ISLAMABAD: The World Bank’s lending arm, the International Bank for Reconstruction and Development (IBRD), has approved a $378.9 million loan to support a major overhaul of Pakistan’s power transmission system, aimed at strengthening grid stability, improving energy security, and enabling large-scale integration of renewable energy.
The project focuses on upgrading critical transmission infrastructure, particularly through the installation of reactive power management devices. These systems are essential for stabilising the grid and facilitating the smooth evacuation of electricity from variable renewable energy sources such as wind and solar.
The initiative will be implemented by the National Transmission and Despatch Company (NTDC) and includes technical assistance to support institutional reforms in the transmission sector. The project will also receive co-financing of $92.5 million from the Asian Infrastructure Investment Bank (AIIB) and $92.7 million from the Islamic Development Bank (IsDB), bringing total expected financing to $698.75 million. The World Bank is scheduled to formally approve the full financing package in mid-March 2026.
According to a World Bank document, the project’s core objectives include enhancing grid reliability, removing transmission bottlenecks, supporting sector reforms, and enabling large-scale deployment of renewable energy. The first phase will prioritise the installation of reactive power compensation devices, which are critical for integrating Variable Renewable Energy (VRE) and addressing persistent grid reliability challenges.
AIIB’s financing will support co-financing arrangements for reactive power devices, while IsDB’s contribution will cover separate procurement packages during the initial phase of implementation.
Planned to run from 2026 to 2035, the project will follow two parallel tracks: major infrastructure upgrades — including the development of a 500kV transmission corridor — and institutional reforms aimed at strengthening governance and supporting the unbundling of the transmission sector.
Pakistan’s installed power generation capacity has more than doubled since 2010, reaching 46,221MW in 2024, with peak demand projected to rise to 37,224MW by 2034. The country has committed to increasing the share of renewable energy in its power mix to 60 per cent by 2030. However, transmission constraints, particularly along the south-central-north corridors, continue to limit the reliable delivery of electricity despite surplus generation capacity.
These bottlenecks have resulted in financial losses and the underutilisation of renewable resources, including the curtailment of wind power in the Jhimpir–Gharo corridor. The Transmission System Expansion Plan (TSEP) 2024–2034 estimates that delays in ongoing projects have created an additional investment requirement of $5.6 billion.
Transmission constraints have also increased reliance on expensive LNG-based power generation, driving up electricity tariffs. Data from the National Electric Power Regulatory Authority (Nepra) shows that average generation costs reached 12.76 cents per kilowatt-hour in July 2024, well above regional benchmarks.
The World Bank-backed project is expected to play a pivotal role in addressing these challenges. Its performance will be assessed through indicators such as additional renewable energy capacity enabled, improvements in seasonal transmission transfer limits, and enhanced grid stability. By modernising Pakistan’s transmission network, the initiative aims to reduce dependence on costly thermal generation and accelerate the country’s transition towards clean, affordable, and reliable energy.
Story by Amin Ahmed
