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Energy is one of the essential factors for the growth of any country. The deficit of energy affects the progress of any country and creates problems in daily life. Karachi, the largest city of Pakistan and its largest economic hub, is facing an electricity shortfall of 633 MW. This research presents analysis of power sector in Pakistan in the context of demand and supply gap, and investigates utilization solid waste generated in the city of Karachi for generation of electrical power using distributed generation (DG) power plants to compensate the gap between energy demand and supply and to facilitate the clean environment. The results show 1263.372 MW of power can be generated from the 16,000 tons of waste produced in the city if residential and commercial consumers incorporate waste-based distributed generation power plants. The proposed DG method also resolves solid waste management issues and challenges by proposing newer waste collection mechanism and transportation techniques.