China three gorges at Karot: Strategic gains

2026-02-28 - 20:03

THE Karot Hydropower Project (HPP) represents one of the most significant additions to Pakistan’s energy infrastructure in recent years. Developed under the framework of the China-Pakistan Economic Corridor, the project symbolizes the country’s shift toward renewable, low-cost and sustainable electricity generation. With an installed generation capacity of 720 megawatts, Karot ranks among the major hydropower facilities contributing to the national grid. It produces 3.4–3.6 billion units of electricity annually, enough to supply millions of households, reduce dependence on thermal power plants that rely on imported fuel, lower electricity tariffs and serve as a strategic milestone in strengthening Pakistan’s energy security. Karot’s electricity generation plays a stabilizing role in Pakistan’s energy mix. Hydropower is cheaper than fossil-fuel-based generation, making project important during periods of high global oil and gas prices. Addition of 720 MW enhances base-load capacity and improves grid reliability, during peak demand seasons. The project contributes billions of units of electricity each year, directly helping reduce load-shedding pressures and improving industrial productivity. Hydropower provides flexible generation, allowing grid operators to manage fluctuations in demand more effectively than many other sources. The total construction cost of the Karot Hydropower Project is estimated at US $ 1.6 – 1.7 billion, financed through a mix of Chinese investment, international financial institutions and loans from Chinese development banks. The project was developed on a Build-Own-Operate-Transfer (BOOT) model, meaning the investor builds and operates plant before transferring ownership to Punjab government. This financing structure allowed Pakistan to add large-scale generation capacity without immediate fiscal pressure on public budget. It also means long-term tariff commitments that affect electricity pricing. The levelised tariff approved for the project is 7.57 US cents per unit for 30 years. This tariff covers capital recovery, operation, maintenance and investor return. In local currency terms, exact rupee cost fluctuates with exchange rates, which means consumers indirectly bear currency risk. Operational data suggests that pure generation cost can be extremely low, in some periods reported at fractions of a rupee per unit due to hydropower’s minimal fuel cost. Final tariff charged to consumers includes capacity payments, transmission costs, taxes, distribution losses and government surcharges. Government doesn’t earn a simple “per-unit profit” from Karot electricity alone. Consumer tariffs reflect a composite structure where distribution companies and the state recover system costs. Margins emerge through taxes, surcharges and cross-subsidies embedded in electricity bills. The project is completed and operated by China Three Gorges Corporation, one of the world’s largest hydropower developers. Under the BOOT arrangement, the company will own and operate the plant for 30 years, after which it will be transferred to Punjab at a nominal price often cited as one rupee. This concession period allows investors to recover costs while leaving Pakistan with a fully operational strategic asset. Karot provides multiple long-term benefits beyond electricity generation, including lower generation costs than thermal power, reduced carbon emissions (3.5 million tons annually), foreign investment inflow, and local employment during construction. The project also strengthens energy security and ensures stable electricity supply for both industry and households. Its main advantage lies in long-term access to cheaper electricity compared with imported fuel plants, while hydropower reduces exposure to global energy price volatility. Critics note that capacity payments and dollar-linked tariffs can still pressure consumers if the rupee depreciates. Ultimately, real consumer benefit depends on broader power sector reforms, transmission efficiency, and reduction of line losses. Karot is important for three reasons. First, it is first major hydropower project completed under CPEC, setting precedent for future investments. Second, it strengthens Pakistan’s renewable energy portfolio at a time when climate commitments are becoming increasingly important. Third, it demonstrates a financing model that Pakistan is likely to use for other large infrastructure projects. The project also enhances regional water resource utilization on Jhelum River while supporting long-term energy planning. The Karot HPP is far more than a power plant; it is a strategic energy asset that reflects Pakistan’s transition toward renewable, infrastructure-led growth. With 720 MW capacity and billions of units added annually to national grid, it plays a meaningful role in addressing electricity shortages and reducing reliance on costly thermal generation. The project highlights both opportunity and complexity. While hydropower offers extremely low generation costs, BOOT model and dollar-linked tariff structure mean consumers still face relatively high electricity prices in short to medium term. Real advantage will emerge after 30-year concession period, when Pakistan acquires asset at a nominal cost and can generate electricity at very low prices. Karot’s success should be measured not only by megawatts produced but by how effectively Pakistan reforms its transmission system, manages tariffs and expands renewable capacity. If integrated wisely into broader energy policy, Karot can become a cornerstone of affordable electricity, economic stability and sustainable development for decades to come. —The writer is editor, political analyst and author of several books based in Islamabad. (naveedamankhan@hotmail.com)