Over the past decade, Pakistan’s solar energy sector has seen significant growth

TEXT: 1. Can you provide an overview of the growth of the solar energy sector in Pakistan over the past decade? What are the key milestones and achievements?

Over the past decade, Pakistan’s solar energy sector has seen significant growth, driven by government policies, international investments, and increasing demand for sustainable energy. Key milestones include the Quaid-e-Azam Solar Park (2015), development of Net Metering Regulations in 2015, introduction of solar financing schemes by the SBP (initially 2017 and then renewed in 2019), and foreign investments through initiatives like the China-Pakistan Economic Corridor (CPEC).

Solar energy adoption has expanded in both urban and rural areas, with the private sector playing a major role in rooftop solar, solar-powered irrigation, and off-grid electrification. The falling costs of solar technology and financing options have accelerated growth.

Today, Pakistan is among the top markets in Asia for imports of solar panels from China, with panel imports in the first half of 2024 reaching 13 GW, compared to around 5 GW during 2023. BNEF (Bloomberg New Energy Finance) expects that Pakistan will add between 10 gigawatts and 15 gigawatts of solar this year, mostly on homes and factories, making Pakistan the sixth-largest market in the world.

1. What are the main challenges currently facing the solar energy industry in Pakistan? How are these challenges being addressed by the Pakistan Solar Association?

There are multiple challenges being faced by the solar energy industry in Pakistan. Some of these are common across other industries and some are specific to the solar sector. To give a few examples:

“Inconsistent policy-making and abrupt changes” – sudden shifts in import regulations or tax regimes such as when GST was imposed on solar equipment effectively overnight in January 2022, and even shipments that were at sea prior to the tax imposition had to be cleared with an almost 20% extra payment on the tax. Companies were stuck with projects that were agreed before imposition of the tax and many projects ended up in disputes. Similarly, during most of 2022 and 2023, imports were strictly controlled, in spite of solar equipment being a critical item due to the potential future foreign exchange savings.

These changes disrupt supply chains, increase costs, and create uncertainty for investors. PSA advocates a stable and predictable policy framework, with avoidance of sudden tariff increases and clearer, long-term guidelines for solar imports and the industry in general.

“Lack of financing options” – Financing is critical given the high upfront investment required for solar systems. Many households and small businesses cannot afford to install solar panels without accessible credit or subsidies. PSA would like to work with financial institutions to develop “green financing” schemes, including partnerships with commercial banks for low-interest loans. These initiatives will help to make solar energy more accessible to a broader segment of society.

“Weak regulatory oversight” – It is crucial to put in place the right systems to ensure that substandard equipment is not imported into the country and that solar installations are done following the right protocols and standards. The absence of adequate quality controls allows unqualified personnel to import and install solar equipment, leading to low-quality installations and safety hazards. PSA is addressing this by advocating for “certification programs” for solar installers and collaborating with government bodies, such as AEDB / PPIB, to ensure that only trained professionals handle solar projects.

“Shortage of skilled manpower” - particularly trained technicians and installers. This shortage impacts both the quality and the speed of solar deployments. PSA is collaborating with vocational training institutes to offer technical training programs, aimed at building a skilled workforce capable of supporting the growing solar market. We have recently signed MOUs with TEVTA and PVTC to collaborate in creating a skilled workforce.

1. Given Pakistan’s high electricity tariffs, how can solar energy provide a viable solution for both residential and commercial consumers? What impact do you foresee solar energy having on electricity costs in the near future?

With the current trend in prices of solar equipment, we are seeing the ROI on solar investments reaching to between 2-3 years and even under 2 years in certain circumstances. Today, in terms of LCOE (Levelized Cost of Electricity) over the expected life of the equipment installed, solar energy is by far the cheapest source of electricity for most energy consumers. This is expected to improve further in the coming years as solar technology improves further and we see more gains in efficiency.

On the other hand, electricity tariffs in Pakistan, are at best expected to remain at the current levels or perhaps decrease slightly with a better energy mix and / or renegotiation of some long-term contracts. With this scenario, it is expected that solar energy will remain a viable option for the coming years.

1. There is criticism that the government’s incentives for rooftop solar systems mainly benefit the affluent. What is your perspective on this? How can policies be adjusted to make solar energy more accessible to lower-income households?

It is not completely correct to say that the government’s incentives are particularly geared towards the more affluent. However, rooftop solar systems are disproportionately adopted by the affluent due to the nature of the product: high upfront costs, availability of rooftop space, etc. This is an issue being debated around the world as similar trends can be seen in almost every region where solar penetration is increasing.

There is a need for debate and discussion among the regulators, academia, industry and policy makers to try to find an ideal solution for this challenge. In Pakistan, as with many other sectors, we are seeing a one-sided approach to this issue as well. In the recently constituted Prime Minister’s Committee on Solar Energy, there is inadequate representation of the industry. In spite of the request from PSA to include a nominee from PSA in the committee, input was not sought, and we hope that this will be corrected in the future. We can learn from the experiences of other countries and jointly develop solutions that maximize the benefits of cheaper solar electricity for everyone.

