefied natural gas (LNG), according to the latest power sector data.
Despite the annual increase, electricity generation remained broadly unchanged from recent years, reflecting subdued demand. Annual generation has hovered around 128,000 GWh over the past four fiscal years after reaching a peak of 145,094 GWh in FY22.
LNG shortages reshape power generation mix
Pakistan’s electricity generation mix shifted noticeably during FY26 as reduced LNG imports, driven by geopolitical disruptions and supply constraints, limited fuel availability for gas-fired power plants.
Generation from re-gasified liquefied natural gas (RLNG) plants dropped 22.9% YoY to 17,130 GWh, reflecting fewer LNG cargo arrivals during the fiscal year.
The shortfall was largely compensated by greater reliance on imported coal.
Electricity generation from imported coal-fired plants jumped 51.8% YoY to 15,794 GWh, supported by higher utilisation of major facilities, including the Sahiwal Coal Power Plant, China Power Hub Generation Company (CPHGC) and Lucky Electric Power Company Limited (LCPCL).
Hydropower remained the largest source of electricity, contributing 39,487 GWh during FY26 despite lower water inflows toward the end of the fiscal year.
Electricity demand remains weak
The modest increase in Pakistan power generation FY26 reflects continued weakness in electricity demand despite improving macroeconomic conditions.
Analysts attributed the sluggish growth to government austerity measures, expanding rooftop solar installations, and periodic load shedding linked to fuel supply constraints.
Demand also remained subdued despite lower electricity tariffs for industrial users, incentive packages for industrial and agricultural consumers, and a 5.8% YoY increase in Large-Scale Manufacturing (LSM) during the first 11 months of FY26.
Higher fuel costs lift generation expenses
Greater reliance on imported fuels increased electricity generation costs during the fiscal year.
In June 2026, the adjusted fuel cost reached Rs8.91 per kilowatt-hour (kWh), exceeding the reference cost of Rs7.71/kWh. As a result, power distribution companies (DISCOs) sought a positive Fuel Cost Adjustment (FCA) of Rs1.20/kWh.
The higher generation cost reflected a reduced share of hydropower and indigenous coal generation, alongside increased use of furnace oil and high-speed diesel plants as international oil prices remained elevated.
Outlook
Analysts expect Pakistan’s electricity demand to remain modest in the near term despite signs of economic recovery.
The National Electric Power Regulatory Authority (NEPRA) projects electricity demand growth of around 1% during calendar year 2026, suggesting stronger economic activity, improved industrial consumption and more reliable fuel supplies will be essential for accelerating power generation in the coming years.