I'm guessing: fewer people buying from the power companies/grid => the fixed costs of these companies are pushed onto the poorer customers, who already couldn't afford much.

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abdullahkhalids 3 hours ago | parent | next [-]

This is correct.

But there is a bit more. Almost all power plants in Pakistan are built with state-backed dollar-denominated loans (reason govt incompetence+corruption). This means if grid demand goes down, power plants don't go out of business like they would in a market based system. Instead, they keep collecting dollar-denominated interest paid by the state, even if they produce zero power.

The state mitigates this by increasing electricity prices (in rupees). I have forgotten how this helps.

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elzbardico 2 hours ago | parent | next [-]

The reason power plants in Pakistan probably require this kind of financing is because Pakistan doesn't have the industrial capability to make the equipment that you need to build a power plant, so, dollars are a requirement.

Power companies in Pakistan also don't have easy access to international money markets, and thus, it makes sense for the government to back those strong currency loans as a subsidy on infrastructure.

This is not exclusive to Pakistan, this is the routine of infrastructure financing on developing countries. J.P. Morgan is not really eager to lend money for PakiPower Incorporated, but it is willing to lend to the government.

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toomuchtodo 2 hours ago | parent | prev | next [-]

It is unfortunate that the government of Pakistan and their investors (China and the IMF) made poor investment decisions. They should feel free to go back to debt holders to renegotiate the debt, or default on it and hand the stranded assets back to creditors. The death spiral is of their own making, and will only accelerate as solar PV and battery cost declines continue. Electricity consumers will simply go off the grid. Such is the risk of unsophisticated investors not understanding the market in which they invest. Capital being at risk is an inherent component of investment.

My condolences and sympathy to the people of Pakistan caught in the mess. The global energy transition will be volatile.

Solar electricity every hour of every day is here and it changes everything - https://ember-energy.org/latest-insights/solar-electricity-e... - June 21st, 2025

Stranded fossil-fuel assets translate to major losses for investors in advanced economies - https://www.nature.com/articles/s41558-022-01356-y | https://doi.org/10.1038/s41558-022-01356-y - May 26th, 2022

Rethinking Energy -- 100% Solar, Wind and Batteries Is Just The Beginning - https://www.youtube.com/watch?v=PM2RxWtF4Ds - January 2021

Who owns the distressed fossil generation collateralized debt? China. Where is Pakistan importing cleantech from? China. There is some IMF debt in there as well, for accuracy.

How Chinese loans trapped Pakistan's economy - https://www.dw.com/en/how-chinese-loans-trapped-pakistans-ec... - August 2nd, 2024

Emeber Energy: China Cleantech Exports Data Explorer - https://ember-energy.org/data/china-cleantech-exports-data-e... (updated monthly)

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jstanley 2 hours ago | parent | prev [-]

So the power plants lend dollars to the state so that they can pay to build the power plant?

Or else I don't see how the power plants are collecting the interest?

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abdullahkhalids 2 hours ago | parent [-]

Usually there are three parties in these agreements.

1. State of Pakistan

2. Someone with dollars (the investors)

3. Local businessman who are willing run the power plant.

The three parties come to an agreement on what the minimum returns should be on the investment. Say 10% annual. Then the investors give money to the businessman, who then import the power plant equipment and start operating it. The state-run electricity distribution companies buys from the power plant as needed and pays them the unit price set by the State of Pakistan. Part of this is converted into dollars at some pre-agreed rate and transferred to the investors.

In all this, if the total returns to the investor are above 10%, then all is good. However, if the grid demand has fallen, and the distribution company didn't buy a lot of units from the power plant, then the State of Pakistan has to step in and give the investors the difference to make up the 10% returns.

Yes, it is an insane system.

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bofadeez 38 minutes ago | parent [-]

State capitalism like you described totally undermines the price system by replacing profit-and-loss–guided entrepreneurial calculation with political allocation of resources, thereby rendering economic calculation increasingly impossible and eroding the coordinating function of the market process.

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kragen 32 minutes ago | parent [-]

Yes, but nobody has found a more effective way to build infrastructure in poor countries. State capitalism as described is how infrastructure development happened in Indonesia, Malaysia, Taiwan, Hong Kong, Korea, Japan, Vietnam, Thailand, etc.

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bofadeez 26 minutes ago | parent [-]

The fact that infrastructure was built under state capitalism does not demonstrate the superiority of central planning, only that capital accumulation occurred despite intervention, often financed by prior scarcity, foreign savings, or coerced transfers; absent market prices and entrepreneurial profit-and-loss, the state cannot know whether the infrastructure created was the most value-productive use of scarce resources, only that concrete and steel were poured.

