Pakistan emerges as significant growth PV market

Pakistan has been on the rise in the global PV market in recent years. Historically, the country has faced power shortages and energy security issue, which have affected economic progress and brought social instability. Fossil fuels remain dominant in Pakistan's energy mix so far. However, energy security issues have become increasingly prominent due to the country's limited coal and natural gas reserves and price volatility. As a result, Pakistan is accelerating its progress in the renewable energy sector via policy measures and international cooperation. Pakistan's PV industry has become a focal point for its government and enterprises.
 

Country overview

Pakistan, without a foundation in renewable energy, has developed PV with the aid of China’s Belt and Road Initiative (BRI) since 2015. With the Chinese fund and technology support, Pakistan's infrastructure has significantly improved, especially in power transmission upgrade, which paid the way for utility-scale PV development. As infrastructure upgrades, the Pakistani government has consistently introduced policy incentives for boosting PV in recent years, aiming to cut reliance on fossil fuels. The government actively draws enterprises and investors worldwide to stimulate the potential of its PV market with tax exemptions and investment incentives.


 

In addition to the completion of utility-scale projects, residential PV demand has gradually increased due to rising electricity prices and improved net metering systems. The value of Pakistan's customs imports of modules has grown yearly, with a more significant surge in the past two years. However, given the rising module imports, Pakistan's Federal Minister for Law and Justice Nazir Tarar issued in April 2024 to set up domestic module manufacturing plants in the National Assembly, providing local manufacturers with 10-year incentives to cut reliance on module imports. The measure will enhance Pakistan's local production capacity, create job opportunities, facilitate technology transition, and boost economic growth.

Nevertheless, as Pakistan's incentives are still under discussion, the market may still rely on imported modules to meet demand in the short term. Starting July 2024, Pakistan has continued its tax exemption measures in 2023 for cell and module imports to reduce the initial investment costs of PV projects, thereby attracting more companies for participation. Pakistan's module imports will grow steadily amid rising demand in the coming years.
 

Provincial policies boost market demand

Pakistan's provinces also play a crucial role in the PV industry. Sindh announced the promotion of 200,000 residential PV systems starting in July 2024. Although this plan aims at low-income households, given the high local electricity prices and power shortages, the government has provided an up to 80% subsidy, making the demand growth in the distributed generation sector significant. Moreover, Sindh plans to build several utility-scale PV projects, each with an installed capacity of 305 MW, which will substantially alleviate local power shortages. Meanwhile, Balochistan's PV conversion plan is progressing steadily to help agricultural wells transition from fossil fuel to PV power, thus cutting fuel costs and raising energy efficiency.

Furthermore, Punjab introduced a policy providing free modules starting August 2024. It allows citizens consuming within 200 units of electricity to obtain modules for free starting August 14. Those consuming between 200 and 500 units of electricity must pay 10% of the cost, with the remaining 90% covered by the government. Accordingly, electricity costs for low-income households will be cut by 40%, further boosting PV system adoption and raising market shares of the distributed generation sector.
 

Market outlook

Pakistan's rise in the PV market is an inevitable response to the energy crisis and a reflection of the global energy transition. Based on InfoLink's statistics, Pakistan's module demand in 2023 was about 3.5 GW and might rise to 6.5-8 GW in 2024, showing the country's rapidly growing PV demand, mainly driven by Chinese-funded projects, rising electricity prices, and policy incentives. PV generation has become essential for meeting Pakistan's energy needs.

Despite Pakistan's optimistic outlook for the renewable energy, several challenges remain to be solved in the short term. Insufficient infrastructure and unstable power grids are primary factors hindering utility-scale project development. The effectiveness of policies and the shortage of technical personnel may also affect the progress of Pakistan's local industries. Coupled with the country's increasing financial pressures, reliance on foreign investment will be vital. Fortunately, given the developing projects and the improving provincial policies, Pakistan's PV demand will likely reach 9-10.5 GW by 2030, securing its position in the global energy market.