Islamabad, Dec 17: Pakistan’s swift adoption of solar energy, largely driven by economic forces rather than political backing, serves as an important model for other emerging economies.
A sharp 155% rise in grid electricity tariffs over three years, combined with falling solar panel prices, has accelerated the transition to renewable energy, with solar power taking the lead. As a result, Pakistan is now the sixth-largest solar market in the world.
This transformation has occurred without significant political support, fueled instead by market dynamics. China’s excess solar panel production has reduced global prices, making Pakistan the third-largest buyer of Chinese exports.
The residential, agricultural, and industrial sectors have readily embraced solar power, importing 13 gigawatts (GW) of Chinese modules in the first half of the year, with projections reaching 22 GW by the end of 2024.
However, as more consumers move to solar power and reduce reliance on the grid, the remaining users face rising fixed costs, intensifying financial pressure on the state. Renewable energy has become an increasingly viable solution, particularly as state-owned power companies and the national grid continue to fall short of delivering reliable electricity.
According to the International Energy Agency, Pakistan’s per capita electricity consumption rose by 87% between 2000 and 2022, yet over 40 million people remain without power, and half the population lacks clean cooking options.
Many areas receive fewer than four hours of electricity daily, while extreme heatwaves have increased the demand for cooling solutions.
Due to high grid costs and its unreliable supply, around 40-50% of industries depend on captive power plants despite being grid-connected.
The government’s inconsistent energy policies—characterized by inefficiencies in pricing, production, and regulation—have worsened the crisis. The electricity price hike in July 2024, viewed by many as an indirect tax, caused grid power consumption to hit a four-year low.
In the past fiscal year, demand dropped by more than 10%, as rising tariffs pushed businesses, industries, and households toward solar-based self-generation.
Global pressures, including the European Union’s Carbon Border Adjustment Mechanism and corporate net-zero targets, are also accelerating the switch to clean energy. Export-driven businesses are under pressure to adopt renewables or risk losing market competitiveness.
For companies without access to renewable energy through the grid or private systems, this transition presents significant challenges. Declining battery prices and consumers’ desire for energy independence are further accelerating solar adoption, underscoring the need for proactive grid modernization to effectively manage distributed renewable energy sources.
Despite its benefits, the rapid shift to solar raises concerns about an unmanaged transition. Pakistan’s experience highlights the financial vulnerability of traditional grids as demand shifts to rooftop solar installations. A decade ago, the question was whether solar could power Pakistan. Today, the critical issue is whether Pakistan and similar economies can fully transition to renewables without destabilizing their grids. Without intervention, the national grid risks falling into a cycle of unsustainable debt.
Upgrading Pakistan’s electricity grid is essential to improve reliability, expand access in off-grid areas, and lower costs. This requires investments in AI-based monitoring, capacity enhancement, fast-response battery storage, and digital metering. Distribution companies must adopt proactive strategies to align supply with demand. However, these reforms require strong political will, which remains unlikely amid ongoing political instability and the significant costs of grid modernization.
China’s dual involvement in Pakistan’s energy sector further complicates the situation. While China is heavily invested in Pakistan’s thermal power infrastructure, it also dominates the supply of solar technology, playing a key role in both sides of the energy equation.
Pakistan’s case provides valuable insights into integrating renewable energy within challenging economic and political frameworks. Globally, grid operators must adapt to prosumers—consumers who generate and use their own energy—by supporting advanced technologies like solar, wind, and battery storage. Moving to a deregulated, competitive energy market is crucial to preventing grid obsolescence, reducing costs, creating new revenue streams, and reviving demand for grid services.
To enable this transition, supportive policies are essential. Providing credit facilities to promote solar adoption in underserved and off-grid areas can drive renewable energy growth. Currently, grid-connected customers often subsidize underserved consumers; unbundling these groups could reduce overall tariffs. Encouraging battery usage among households, businesses, and independent producers can also address grid challenges like the “duck curve” and improve energy stability and quality.
