ublic-private partnerships are one of the key strategies to bolstering Pakistan’s energy sector.
To make energy infrastructure sustainable and cut the public sector burden, Pakistan will be relying on private sector investment and expertise. Pakistan was amongst the pioneering nations in the early 1990s to introduce PPP investments in the energy sector with the landmark Hub Power project.
These projects were supported by the World Bank and attracted $5 billion investment, adding around 4,500 megawatts to the national grid. The rapid growth of PPPs in the energy sector opened the door for future collaborations to deal with energy shortages in the country.
According to the World Bank Public Private Partnership Monitor, Pakistan reached financial close in 108 PPP projects between 1990 and 2019 with a total investment of $28.4 billion. The massive influx of private capital was crucial in laying out the energy infrastructure.
In October 2024, the government prematurely ended power purchase agreements with some of the major private utilities to save nearly Rs 60 billion annually. However, this raised concerns that the ‘prudent’ fiscal maneuver could make Pakistan less attractive to future investors.
Public-private partnership investment provided a much needed boost to power production in the 1990s. However, it also caused larger ecological footprints and was biased towards non-renewable resources of energy. This highlights the need for technological integration and development in a PPP approach to renewable energy projects for long term environmental sustainability.
Transition to renewable energy is the latest trend. There is an opportunity for Pakistan to build alternative PPP strategies and redefine its energy sector. It is important to tackle the way architecture embeds renewable energy projects. Public-private partnerships are essential in order to guarantee access to affordable energy and the viable deployment of a net-zero energy value chain, for all. Suggested strategies for exploiting PPPs include the following:
Stability and Transparency: The government is eager to redefine policies to benefit the people but the primary focus should be on uniformity, transparency and clarity to keep private investors on board. For investor confidence assurance, there is a need for guarantees that contracts will be honoured are and that the regulatory framework is fair and robust.
Incentives: Tax credits, subsidies and lower tariffs for private entities can motivate the investment of sustainable energy solutions. Measures to attract private investor will be a contributing factor in making economic growth with the environment. Private developers can also be rewarded for staying operationally efficient.
Public-private partnership investment has provided a much needed boost to power production. However, it has also caused larger ecological footprints and been biased towards non-renewable resources of energy.
Regulation: Strong laws and regulations that protect both public and private party interests are indispensable in this context. This involves transparent grievance redress mechanisms and international best practices.
Innovative financing: Innovative financing schemes can unleash the potential of green financing instruments. Green bonds, climate funds and blended financing models can unlock new possibilities for PPPs. Nudging financial institutions to design project-specific funding arrangements and mobilising international climate financing institutions such as the Green Climate Fund can provide long-term capital with environmental protection. This can lighten the government’s borrowing burden and reduces the private sector investment risk.
Digitalisation: The energy infrastructure must advance beyond conventional generation and transmission. Pakistan needs to promote PPPs that incorporate digital solutions like smart meters, AI-based energy demand forecasting and real-time grid monitoring.
These technologies enable enhanced efficiency, minimise losses and energy supply to correct location at the right time. Partnerships with technology firms, research organisations and energy startups can provide innovative solutions for urban power load management and rural electrification.
Job creation: In addition to infrastructure, PPP investments can be used to encourage industrial growth and employment. Collaborative ventures among foreign energy companies and domestic manufacturers for solar panel manufacturing or wind turbines can develop local capabilities. Thousands of jobs in engineering, construction, operation and maintenance areas can be created with effective skill development programmes.
Local hiring: PPP projects must have provision for local employment; training schemes and utilisation of locally sourced materials. This will create a multiplier effect to enhance energy supply as well as development of human capital and local economy.
Global Climate Goals: Aligning PPP plans with Pakistan’s obligations under international treaties such as the Paris Climate Accord can ensure long-term applicability and access to global assistance. Pakistan has pledged to increase the share of renewable in its energy mix to 60 percent by 2030. The PPP have to be designed with that goal in view. Third party sustainability audits can enhance credibility.
Public-private partnerships can have a significant impact and revitalise Pakistan’s energy sector. Strategic collaborative efforts can pave the way for a sustainable energy landscape.
The writer is an independent PPP projects consultant. He can be reached at: waseemalitipu@gmail.com.
