Discuss the significance of renewable energy resources for Pakistan. (CSS -2021)

Significance of Renewable Energy Resources for Pakistan (CSS-2021)

Introduction

Pakistan has grappled with a persistent energy crisis for decades, with an economy still heavily reliant on imported coal, oil, and natural gas. Yet the country possesses substantial untapped potential in wind, solar, hydropower, and biomass. What makes this topic newly urgent is that, since 2021, Pakistan has undergone one of the world’s most striking consumer-led solar revolutions — not because of government planning, but largely in spite of it.

Policy Drift and Missed Targets

Pakistan’s renewable energy targets have moved in a strikingly inconsistent direction. The 2006 policy set modest targets of 1,235 MW of wind and 430 MW of solar. The 2019 Alternative and Renewable Energy (ARE) policy raised ambitions to 30% of generation from renewables (excluding hydropower) by 2030 — only for the 2021 Indicative Generation Capacity Expansion Plan (IGCEP) to quietly cut that target to 12%, while redefining “renewable” to fold in seasonal hydropower, a category shift that sidelined solar and wind in favor of costlier, slower-to-build hydropower projects.

This policy hesitancy occurred even as solar became, by 2020, the cheapest form of electricity in history in most major markets — a trend Pakistan’s own policy framework failed to capitalize on early. Regional comparisons underline the missed opportunity: India built the world’s fourth-largest wind and fifth-largest solar capacity over the same period, hitting a 20 GW solar target four years ahead of schedule, while China’s renewables share reached roughly 40% of installed capacity.

The Unplanned Solar Boom (2022–2026)

What government policy failed to deliver, market forces largely have. Facing a punishing combination of currency depreciation, soaring grid tariffs, and unreliable supply, Pakistani households and businesses turned to rooftop solar at a pace few anticipated:

• Net-metered rooftop solar capacity grew from just 190 MW in FY2020 to nearly 7,000 MW by FY2026 — a roughly 37-fold increase in six years, driven largely by a rupee that depreciated around 75% between FY2021 and FY2025, electricity tariffs that rose nearly 140% over the same period, and imported panel prices that fell by around 60%.
• Pakistan has imported well over 30 GW of Chinese solar panels cumulatively — making it one of the world’s largest importers of Chinese solar equipment, equivalent to a majority of the national grid’s entire installed capacity.
• Total installed solar capacity (grid-tied, net-metered, and off-grid combined) is now estimated in the 27–33 GW range as of early 2026, and solar’s share of total electricity production crossed roughly 25% by 2025 — making it, by some measures, Pakistan’s single largest electricity source.

This is a genuinely striking outcome: Pakistan’s renewable transition has been driven overwhelmingly by household and commercial self-interest — cheaper bills and blackout resilience — rather than by the top-down industrial policy the original 2019–21 framework envisioned.

Growing Pains: The “Utility Death Spiral”

This rapid, unplanned growth has created a new structural problem. As wealthier, grid-connected consumers shift to solar under generous net metering (which credited exported solar power at the full retail rate), utilities lost significant revenue — estimated at roughly Rs. 101 billion in FY2024 alone — while non-solar consumers were left absorbing a larger share of fixed grid costs. To address this, the government replaced net metering with a net billing regime under the Prosumer Regulations 2026 (effective February 2026), which pays new rooftop exporters a lower reference price for power sent to the grid while still billing imported grid power at full retail rates.

This is an important nuance for a complete answer: Pakistan’s renewable transition isn’t simply a success story — it now raises real distributional and grid-stability questions, since a two-tier system risks widening the gap between those who can afford solar installation and those who remain fully dependent on an increasingly strained grid.

Coal: The Contradiction

Despite renewable momentum, Pakistan’s coal commitments remain incoherent. Then-PM Imran Khan’s 2020 Climate Action Summit pledge of “no more coal power” was quietly narrowed to “no more imported coal,” while nine operating and five near-complete coal projects were left untouched. Coal imports have continued growing at a double-digit annual rate — driven not only by power generation but by the cement industry feeding Pakistan’s construction sector — undercutting the credibility of the country’s climate commitments.

Hydropower: A Costlier Alternative

Large hydropower projects have increasingly lost their historical cost advantage. The Neelum-Jhelum project’s per-unit cost has escalated to 16–18 cents/kWh, compared with roughly 4–5 cents/kWh for utility-scale solar. Without financial close secured before construction, projects like Diamer-Bhasha, Mohmand, and several run-of-the-river schemes risk similar overruns — reinforcing the case that Pakistan should treat water storage and power generation as separate policy problems rather than bundling them by default into large dam projects.

The Access Gap

Even amid a solar boom concentrated among wealthier, grid-connected consumers, roughly 61 million Pakistanis still lack reliable electricity access, with nearly half of the rural population underserved. Upgrading transmission infrastructure alone is estimated to cost around $20 billion through 2040 — a timeline off-grid and mini-grid solar solutions could meaningfully shorten for underserved communities, health facilities, schools, and small businesses.

Significance of Renewable Energy for Pakistan

1. Energy security — reducing reliance on imported fossil fuels insulates Pakistan from currency and global commodity shocks, a vulnerability starkly exposed by recent rupee depreciation.
2. Economic relief — cheaper generation costs ease pressure on both consumers and the circular debt-laden power sector.
3. Climate commitments — a credible renewable transition strengthens Pakistan’s position in international climate finance and diplomacy, particularly given its high vulnerability to climate change.
4. Rural development — decentralized solar can leapfrog decades of transmission-infrastructure backlog for underserved populations.
5. Job creation — the solar installation, maintenance, and manufacturing supply chain has already begun generating employment, reinforced by a $1 billion Pakistan-China joint venture advancing local panel manufacturing.

Recommendations

1. Restore ambitious, technology-neutral renewable targets, rather than redefining categories to favor costlier options.
2. Manage the net billing transition carefully to avoid disincentivizing continued solar adoption while protecting grid revenue sustainability.
3. Extend financing tenures (from the current 7–10 years toward 20 years) to lower the effective cost of solar financing, as the State Bank has scope to influence.
4. Separate water storage from power generation policy, evaluating large dams on their storage merits rather than bundling them into renewable energy targets.
5. Scale off-grid and mini-grid solutions aggressively for the 61 million Pakistanis still lacking reliable access, rather than waiting on transmission upgrades alone.
6. Align the National Electric Vehicle Policy with solar-supported charging infrastructure to avoid simply shifting fossil fuel demand from vehicles to an unprepared grid.
7. Set a credible, enforceable coal phase-down timeline, closing the gap between climate rhetoric and actual project pipelines.

Conclusion

Pakistan’s renewable energy story since 2021 is a case study in how market forces can outpace policy — for better and worse. A rupee crisis and tariff shock did what a decade of renewable energy policy could not: pushed solar past a quarter of national electricity generation in just a few years. But this success has been uneven, favoring those who could afford the upfront investment, and has forced difficult grid-financing tradeoffs that policymakers are only now beginning to address. The task ahead is less about proving renewable energy’s potential — that case has been made empirically — and more about designing policy that makes the transition affordable, stable, and equitable for the entire country, not just those who could self-install their way out of the grid’s problems.