Year 2 Annual Progress Report: Power Sector Improvement Activity (PSIA) Fiscal Year 2023

The activity began on January 27, 2022, and is scheduled to end on September 26, 2025. The primary objective of PSIA is to increase power sector competition through support to develop Pakistan's wholesale electricity market. The activity is divided into three main objectives: Objective 1 focuses on increasing power sector competition through support to develop Pakistan's wholesale electricity market. Objective 2 aims to improve the management and operation of transmission and distribution (T&D) systems, while Objective 3 seeks to optimize grid electricity load. The activity also includes cross-cutting activities, such as gender integration and environmental compliance. In Year 2 of the activity, significant progress was made in achieving the objectives. Under Objective 1, preparatory activities, transition, and implementation support for the wholesale power market were provided. The DISCOs (distribution utility companies) were interfaced with the wholesale market, and capacity building was conducted to support the development of competitive procurement frameworks and private clean energy investment. Under Objective 2, institutional capacity development for integrated system and energy plans was conducted, and improved management, operations, and financial viability of distribution utilities were achieved. Information technology interventions were also implemented to strengthen DISCO planning and performance. Under Objective 3, measures to mitigate seasonal demand imbalances and idle capacity costs were implemented, and increased electrification and end-use efficiency were achieved. Energy storage/supplementation was also used as a means of optimizing grid dispatch and system utilization. The activity also made progress in cross-cutting areas, including coordination with the host country government and donors, gender considerations, and environmental compliance. The activity's performance indicators and progress toward achieving the activity's targets are presented in the performance indicator tables. Implementation challenges were also identified and addressed during the reporting period. Planned interventions for the next year include increasing power sector competition through support to develop Pakistan's wholesale electricity market, improving the management and operation of T&D systems, and optimizing grid electricity load. The activity's financial reporting is presented in the financial report section, and photos from key events during the reporting period are included in the annexes. Success stories from the activity are also presented in Annex A, and a project personnel summary is provided in Annex C.