Opinion by Zulfiqar Ali Butt
Pakistan, home to 240 million people, faces an energy paradox: surplus generation capacity alongside persistent electricity shortages. Despite an installed capacity of 44,000 megawatts (MW), nearly 40% of households endure over six hours of daily outages, costing the economy $18 billion annually in lost GDP.
At the core of this crisis is a dysfunctional system dominated by Independent Power Producers (IPPs), which claim Rs. 900 billion annually in capacity payments, 64% of total costs for underutilised fossil fuel plants. These contracts, which guarantee payments regardless of actual electricity usage, have driven tariffs up by 75% since 2020, making Pakistani industries 35% less competitive than regional peers. Meanwhile, transmission losses of 17–20%, twice the global average, prevent surplus power from reaching consumers.
Yet, a promising solution lies in plain sight: solar energy. Pakistan’s solar potential exceeds 2,900 gigawatt-hours annually, enough to power the country 100 times over. However, solar contributes only 4% to the energy mix, despite its potential to deliver 40,000 MW by 2035. The path forward lies in decentralised rooftop systems rather than mega solar parks.
Already, over 1,500 MW of rooftop solar has been installed, spurred by a 300% surge in net metering adoption in 2022. Scaling this to 12,000 MW by 2030 could reduce oil imports by $4 billion annually and create 500,000 jobs, according to the International Renewable Energy Agency (IRENA).
A 2022 pilot in Punjab showcased the potential: rooftop solar redirected to industrial zones via wheeling agreements cut energy costs by 30% and boosted exports by $500 million. For every 1 MW of installed solar, 25–30 jobs are generated. If export zones adopt decentralised energy, GDP growth could rise by 2–3% annually, drawing foreign investment and expanding value-added exports. Replacing just 10% of fossil energy with solar would cut CO₂ emissions by 28 million tons annually, the equivalent of planting 650 million trees.
Realising this vision requires decisive policy action. Redirecting capacity payments toward grid upgrades and rooftop subsidies is vital. Bangladesh’s solar home system, which reached 20 million people, and India’s 30% rooftop subsidy model provide successful blueprints. Bureaucratic delays remain a hurdle; net metering approvals can take up to six months, while grid modernisation will require $3–5 billion. But with 80% of rooftop installations already driven by households and businesses, policy support, not public funding, is the missing piece.
The numbers are compelling. A 20% shift to solar could reduce circular debt by Rs. 500 billion annually by 2027, according to IMF estimates. Pakistan’s Rs. 2.6 trillion circular debt could instead finance 10 Mangla-sized hydropower projects. Decentralised solar presents a faster, more cost-effective alternative.
As global markets shift toward sustainability, Pakistan stands at a crossroads. Continuing with the broken IPP model risks deeper economic decline. Embracing decentralised solar could transform rooftops into revenue-generating assets, stabilise the grid, and reignite exports. With over 300 sunny days annually, Pakistan’s energy future could be not just stable, but radiant.
The current tiered tariff system penalises higher consumption, hindering industrial growth. Moving to inverted slabs, where per-unit costs decline with increased use, could save a textile unit consuming 25,000 kWh/month up to Rs. 375,000. This aligns with global best practices like Japan’s “Negawatt Trading,” where energy efficiency improves without compromising output. Such reforms could cut energy intensity by 12% and boost production by 8%.
Smart integration of rooftop solar (targeting 12,000 MW by 2030), hydropower (25% baseload), and IPPs (used for peak loads) through advanced grids is essential. Brazil’s smart grid model reduced transmission losses from 17% to 8%, saving $200 million annually, a strategy Pakistan could replicate.
Pakistan must also reassess costly, loan-heavy projects like the ADB-funded Kanjhar Lake Floating Solar Park, which risk locking the country into debt and dependency on imported tech. Instead, policies should encourage domestic private investment in rooftop solar and land-based solar parks. Tax holidays for local solar manufacturing, streamlined land acquisition, and deregulated energy pricing can mobilise local capital for scalable, self-reliant projects.
Rooftop solar requires no land and offers a 3–5-year payback period. Prioritising it over flood-prone reservoirs could redirect $3 billion annually from oil imports into the domestic economy. With 80% of rooftop installations already privately financed, improving policy could rapidly accelerate deployment. Fast-tracking net metering approvals to 15 days and offering India-style 30% subsidies could attract $4.8 billion in private investment by 2030.
Delaying action could result in $18 billion/year in GDP losses and missed climate targets. A phased rollout of smart meters by 2025, 8,000 MW of solar by 2028, could reduce CO₂ emissions by 28 million tons by 2030, while curbing circular debt and stabilising electricity tariffs. Fixed monthly taxes of Rs. 5,000–10,000 on solar households would unfairly burden low-income families and deter adoption.
Pakistan must prioritise green industrial zones powered by decentralised solar and equipped with digital grid technologies such as smart metering. Rather than relying on IMF or ADB loans, policies should promote domestic private investment. Tax incentives for renewable-powered industries, simplified project approvals, and ESG mandates for exporters can draw local capital. Emulating China’s digital public infrastructure with real-time energy trading and AI-based demand forecasting would empower private players while reducing fossil fuel dependence.
Banks should offer 2–3% low-interest loans with flexible repayment plans to enable households and SMEs to install solar systems. With extreme seasonal temperatures above 52°C in summer and below freezing in winter, the demand for energy-intensive appliances is rising. Household-level solar can reduce pressure on the national grid in summer and lower gas use in winter, enhancing energy resilience.
To further mobilise capital, Pakistan could issue green bonds for industrial zones, supported by risk-sharing tools like partial credit guarantees. Deregulating energy pricing in solar zones would increase returns, following India’s model that attracted $42 billion in private renewable investment since 2020. Globally, green zones in regions like Guangdong, China, have cut emissions by 28 million tons while boosting exports.
With circular debt at Rs. 2.6 trillion, empowering private stakeholders through digital innovation and regulatory clarity, is the most viable path to energy security, economic revival, and job creation, without adding to fiscal stress.
As the fifth most populous country, with over 60% of its population under 40, Pakistan has a demographic edge. This digitally savvy youth is already driving IT exports, which surged in 2023–24. With the right policies, Pakistan could become a hub not only for IT and digital services but also for blockchain development and cryptocurrency mining. By tapping its abundant renewable energy—solar, hydro, and wind Pakistan can attract global blockchain investments and emerge as a player in the decentralised digital economy.
Note: The writer is the Secretary General of the SAARC Chamber of Commerce and Industry (SAARC CCI). The views expressed in this article are his personal opinions and do not reflect the official policy or position of the SAARC CCI. — globalnan.com
