Pakistan has A Very Unhealthy Solar Adoption Speed While Grid Gets Pricier

The green energy transition in Pakistan has only just started but oversupply in the solar energy sector, rising power prices, and continued reliance on fossil fuels threaten to derail progress. Our solar adoption speed is faster than any cooling effect which still hasn’t dropped on the national grid unit prices. Power Division sources told ProPakistani that it is unhealthy and needs to slow down. Officials said they need more time to tame Independent Power Producers (IPPs) and those run by families to mitigate future risks of price spikes and surplus complications. The government has been making payments to producers and distributors which needs to change. The ongoing renegotiations on power purchase agreements may offer some relief if handled properly, they added. According to the World Economic Forum, Pakistan is now the world’s sixth-largest solar market. Grid electricity tariffs that have increased by 155 percent over three years are fuelling a rush in renewable energy adoption in Pakistan, and solar power is leading the way. Still, Pakistani spending on renewable energy is way below its rivals, with over Rs. 19.65 billion — or 0.02% of its GDP — invested in the 8 months of the current fiscal year (728 GWh produced since June 2024: Topline Securities). However, the country still faces significant hurdles in balancing its ambitious climate goals with delivering energy security. The International Monetary Fund has been engaged in releasing $1.2 billion besides a $1 billion tranche of its $7 billion loan program for Pakistan. The central bank may get this money by April. It’s uncertain whether existing infrastructure can support the surge in wind and solar, in this writer’s view. “We are in uncharted territory for the solar energy transition,” he said. The years-long boom in clean energy is straining the grid, and cuts in the output of solar equipment imports are too early and too much to end uncertainty in the industry this year, he believes. There will likely be a longer trough in overall electricity prices rather than a V-shaped recovery, he said, pointing to a failure to eliminate smaller, inefficient power generation sources like surplus Furnace Oil, Coal and RLNG. Pakistanis are still expected to keep installing renewables at pace, with additions of around 5,000 gigawatts per year expected over the next five years. But such a rapid expansion will require massive investment in long-distance transmission lines, energy storage, and flexible peak-loading to make up for clean energy’s intermittency. “Unfortunately Coal and RLNG remain the most accessible but expensive and inefficient balancing tools for grid stability,” a dry energy importer told ProPakistani. The deluge of solar power has thrust electricity prices into negative territory in regions with full access to renewable energy solutions, which bodes ill for Pakistan. Punjab province, home to Pakistan’s largest solar fleet, has been forced to curtail rooftop projects due to grid constraints and complications in net-metering rules. The government recently decided to cut the buyback rate for net metering to Rs. 10 for new users while giving a small headstart to existing users to remain on Rs. 27 per unit for an initial period of 5 years. After this period, their contract will be re-negotiated and brought down to Rs. 10 per unit. Currently, solar instruments are selling for cheap due to over-imports by traders and market slump after news about the updated net metering rules. Consumers can still buy the product for cheap but savings will be slow and — unfortunately — very little. To maximize the impact of adding more solar power, Pakistan must break its old habit of relying heavily on family-run IPPs, an old habit that’s hard on the economy, the importer said. Meanwhile, a commodities broker predicts prices will surge to record highs as the country imports huge amounts of solar sheets from top consumer China. Pakistan is not prepared for energy shocks that exceed expectations as the world braces for US President Donald Trump to announce more tariffs on its trading partners next month. This doesn’t matter for middle-income poor-energy countries like Pakistan but Trump’s stance on China will hurt local importers of solar instruments. Consumers will have to pay more, and adoption will collapse.