Pakistan is currently experiencing some of Asia’s highest energy prices, as electricity costs have increased by 155% since 2021. With over 40% of the population living below the poverty line, many households are turning to renewable energy — particularly solar power — to offset high electricity bills.
However, this growing trend towards solar poses challenges to Pakistan’s power sector, which is already struggling with financial strain and a decline in grid-based energy demand.
In recent years, energy expenses for some Pakistani residents have surpassed their rent payments, prompting a shift toward alternative energy sources.
In the first half of 2024 alone, Pakistan imported $1.4 billion worth of solar panels from China, making it the third-largest buyer of Chinese solar products globally.
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For consumers, this renewable energy source can be up to 70% cheaper than relying on the nation’s gas-powered grid. While this transition has provided relief for many Pakistanis, it has intensified challenges for the national power grid.
As more residents choose solar power over grid-based energy, the financial burden on remaining customers has increased, driving officials to consider further price hikes to offset the shortfall.
The nation’s power minister, Awais Leghari, described the situation as a “catch-22,” noting that as more consumers leave the grid, fewer users are left to shoulder the already-high capacity payments, potentially making energy unaffordable for many residents.
This reduction in revenue for the country’s power sector comes as it also deals with over $9 billion in debt, much of it owed to China. Pakistan currently has more Chinese energy financing than any other nation.
With state-run energy consumption at its lowest point in four years, officials are working to renegotiate their debt terms with Chinese creditors to ease financial pressure.
[Jack Aylmer]
PAKISTAN HAS SOME OF THE MOST EXPENSIVE ENERGY PRICES IN ASIA.
AND WITH OVER 40-PERCENT OF THE COUNTRY’S POPULATION LIVING IN POVERTY – MANY ARE MOVING TO RENEWABLE ENERGY AS A WAY TO CUT DOWN ON SKY-HIGH ELECTRIC BILLS.
BUT A TREND OF SOLAR PANEL ADOPTION IS NOW THREATENING PAKISTAN’S POWER SECTOR.
HERE’S WHAT’S GOING ON.
SINCE 20-21, ENERGY PRICES IN PAKISTAN HAVE INCREASED BY 155-PERCENT.
PUTTING A STRAIN ON RESIDENTS FACING ENERGY COSTS HIGHER THAN THEIR RENT PAYMENTS.
AS A RESULT, PAKISTAN BECAME THE THIRD-LARGEST BUYER OF CHINESE SOLAR PANELS DURING THE FIRST HALF OF 20-24-
PURCHASING 1.4 BILLION DOLLARS WORTH OF THIS RENEWABLE ENERGY SOURCE.
FOR THE PAKISTANI PEOPLE, ACQUIRING ELECTRICITY THIS WAY CAN BE UP TO 70 PERCENT CHEAPER THAN USING THEIR COUNTRY’S POWER GRID.
BUT WITH FEWER RESIDENTS PURCHASING ENERGY FROM THE NATION’S PREDOMINANTLY GAS-POWERED GRID AND INSTALLING SOLAR PANELS INSTEAD-
OFFICIALS FEAR ALREADY HIGH ELECTRICITY COSTS WILL BECOME UNAFFORDABLE FOR NEARLY EVERYONE IN PAKISTAN.
“We are in a catch 22 situation, where as many people who get off the grid, the capacity payments is actually shared by much lesser amount of much, much lesser number of users who stay on the grid.”
POWER GRID PRICES WILL NEED TO RISE IN ORDER TO MAKE UP FOR THE LOSS OF PAYING CUSTOMERS-
AS THE COUNTRY EXPERIENCES ITS LOWEST ENERGY CONSUMPTION RATES FROM STATE SOURCES IN THE LAST FOUR YEARS.
PAKISTAN’S POWER SECTOR IS ALREADY OVER NINE BILLION DOLLARS IN DEBT-
MUCH OF WHICH IS OWED TO NONE OTHER THAN CHINA.
BEIJING HAS INVESTED SO MUCH MONEY HERE THAT PAKISTAN HAS MORE CHINESE ENERGY FINANCING THAN ANY OTHER COUNTRY IN THE WORLD.
SO NOW, IN A BID TO AVOID FURTHER EXACERBATING RISING ENERGY PRICES IN THE COUNTRY-
PAKISTANI GOVERNMENT OFFICIALS HAVE SAID THEY’RE WORKING TO RENEGOTIATE THE TERMS OF THEIR DEBT TO CHINESE CREDITORS.
TO GET MORE STORIES ABOUT THE RISKS AND BENEFITS OF THE RENEWABLE ENERGY TRANSITION, DOWNLOAD THE STRAIGHT ARROW NEWS APP AND SIGN UP FOR ALERTS FROM ME- JACK AYLMER.
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