	▲	kragen 19 minutes ago \| parent [-]
		I think it demonstrates the increased variance of central planning. The Congo Free State was also centrally planned, and so was the Holocaust, the Holodomor, the Armenian Genocide, Suharto's mass murder of suspected PKI sympathizers, etc. But the expected outcome for poor countries is that they stay poor and don't develop into industrialized export giants the way my laundry list of countries did.

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gus_massa 3 hours ago | parent | prev | next [-]

Don't they charge a minimum just for keeping the wires connected?

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abdullahkhalids 3 hours ago | parent | next [-]

I heard that they are trying to restructure the billing in this way for next fiscal year (July 2026- ), but its really difficult to find a non-regressive scheme. Electricity per-unit prices in Pakistan are set by the government, they vary depending on how much you consume [1], and they play a pretty significant role in government popularity.

[1] There is a price for the first 50 units you consume, then a higher price for the next 150 units, etc. Similar system to income taxes.

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namibj 3 hours ago | parent [-]

Grids in Germany if you're not a "typical household/office" with therefore atypical grid usage bill for peak power and energy separately; the billing related peak power is measured by averaging power over 15 minute chunks, and taking the worst one of a year.

Alternatively it's also practical for such solar situations to bill for market rate price of the energy in each 15 minute chunk separately; this doesn't correctly attribute transformer and other transmission equipment expenses between solar houses and non-solar houses, but it's still handling the grid tie solar load on the grid's power plants during periods of very little sun.

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andyferris an hour ago | parent [-]

> averaging power over 15 minute chunks, and taking the worst one of a year.

What an interesting metric. Wouldn't even a very cheap and small battery (definitely small enough to keep inside an appartment) provide enough smoothing to, like, halve this peak number? You could rig it to not even output energy until you are beyond the current year's peak usage... How much money would you save this way?

I just feel this number is so prone to small mistakes (grandma plugs in the wrong things at the wrong times) and hacks (like the above) that the relationship between users' reward/punishment and the grid's health seems wildly disproportionate.

> market rate price of the energy in each 15 minute chunk separately

I am currently on a plan with 5 minute market rates, can buy and sell in (sell prices can go negative - as can buy, actually), all automated. At least I feel we am working with the grid, not against it, and we make a small net profit (before depreciation).

	▲	Tuna-Fish 32 minutes ago \| parent \| next [-]
		> relationship between users' reward/punishment and the grid's health seems wildly disproportionate. It's still much closer to the real costs for the grid operator than $/kWh. The fundamental problem that rooftop solar has revealed is that people think they are paying for the electricity, but they are not. Electricity is dirt cheap. Most of what they are paying for is the maintenance of the grid, and simple usage based billing crushes the system because of freeloader problem once rooftop solar is added. Long term, the likely thing you pay for will be the size of the main fuse that connects you to the grid. Because that's the thing that scales with the costs you impose on the operator.
	▲	distances 43 minutes ago \| parent \| prev [-]
		> Wouldn't even a very cheap and small battery (definitely small enough to keep inside an appartment) Like namibj mentioned, this does not apply for residential contracts.

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phkahler 3 hours ago | parent | prev | next [-]

When they start charging that way, the rich will buy batteries and disconnect from the grid entirely.

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bee_rider 3 hours ago | parent | prev | next [-]

I think most places the service is priced under the assumption that usage is enough to pay for the grid…

I’ve only ever rented though. Are connection fees something that homeworkers think about?

Possibly we will have to see changes to account for this sort of stuff at a more granular level, as the grid becomes more dynamic. But, that’s a future we should be actively looking to design for, as the energy supply mix is going to change whatever anybody thinks about that. Can’t beat energy falling from the sky, on price…

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namibj 3 hours ago | parent [-]

In a random German apartment usage tends to be on the order of 30-ish EUR per person, and the connection fee is typically around 10 EUR per month.

	▲	apelapan 28 minutes ago \| parent [-]
		Is the €30 usage fee going directly to the producer of electricity, or is part of it a variable transmission fee that goes to the network operator? My monthly electricity bill in Sweden, averaged over a year to 1600KWh/month, is approximately €90 production, €50 transmission fee, €25 fixed connection-size fee (25A, 400V), €70 national electricity tax and €50 VAT for a total of €285/month. We'll be moved to yearly-peak-based transmission tariff in 2027 (European law), but for now I don't need to worry about plugging in the car to chargeon cold days or taking shower when someone is cooking.

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3 hours ago | parent | prev | next [-]

[deleted]

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manmal 3 hours ago | parent | prev [-]

Usually that’s included in per-kWh fee, so indeed usage dependent.

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riku_iki 3 hours ago | parent | prev [-]

its easily fixable, utility company can charge fee for fixed cost those who connected to the grid, and if all rich decided to disconnect, then they disconnect neighborhood eliminating fixed cost.