There are moments in economic history when numbers stop being just data and start acting like a warning sign. K-Electric’s (KE) fuel mix is one such case.
As the Middle East conflict moves into its second month, K-Electric emerges as the most exposed fault line in Pakistan’s fragile energy architecture. The reason: the city is positioned on the frontline of the conflict, with its energy backbone tightly tied to imported molecules priced in someone else’s war.
“K-Electric, which supplies power to Pakistan’s largest city and economic hub, relies heavily on factors outside its control in two key ways,” contends the Sustainable Development Policy Institute’s (SDPI) Dr Khalid Waleed.
“First, it produces only about a third — 36 per cent to be precise — of the electricity it needs, while more than half comes from the national grid. Although connections with the grid have been expanded in recent years to import over 2,000 megawatts from the national grid as part of their cost-minimisation strategy, this has created a new risk: a large share of Karachi’s electricity now depends on infrastructure and decisions that K-Electric does not control,” he says.
While the rest of the country has developed a far more diverse energy mix and continues to diversify further, Karachi remains heavily dependent on thermal generation
This arrangement may be cheaper, but it is not always reliable. Official data shows that in the last fiscal year alone, 2.8 billion units of electricity worth Rs80bn could not be delivered across the country due to transmission issues.
“Second, K-Electric’s own power generation is heavily dependent on a single fuel. Nearly 90pc of the electricity it produced last year came from RLNG, an imported fuel that is among the most expensive in the country. Karachi’s dependence on this fuel is especially acute: electricity prices in the city are not just reliant on imported fuel, but effectively indexed to it. So, when imported gas prices rise, electricity in Karachi becomes more expensive almost immediately.”
Because RLNG is costly, K-Electric prefers to use cheaper electricity from the national grid whenever it is available. In fact, grid electricity is used first, while its own RLNG-based plants are pushed lower in priority, and oil-based plants are used only as a last resort.
“As of 19 March 2026, after two must-run solar plants of 50 MW capacity each, the national grid drawal is ranked first in K-Electric’s merit order to minimise costs. But there is a downside: the cheapest electricity comes from sources K-Electric does not control. In simple terms, while the company saves money by depending on the grid, it also becomes more vulnerable when that supply is disrupted.”
With the ongoing US-Israel war on Iran and the closure of the Strait of Hormuz for weeks, Pakistan faces an immediate and serious risk to its energy supplies; one of the biggest concerns is electricity.
“Karachi’s power system depends heavily on imported RLNG, which arrives by sea through the same route that is now disrupted. About 57pc of the city’s electricity comes from the national grid, and a large part of that grid also runs on RLNG. This means that when LNG imports are interrupted, both Karachi’s own supply and the electricity it receives from the rest of the country are hit at the same time,” says Dr Waleed.
In response, K-Electric would try to generate more electricity from its own plants. However, most of these plants also rely on RLNG. In simple terms, the backup plan runs on the same fuel that is at risk. That makes the entire system fragile, with very limited room to cope if the disruption continues.
The second pressure is rising costs. “RLNG directly links global price changes to electricity tariffs. When LNG prices go up internationally, K-Electric’s cost of generating power rises almost immediately. This increase is passed through to consumers, or absorbed by the government through subsidies, which are already expected to reach around Rs125bn next year,” he argues.
The third impact is on public finances. In Karachi, electricity prices cannot always be raised enough to fully recover these higher costs due to political and economic constraints. As a result, the gap builds up elsewhere in the form of circular debt and delayed payments.
There is also a structural divergence emerging. Haris Sohail, an energy economist at the Policy Research Institute for Equitable Development, explains, “While the rest of the country has developed a far more diverse energy mix and continues to diversify further by integrating renewables, Karachi remains heavily dependent on thermal generation. As a result, generation costs in K-Electric’s system are over twice as much as the national grid, and this continued dependence makes Karachi much more vulnerable to the Iran war shock.”
The adoption of rooftop solar in Karachi does not reflect the trend observed in the rest of the country, owing to the city’s high-rise living patterns, Mr Sohail says. Utility-scale solar projects also faced setbacks: Even though the bidding for a 220 MW solar-wind hybrid project by KE attracted the country’s lowest tariff bid at 8.9 rupees per unit, the project remains stalled because of concerns related to the project’s costing parameters.
The short-term remedy, he argues, is to ensure that the utility keeps getting access to the relatively cheaper electricity from the national grid so that the country’s economic hub does not face disruption. “The medium- and long-term solutions concern implementing concrete steps for the integration of renewables into K-Electric’s energy mix. First, the solar projects, which were procured at record-low costs and are currently facing delays, must be expedited.
“Second, the wind power plants in Jhimpir and Gharo should be integrated into the utility’s system. This would ensure Karachi receives electricity that is both cheaper and cleaner than RLNG-based generation.”
Dr Waleed warns that K-Electric is not just a power distributor but a fully integrated utility serving Pakistan’s main economic hub. This means any rise in its costs quickly feeds into industry, exports and tariffs. He concluded that the response must go beyond financial measures and focus on physical change, especially faster investment in solar and wind.
The target of 30pc renewables by 2030, he notes, is now about energy security, not just climate policy. “A key gap is storage. Solar can reduce daytime fuel use, but without batteries it cannot replace expensive RLNG power. With storage, it can also meet evening demand more cheaply.” The key question is whether this change happens before the next energy crisis hits.
A KE spokesperson confirmed that the findings regarding the company’s reliance on RLNG to meet rising summer demand were accurate. However, he noted that a media report indicated the government was considering diverting 100 million Cubic Feet per Day of local gas to the utility as a replacement for RLNG to help address higher summer demand.
When asked how the company would handle potential prolonged outages if local gas was not provided and supply from the national grid dropped significantly below the 2,000 MW allocated to Karachi — due to system constraints and reduced RLNG-based generation — he said he would need to consult the leadership before responding.
Published in Dawn, The Business and Finance Weekly, April 6th, 2026