Pakistan is expected to postpone three major hydropower projects with a combined generation capacity of 1,832 megawatts (MW) after rapid growth in rooftop solar installations reduced electricity demand and altered the country’s long-term power planning priorities.
According to an audit of the Private Power and Infrastructure Board (PPIB) for FY2024-25, the 700.7 MW Azad Pattan, 1,124 MW Kohala, and 8 MW Kathai II hydropower projects remain unimplemented due to financing challenges and changing electricity demand forecasts. The projects also failed to secure a place in Pakistan’s latest least-cost power expansion strategy.
The audit highlights that the Azad Pattan Hydropower Project, which received its Letter of Support (LoS) in June 2016, has yet to achieve financial close despite receiving five deadline extensions. Officials attributed much of the delay to financing constraints involving Sinosure, China’s export credit insurer, whose support is considered crucial for the project’s funding.
Although the project’s sponsor requested another extension until December 2027, the PPIB Board opted to maintain the existing status while awaiting the outcome of a joint review of the China-Pakistan Economic Corridor energy portfolio. The decision was influenced by the fact that the project was not included in the draft Indicative Generation Capacity Expansion Plan (IGCEP) 2025-2035, which identifies the country’s most cost-effective future electricity projects.
The delay reflects a broader transformation in Pakistan’s energy landscape. The rapid adoption of rooftop solar systems by households, businesses, and industries has significantly reduced reliance on grid electricity during daylight hours, prompting authorities to reassess future generation requirements. As electricity demand projections evolve, planners are increasingly prioritizing projects that align with the country’s least-cost energy strategy.
Hydropower has long been viewed as a key component of Pakistan’s renewable energy mix due to its ability to generate low-cost electricity and improve energy security. However, large-scale infrastructure projects require substantial financing, lengthy construction periods, and long-term demand certainty to remain economically viable.
Energy experts believe the review of these projects demonstrates the government’s shift toward balancing investment decisions with changing market conditions. While the hydropower schemes have not been cancelled, their implementation is expected to remain on hold until financing issues are resolved and future demand forecasts justify their inclusion in national energy planning.
The evolving energy mix, driven by rapid solar adoption and updated expansion plans, signals a new phase in Pakistan’s electricity sector as policymakers seek to ensure reliable and cost-effective power generation for the years ahead.