1. What are the advantages and disadvantages of rooftop solar compared to centralized solar power plants in Pakistan? How can the government and industry address the imbalance in benefits?

Generally speaking, assuming centralized solar power to be the traditional utility-based model, rooftop solar, or distributed generation can be considered to be the future model of power generation. Entities, whether households or industrial customers, are no longer either Producers or Consumers. Instead, we are seeing a new term of ‘Prosumers’, i.e. entities who could be both Producers or Consumers of electricity, depending upon the circumstances. The policy makers in the government need to be cognizant of this reality as the grid of the future is being planned.

Especially for a country like Pakistan, where our track record of deploying centralized power plants, or Independent Power Producers, is not stellar, it is critical to learn from our past experiences. Perhaps the biggest advantage of rooftop solar is that investment in equipment and project development is a purely private investment. There are no sovereign guarantees required and neither is there a need for ‘take-or-pay’ contracts. This makes rooftop solar flexible and demand-driven. The government just needs to ensure adequate regulatory oversight that helps the sector to take a course which is beneficial for Pakistan’s power sector over the long term.

1. What are some of the latest technological advancements in solar energy that could impact Pakistan? How are these technologies being incorporated into local projects?

Like any new technology, the solar industry is seeing rapid development of more efficient equipment, innovative approaches to deployment, and an overall declining trend in costs. We are seeing the same in the local market as well. The products available in the market today are markedly different (and better) versus the products that were available just 18 to 24 months ago.

This trend is equally prevalent in the Pakistan market as well. This is partly due to our proximity to China, which is the epicenter of technological development in these new sectors (renewables, solar, lithium batteries, electric vehicles, etc.). At the same time, it is driven by the distributed nature of the technologies. The same basic building blocks, i.e. solar panels, are deployed for the smallest solutions such as drinking water pumps in remote areas to large scale solar farms. This gives a flexibility for adoption of new technologies that is simply not possible for the traditional energy sector which are dependent on large scale solutions that take years to deploy and thus cannot be upgraded or changed with the same flexibility as solar energy solutions.

1. What are your expectations for the future prices of solar panels and storage solutions? How do you anticipate these trends will affect the adoption of solar energy in Pakistan?

We anticipate an overall declining trend in prices of solar panels and storage solutions. Although it will likely not be as dramatic as what we saw in the last year or two, it can be expected that technological advancements will continue in both these sectors: solar panels and energy storage. This will result in improved, more efficient products at a lower cost. And we will see an increased adoption of solar energy an storage solutions in Pakistan as a result of these trends. We are not far from a time where there will be solar on every rooftop and access to some level of storage for every consumer.

1. Energy storage is crucial for the stability and efficiency of solar power. What developments are taking place in the field of solar energy storage in Pakistan? Are there any significant projects or innovations we should be aware of?

Absolutely. Batteries, or more accurately, Energy Storage, is the holy grail of the renewable energy transition. Solar energy, by definition, is dependent on the sun, which make it “intermittent”. Energy storage is the key that allows us to unlock the potential of 24-hour solar power. If the last 5-10 years were the time of solar panels, we can anticipate the next 5-10 years to be the era of massive improvements in storage technology. Already we are seeing a plethora of options available in the market for lithium batteries. A recent count shared in an industry forum listed 78 new lithium batteries brands available in the market today, compared to less than a handful just 2-3 years ago.

We are also seeing this trend on industrial scale projects. A quick Google search of utility-level storage solutions (or BESS solutions) will lead to a number of articles highlighting launch or signing of solar + storage solutions by large industries in Pakistan.

1. How effective are current government policies and regulations in supporting the growth of the solar energy sector? What changes or improvements do you think are needed?

Please refer to the answer to Q4 above. In addition, an important aspect to consider is the advent of battery technology. The policy makers in our government need to onboard various stakeholders (solar industry, power sector companies, academia, etc.) and visualize the future of the power sector in 5 years, 10 years, 20 years, 50 years. They do not need to hit the perfect answers but we need to set the direction in our policy that will enable us to reach the future vision. Solar, and in particular, Solar + Storage, is the tsunami that is headed our way. We need to determine how best we can take advantage of this by adapting ourselves to leverage these to our advantage rather than to resist the change and then the onslaught will carve its own way.

1. What efforts are being made to increase public awareness and education about solar energy in Pakistan? How important is it to educate the general public about the benefits and opportunities of solar power?

Pakistan is a very resilient country and the Pakistani public (‘awaam’) have always demonstrated an amazing ability to adapt to new trends, whether it may be the rush of CNG-kits in our cars and vehicles, or the rapid adoption of Tik-Tok and any other technology. Similarly, in solar, we have been amazed to see the rapid adoption of Solar in the less affluent segment of the society. As an example, with an expected import of around 15-17 GW of solar panels in Pakistan this year, only around a third of this volume is expected to be connected to the grid, i.e. through the typical Net Metering systems that are deployed in urban areas. A majority of the solar deployment will be in Off-grid / rural areas where the current power availability is unreliable and sporadic. The general public is already very aware about the benefits and opportunities of solar power.

Amir Pervaiz Chaudhary | Chairman PSA (Pakistan Solar Association)

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