The Benefits of Solar Energy for Businesses in Pakistan: Lowering Costs and Boosting Sustainability
Benefits of Solar Energy for Pakistan''s Small and Medium Enterprises (SMEs)
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🗞️ Driving the news: Pakistan is experiencing a solar power boom, driven by falling solar panel costs and skyrocketing electricity tariffs, with solar adoption reaching record levels across industrial, residential, and agricultural sectors• The country imported 13GW of Chinese solar modules in the first half of 2024, forecasted to reach 22GW by year-end, making it the world’s sixth-largest solar market• However, this rapid shift toward renewables highlights risks for the national grid, which faces declining demand and mounting financial pressures
🔭 The context: Pakistan''s electricity grid struggles to meet demand, with over 40 million people still lacking access to electricity• High costs and unreliable grid performance have led 40-50% of industries to adopt captive power solutions• Global climate policies, like the EU’s Carbon Border Adjustment Mechanism, and competitive pressures from export markets further incentivize clean energy adoption in Pakistan
🌍 Why it matters for the planet: Pakistan’s transition underscores the dual opportunities and challenges of renewable integration in emerging markets• Solar power reduces carbon emissions and offers energy security but exposes structural weaknesses in traditional grid systems• The country''s experience highlights the need for grid modernization to manage distributed renewables effectively and avoid economic disruptions
⏭️ What''s next: Pakistan must modernize its grid with AI-driven tools, battery storage, and digital metering while fostering a competitive energy market• Proactive policies, such as credit facilities for underserved communities and incentives for battery use, are essential to sustain the transition• Global grid operators can learn from Pakistan’s experience to avoid similar pitfalls in other markets
💬 One quote: “Can Pakistan and other emerging markets realistically transition entirely to renewable energy without jeopardizing the stability of their national grids?” — World Economic Forum analysis
📈 One stat: Solar imports in Pakistan reached 13GW in the first half of 2024, projected to hit 22GW by year-end, making it the sixth-largest solar market globally
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ISLAMABAD: Pakistan has become the world''s sixth-largest solar market, with its swift transition to solar energy offering valuable insights for emerging economies, according to a World Economic Forum (WEF) report released this week.
As Islamabad faces surging fuel prices, the focus on renewable energy is gaining momentum.
The country''s energy sector has long grappled with challenges such as circular debt, power theft, and transmission losses, leading to frequent blackouts and soaring electricity costs. However, experts highlight that Pakistan’s favorable climate, with over nine hours of daily sunlight in most regions, makes it ideal for solar power generation. The World Bank estimates that utilizing just 0.071 percent of Pakistan''s land for solar photovoltaic (PV) power generation could meet the nation''s entire electricity demand.
Currently, only 5.4 per cent of Pakistan’s 39,772-megawatt installed power generation capacity comes from renewables such as wind, solar, and biomass, as per the National Electric Power Regulatory Authority (NEPRA). Fossil fuels dominate the energy mix at 63 percent, followed by hydropower at 25 percent.
The WEF report attributes Pakistan’s rise in solar energy adoption to falling solar panel prices and steep hikes in grid electricity tariffs, which have surged by 155 per cent over three years. "This is fueling a renewable energy rush, with solar power taking the lead," the report noted.
China''s overproduction of solar panels has played a key role in this shift, making Pakistan the third-largest destination for Chinese solar exports. The report revealed that Pakistan imported 13 gigawatts (GW) of Chinese solar modules in the first half of this year, with projections reaching 22GW by year-end.
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The report also pointed to systemic inefficiencies in Pakistan''s energy sector, including inconsistent government policies and production and pricing challenges, which have worsened the energy crisis. These issues have led to an over 10 per cent drop in grid electricity demand in the past fiscal year, as inflated tariffs pushed consumers to seek alternatives like solar power. This trend has seen a surge in solar adoption among industrial, commercial, and residential users who can afford self-generation solutions.
WEF recommended supportive policies such as providing credit for solar in off-grid areas and restructuring consumer categories to further accelerate renewable energy adoption.
"Pakistan''s experience highlights the importance of aligning policy innovation with market dynamics to achieve sustainable and equitable energy solutions," the report concluded.
High energy prices and levies are becoming strong drivers for commercial and industrial (C&I) solar projects in Pakistan. Omar Malik, the CEO of Pakistani C&I solar developer Shams Power, speaks with pv magazine about market trends and challenges.
Image: Shams Power
C&I power consumers are increasingly deploying solar arrays in Pakistan due to high energy prices and tariffs.
"The average industrial consumers currently pay a tariff of $0.12/kWh," Omar Malik, the CEO of Pakistani solar developer Shams Power, told pv magazine. "But this is only half the story, as they also have to pay another $0.10 in taxes on every kilowatt-hour they purchase from the grid. The government relies on five to six sectors for the bulk of its indirect tax collection, with electricity being one of the largest ones."
High-self consumption rates mean lower electricity costs and lower taxes. Under the nation''s current regulations, the sale of excess power to the grid under net metering is only allowed for generators up to 1 MW in size.
The government also only exempts import duties on solar panels. "The exemption on solar inverters has been recently removed," Malik said. "But this has not had consequences on the market development."
Pakistan''s National Electric Power Regulatory Authority (NEPRA) issued 1,596 net-metering licenses across the country with a cumulative capacity of 221.05 MW in the 2022-23 fiscal year, according to official statistics from the Associated Press of Pakistan.
About Pakistan solar energy for businesses
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