KARACHI: A country's energy mix — the recipe of fuels and technologies it uses to make electricity, move vehicles and run factories — sounds like engineering trivia until you notice how much of Pakistan's economy it explains. It determines the import bill that drives the current account, the generation cost that electricity tariffs must recover, the circular debt that burdens the budget, and the input costs of every cement, textile and fertiliser plant on the stock exchange. Pakistan's mix has been rebuilt several times in living memory: an era of cheap domestic gas and hydro, a furnace-oil era of expensive emergency power, a coal and imported-gas era built under Chinese-financed projects, and now the beginnings of a solar era arriving from rooftops up rather than power stations down. This guide explains each source, what it costs and why it was chosen, and how the mix is likely to keep evolving. It states no current generation shares or prices as fact — the mix shifts seasonally and yearly; NEPRA's state-of-industry reports and the Pakistan Energy Yearbook are the official sources to check.
Two mixes, not one: electricity and total energy
First, a distinction that prevents most confusion. The electricity mix describes what generates power: gas, coal, hydro, nuclear, oil, wind, solar and bagasse, measured in units generated. The primary energy mix is bigger: it includes all the natural gas burned directly in homes, fertiliser plants and CNG stations, the petrol and diesel burned in vehicles, coal used by cement kilns and brick makers, LPG, and firewood and biomass still used by many households. Natural gas and oil dominate the primary picture, which is why Pakistan's import dependence is fundamentally an oil and gas story even where electricity headlines focus on power stations. When officials quote a source's share, always ask: share of electricity, or share of all energy? The answers differ greatly, and each matters for a different question — tariffs follow the electricity mix, the trade deficit follows the primary one.
Second, capacity is not generation. A solar plant's installed megawatts produce power only when the sun shines; a hydro plant's output swings with river flows and dam releases for irrigation; a gas plant may sit idle when fuel is short. Pakistan's installed capacity has at times comfortably exceeded peak demand — the surplus behind the capacity-payment burden in circular debt explained — while actual generation from the cheapest sources was constrained by fuel and water. Judge any plant or technology by units actually generated and the cost per unit, not by nameplate megawatts in a press release.
The incumbents: gas, hydro and oil
Natural gas built modern Pakistan's energy system. Domestic fields, developed from the 1950s onwards, supplied power stations, fertiliser feedstock, industry, CNG for vehicles and piped cooking gas at prices held low by policy — so low that demand was encouraged far beyond what fields could sustain, and residential and low-value uses were connected on a vast scale. As mature fields declined and new discoveries lagged consumption, shortages appeared: gas load-shedding, fertiliser plant shutdowns and power stations without fuel. The response, from the mid-2010s, was to import liquefied natural gas, re-gasified at terminals near Karachi and sold as RLNG — reliable and cleaner than oil, but priced in dollars on international markets and therefore a direct, permanent addition to the import bill and a transmitter of global price shocks into Pakistani tariffs, exactly the channel the rupee explained describes. Gas allocation — who gets scarce domestic gas, power, fertiliser, industry or homes — remains one of the state's most consequential and contested economic decisions, revisited in our fertiliser and subsidy guides.
Hydropower is Pakistan's cheapest established source once a dam exists: no fuel, very low running costs, and reservoirs that also store irrigation water and moderate floods. The great Indus cascade — Tarbela and Mangla as the historic anchors, with a pipeline of large projects including Diamer-Basha under construction and Dasu in stages — gives hydro a large seasonal swing: abundant in summer melt and monsoon, scarce in winter when heating demand rises and rivers run low. Hydro's economics are dominated by upfront cost and time: dams take a decade, attract financing and resettlement controversies, and then produce for generations at costs that make later tariff-payers grateful. In merit-order terms — the ranking by which the system operator dispatches the cheapest available generation first — hydro sits near the front whenever water is available.
Oil, mainly furnace oil and high-speed diesel in generation, is the mix's expensive past. Oil-fired plants, including the big independent power producers contracted in the 1990s and the emergency rental and fast-track plants of the shortage years, could be built quickly and run on imported fuel delivered by ship — at generation costs that soared with every oil price rise and rupee fall, and that taught Pakistan the phrase "expensive electricity" the hard way. Policy has pushed oil generation steadily down the merit order towards a residual, backup role; its share of generation has fallen greatly from its peak, and the plants' story is now mostly about capacity contracts and receivables, told in how Hubco makes money. In total energy, though, oil remains king of the road: transport runs on petrol and diesel, and that import bill is the larger, quieter half of oil dependence.
The 2010s build-out: coal, nuclear and renewables join at scale
The China–Pakistan Economic Corridor energy programme of the mid-2010s rebuilt the supply side around three additions. Coal arrived in two forms: imported-coal plants on the coast, burning fuel shipped from abroad and priced in dollars, and mine-mouth plants at Thar, where vast lignite reserves in Sindh — long known, long undeveloped — finally began feeding power stations built beside the mines. Thar coal's strategic appeal is that its fuel is domestic and its cost does not ride global shipping markets; its challenges are water use in a desert, lignite's lower energy content, and the environmental cost of coal anywhere on earth. Nuclear expanded quietly with additional units at Karachi and Chashma built with Chinese partnership, adding large blocks of steady, fuel-cheap generation whose uranium costs are small and stockpilable — nuclear's share of the mix is meaningful and its running cost among the lowest, balanced by the capital intensity and the specialised safety and regulatory regime the Pakistan Nuclear Regulatory Authority oversees.
