Inside Pakistan’s rooftop solar blitz

Pakistan has quickly become one of the world’s leading solar markets as households and businesses rush to decentralised solutions to counter soaring energy bills and frequent blackouts.

The context: The country’s electricity tariffs have surged 155% over the past three years owing to recent investments in coal-fired power and liquefied natural gas, according to a new report by research groups Renewables First and Herald Analytics. Since many of these projects were financed in dollars, the local currency’s rapid depreciation since 2021 has made them uneconomical.

Moreover, Pakistan over-invested in new thermal power plants, yet many of the projects include “take or pay” clauses, meaning they’re entitled to significant capacity payments even if they’re switched off.

This has led to a rapid increase in electricity prices and has prompted a nation-wide scramble for solar panels, which are mostly being installed on rooftops.

The trend has also been driven by Pakistan’s net-metering policy, whereby households and businesses can reduce their electricity bills by selling excess solar power back into the grid.

The latest: In the first nine months of 2024, the country imported 17GW of solar panels from China, according to the report. That makes it the third-biggest market for Chinese panels globally.

While imports don’t necessarily translate immediately into installations — and in fact there’s huge a glut of modules — BloombergNEF expects up to 15GW of new solar deployments in 2024.

That would expand Pakistan’s total electricity generating capacity — across all technologies — by nearly a third in a single year.

The solar panels installed this year would, in a theoretical scenario where they’re all delivering maximum output, produce enough electricity to meet half of the nation’s peak electricity demand during the summer months, and nearly enough to meet Pakistan’s average annual grid demand of 18GW.

Yes, but: No one knows exactly how much solar has already been installed amid the scramble, and there are valid concerns about how this’ll impact grid stability and utility finances.

Pakistan’s demand for power from the grid fell 9.1% in 2023 partly because of the flight to rooftop solar, according to BloombergNEF. Given the surge in module imports in the first half of 2024, another sharp fall is on the cards this year.

Moreover, when electricity demand recedes with the seasons — the decline is particularly acute in the winter months when air conditioners aren’t in use — there will be significant oversupply. To counter this, says Ember analyst Dave Jones, Pakistan will need to ramp up battery deployments to shift solar output to the evening and help balance the grid.

Lessons for others: “The swift changes in Pakistan’s energy landscape serve as a wake-up call to governments worldwide: adapt swiftly or risk being left behind by market forces,” Renewables First and Herald Analytics write in their report, which urges governments to modernise their energy policies and power grids.

“In this new energy world, the Global South, led by the likes of Pakistan, may well leapfrog traditional development pathways, showcasing a model of rapid, distributed, and people-centric energy transition that could inform global strategies for years to come.”