Something is happening in Pakistan. The amount of electricity delivered to customers by its grid is going down — a lot! It’s not that Pakistanis are turning off their electrical devices. What they are doing instead is generating more solar power from panels they own themselves. They are becoming prosumers, and that could portend a major shift in the energy market for other countries as well.
In a blog post on November 25, 2024, the World Economic Forum said that Pakistan’s rapid adoption of solar power, which is being driven primarily by market forces and with only minimal political support, provides valuable lessons for other emerging markets. “Declining solar panel prices, coupled with skyrocketing grid electricity tariffs that have increased by 155% over three years, are fueling a rush in renewable energy adoption in Pakistan, with solar power leading the way. The country is now the world’s sixth-largest solar market,” it said.
The driving force here is economics, not policies. Many countries feel threatened by China’s overproduction of solar panels, which has driven down their cost to the point where they are ridiculously cheap. As a result, Pakistan is now the third largest importer of Chinese-made solar panels. If Pakistan had its own solar panel industry, it would impose significant import duties on those panels from China, but it does not. Therefore, the influx of cheap panels is welcomed by most Pakistanis — but not all, as we shall see. Industrial, agricultural, and residential sectors have embraced solar, with imported Chinese modules totaling 13 GW having been added in the first half of the year. Forecasters predict that figure will rise to 22 GW by the time 2024 is over.Solar Power Vs The Traditional GridWhile this may be good news for the environment and global efforts to adopt cleaner forms of energy production, the shift could bring new headaches for the Pakistani government as demand for energy from the state power grid shrinks and Islamabad juggles its tenuous financial outlook with the corresponding drop in revenue, says OilPrice.com. Kaiser Bengali, an economist who worked as an adviser to the chief minister of Pakistan’s southeastern Sindh Province, says the influx of Chinese panels has sparked an episode of “circular debt” where those left reliant on the expensive state power grid need to choose between saving money to switch to solar or refusing to pay their bills — which could, in turn, spark a cascade of unpaid debts. Consumption of electricity from the national grid fell by 10% in 2023 compared to the previous year amid rising electricity prices, and this decrease could deepen as Islamabad faces pressure to increase electricity prices in order to repay a loan from the International Monetary Fund.
These new realities are shaped by the inability of the national grid to deliver a stable supply of electricity, a challenge that has consistently hindered economic growth. The International Energy Agency reports says Pakistan’s per capita electricity consumption grew by 87% between 2000 and 2022, yet more than 40 million people remain without access to electricity and half the population still lacks clean cooking facilities. Many more live in off-grid or underserved areas, without access to electricity for more than 4 hours a day. Meanwhile, record-breaking heat waves are boosting demand for basic cooling from fans and air conditioners.Inconsistent Energy PolicyThe government’s inconsistent energy policy, which is characterized by inefficiencies in production, pricing, and regulations, has made the energy crisis worse. A price hike in July was seen by many as an alternative tax and has driven electricity consumption from the grid to its lowest level in four years. This trend has sparked a wave of solar adoption among industrial, commercial, and private users who can afford self generation from solar panels.
Global regulations, such as the European Union’s Carbon Border Adjustment Mechanism, and global brands’ net-zero commitments are adding to the urgency of cleaner energy adoption. Export driven industries face competitive pressure to source renewable energy or risk losing market share to greener competitors. Without access to renewable energy via the grid or captive units, these businesses are at a significant disadvantage, the WEF suggests.
