PAKISTAN`S energy discourse remains largely supply-centric.

Successive governments have equated progress with adding megawatts to the grid, whether through imported coal and LNG or solar and wind. Yet this narrow focus overlooks a deeper structural reality: the global energy transition is not only about how electricity is produced but also about how it is consumed.

Behind Pakistan`s relentless capacity expansion lies a hidden crisis. The power sector`s challenge is not a lack of generation but ineffective demand management.

Installed capacity now exceeds 46,000 megawatts, yet peak demand rarely crosses 30,000MW, and off-peak demand falls below 8,000MW. Annual capacity utilisation remains stuck around 34 per cent, while capacity payments to idle plants reached Rs1.9 trillion this year alone, feeding a circular debt that has crossed Rs2.6tr.

Despite having a generation fleet large enough to ensure reliability, millions continue to face unannounced load shedding, not due to generation shortfalls, but because of policy and infrastructure failures. An unmet demand of up to 5,000MW or more persists due to revenue-based load shedding in high-loss areas, a strategy increasingly used by distribution companies to manage financial losses on paper rather than reducing them structurally. This penalises even bill-paying consumers in those regions. Simultaneously, ageing transmission and distribution networks constrain power evacuation and system reliability, further suppressing demand and deepening public disillusionment.

Due to sluggish economic growth, the expected increase in electricity demand has not materialised. The gap between peak summer and winter demand continues to widen, exposing structural weaknesses in demand planning and sector management. These inefficiencies, rooted in decades of poor governance and policy inertia, are embedded in the price of electricity, eating into household incomes, fuelling inflation, and undermining the competitiveness of export-orientated businesses.

Policy responses have so far focused narrowly on reducing generation costs by shifting from imported to local fuels and by negotiating contracts with some independent power plants. While necessary, these efforts alone will not address the underlying crisis. Pakistan needs a productive electrification strategy that views electricity not merely as a fiscal burden but as an economic enabler. This paradox is not unique to Pakistan.

Globally, two overlapping but distinct contests are shaping the energy transition. The first is the `renewables race`, thecompetition to replace fossil fuels with solar and wind. Here, Pakistan has made some headway, with renewable energy comprising 12.5pc of installed capacity and solar imports ranking among the highest globally.

The second, less visible yet equally transformative, is the electrification race, the shift in how energy is consumed. It is a structural reordering where electrons replace fossil molecules in final demand.

Electric vehicles, induction cooking, heat pumps, and electrified industrial processes are defining this global shift. But in Pakistan, electrification beyond lighting and cooling remains conspicuously absent from policy debates. While policymaking institutions often acknowledge its importance, there has been little serious effort to translate these discussions into actionable strategies.

The Economic Survey 2024-25 reveals that households consume nearly 50pc of electricity, while industrial consumption remains stagnant at 26.3pc, agriculture at 5.7pc, and commercial use at 8.6pc. Mostresidential use goes into inefficient fans, lights, and air conditioning, with little productive output.

This underutilisation is economically disastrous. Surplus generation should be a growth enabler, not afiscal burden. Pakistan urgently needs a demand-driven energy strategy anchored in electrification. Four strategic priorities can catalyse this shift.

First, accelerating industrial electrification; globally, clean, low-cost electricity inputs underpin manufacturing competitiveness, but in Pakistan, it`s the other way round. Encouraging industrial consumers to transition from captive generation to grid electricity can unlock latent demand, lower per-unit costs, and optimise existing generation assets. However, achieving this shift will require not just the marginal cost-based pricing through market-orientated reforms to make grid electricity a competitively viable option for industries, but also investment in grid upgrades andexpansion.

Second, electrifying transport systematically; while an electric vehicle policy exists, its implementation remains limited.

Electric motorcycles, which dominate urban mobility, can significantly reduce petrol consumption and urban air pollution while also utilising surplus grid power.

Financing schemes and accessible charging infrastructure are needed to mainstream adoption and reduce reliance on imported fuels.

Third, shifting household energy use from gas to electricity; with domestic gas reserves depleting and imported LNG prices remaining volatile, Pakistan must promote electric cooking, water heating, and efficient cooling. Incentivising induction stoves and heat pump technologies can reduce household energy costs and ease pressure on the gas grid, but this requires a holistic implementation plan with clear targets and timelines to ensure meaningful uptake.

Fourth, attracting data centres as new high-load consumers, but only by offering competitive tariffs and reliable power supply.

This can absorb surplus generation, stimulate digital infrastructure growth, and position Pakistan as a regional technology hub.

Crucially, this must be underpinned by institutional reform. While the Indicative Generation Capacity Expansion Plan continues to forecast generation additions without integrating demand-side targets, Pakistan urgently needs a comprehensive and integrated energy plan that aligns supply investments with productive demand growth, economic development, and climate goals.

Subsidy structures must also be reformed. Protecting over half of residential users through cross-subsidies from other sectors undermines competitiveness and deters investment. Targeting subsidies based on vulnerability rather than blanket slabs can balance social protection with industrial growth.

Ultimately, the future is electrification.

Pakistan`s current approach builds capacity without creating purpose, generation without utilisation, and subsidies without productivity; an economically unsustainable trajectory. Only comprehensive measures can align the power sector with economic growth and national resilience.

Otherwise, Pakistan risks remaining trapped in an outdated model: rising debts, idle plants, expensive electricity, and missed opportunities.

Afia Malik is a senior research economist at PIDE, Islamabad, and Shafgat Hussain Memon is an academic researcher in energy based in Jamshoro.