Wind and utility solar entered at commercial scale in the same decade — wind corridors in Sindh's Jhimpir and Gharo belts, solar parks in Punjab — under feed-in and auction tariffs that fell over time as global panel and turbine prices collapsed. Bagasse cogeneration at sugar mills added seasonal renewable generation tied to the crushing calendar described in our sugar sector guide. The deeper energy transition story, however, arrived unplanned: rooftop solar. As tariffs rose and panels cheapened, households, farms — solar tube wells — and factories installed distributed solar at a pace official planners had not forecast, cutting grid demand in daylight hours, reshaping the load curve the system must serve, and creating a new policy debate about net metering terms and the fixed costs of a grid whose volumetric sales are shrinking. For the primary mix, meanwhile, LPG grew as piped gas shrank, and electric vehicles remain a small but watched wedge in transport demand.
What decides the mix: cost per unit, currency and contracts
Three forces actually determine what Pakistan runs on, and none of them is a slogan. The first is the merit order and marginal cost: at any hour, the system should run the cheapest available fuel first — hydro and nuclear and renewables at the front, domestic gas and Thar coal in the middle ranks, imported coal and RLNG after, oil last. The second is contract structure: most large plants were built under long-term power purchase agreements with capacity payments owed regardless of dispatch, many denominated in or indexed to dollars, so yesterday's procurement choices lock in today's bills even when a cheaper technology appears — the core inheritance inside circular debt. The third is fuel logistics: RLNG depends on terminals, pipelines and a global spot market; imported coal on ports and shipping; Thar coal on mine expansion and transmission lines out of the desert; hydro on dams and river politics. A mix is a supply chain, and Pakistan's has repeatedly been surprised by its weakest link.
Work an illustrative comparison — invented round numbers showing mechanism, not current tariffs. Imagine one unit of electricity from each source with total costs, fuel plus capacity spread over output, of roughly: hydro Rs 3, nuclear Rs 8, solar (utility, daytime) Rs 9, Thar coal Rs 12, domestic gas Rs 10 at administered prices but scarce, RLNG Rs 22, imported coal Rs 18, furnace oil Rs 35. The exact numbers move constantly with fuel prices and the exchange rate — check NEPRA determinations for real figures — but the ladder's shape explains policy: every unit shifted from the top of the ladder to the bottom cuts the average generation cost that tariffs must recover, and every dollar-priced input raises the whole ladder when the rupee falls. It also explains the political economy: households were promised gas-era prices while the system slid towards oil- and RLNG-era costs, and the difference accumulated as debt.
Seasonality deserves its own warning for anyone learning to read energy data. The mix in a summer month — hydro at full flow, solar long, demand at its air-conditioning peak — looks nothing like the mix in a winter month, when rivers shrink, fog cuts solar output in the plains, gas is diverted to household heating and demand for electricity falls while demand for gas peaks. Annual shares smooth these swings into a single calm-looking pie chart. Companies' results follow the seasons, not the pie chart: a generator's quarterly earnings, a gas utility's unaccounted-for losses and a fertiliser plant's shutdowns all make sense only against the month they occurred in. Compare like season with like season, year on year, before concluding that any energy trend has changed.
Where the mix is heading — and what investors should watch
Official planning — through the indicative generation capacity expansion plans published under NEPRA's framework and successive government policies — points in a consistent direction: more hydro as mega-projects complete, a rising share of solar and wind procured increasingly through competitive auctions rather than negotiated tariffs, nuclear steady, coal capped at Thar's expansion, RLNG as a balancing fuel whose share flexes with price, and oil fading to emergency use. Electrification of transport and industry would grow the electricity system itself relative to direct fuel use. The distributed solar surge adds a wild card: the grid of the future may generate a large minority of daytime energy on rooftops the utility does not own, and tariff design — how fixed network costs are recovered from customers who buy fewer units — becomes the central regulatory puzzle, as it already has in many countries.
For PSX investors, the mix is a cost map of the real economy. Gas allocation decisions move fertiliser margins, as PSX fertilizer stocks explains; RLNG and oil prices move generation and oil-marketing earnings; hydro flows move the earnings of hydro-exposed generators and the national generation cost each summer; solar adoption moves demand for grid electricity, for panels and inverters distributed by listed firms, and for the alternative of captive generation in textiles and cement. The exploration and production companies in PSX exploration and production stocks sit upstream of the gas portion of the whole story. Reading a company's results against the season's mix — a wet summer, an RLNG price spike, a Thar unit outage — turns confusing profit swings into arithmetic.
The long-run stakes are national. Every percentage point of the mix sourced from imported fuel is a standing order for dollars that must be earned by the exports in Pakistan's exports explained; every point sourced from sun, rivers and domestic mines is a small permanent reduction in external vulnerability. Energy transitions elsewhere are discussed as climate policy; in Pakistan the same shift is also, unavoidably, balance-of-payments policy.
This article is educational content, not financial advice. Generation shares, fuel prices and tariffs change with seasons and policy; verify current data with NEPRA, the Pakistan Energy Yearbook and the Economic Survey before relying on any figure.
Key takeaway: Pakistan's energy mix has moved from cheap domestic gas and hydro through an expensive oil era to coal, RLNG and nuclear — and now towards hydro and solar — with each shift rewriting the import bill, the tariff and the cost base of every listed company.
