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Surprise solar boom in Pakistan helps millions, but harms grid & power cos

Driving the demand were households and factories producing everything from cement to apparel, who have suffered frequent blackouts in the past due to the unreliable grid

Solar panel, solar energy

The rapid and unregulated boom also threatens to weaken the country’s utilities and destabilise the fragile economy. | Representational

Bloomberg

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There’s a shiny new addition to Pakistan’s dusty agricultural heartland: rows upon rows of solar panels. Imports of solar equipment from China in the first nine months are well ahead of those for the whole of 2023, according to data compiled by BloombergNEF. The $1.7 billion of purchases would equate to 17 gigawatts of generation, more than a third of Pakistan’s total power capacity, if it’s all deployed on rooftops and farms across the country, according to industry estimates.
 
For corn grower, Mohammad Murtaza, installing panels has enabled him to slash his power bill by switching irrigation pumps from diesel or pricey electricity from the grid. Farmers like him are the latest to join the solar craze, following households and factories, in a country where power prices for some have tripled since 2021 as the government cut subsidies to meet International Monetary Fund loan requirements. 
 
This breakneck solarisation has several benefits. It’s brought financial relief to consumers and businesses who can afford the panels, it’s saving the government money on fuel imports, and it will help Pakistan move toward its goal of doubling renewables to make up 60% of the energy mix by the end of the decade.  
But the rapid and unregulated boom also threatens to weaken the country’s utilities and destabilise the fragile economy. 
“There’s a great solar rush happening in Pakistan: the numbers are staggering,” said Muhammad Mujahid, executive director at Lahore-based panel distributor Innovo Corporation. But it’s also creating the “risk of a utility death spiral,” he said. 
As many customers curb their consumption from the grid or even abandon it completely, Pakistan’s power companies are permanently losing a major chunk of demand and revenue. State-owned utilities have accumulated losses of 2.4 trillion Pakistani rupees ($8.6 billion) between 2014 and 2023, according to government data. The IMF has said retaining demand should be a key objective of reforms.   
“Pakistan’s distribution companies are losing every day as solar becomes attractive,” said Salahuddin Riffai, who was chairman at Islamabad Electric Supply Co. until 2022. “The burden is ever increasing on the customers who are left.” 
The country was already struggling financially after borrowing heavily from China under the Belt and Road Initiative over the last decade to build up power generation capacity. Pakistan is now in negotiations to try and lengthen the maturities of that debt. The government is also in talks with local power producers to revise or end purchase contracts and is considering privatizing some utilities as cost-cutting measures. 
“If the government opens up the power market without capping solar capacity, most of the current generation fleet will become idle,” said Syed Faizan Ali Shah, who sits on the prime minister’s solarization committee. “So then who will pay for those power plants? This is a major concern.” 
The flood of solar panels from China started in 2023, and turned into a deluge after Pakistan removed import curbs late last year, making it the third-largest destination for Chinese panels, according to BNEF. Now they’re being advertised on billboards in major cities and during cricket matches.  
The frenzy wasn’t restricted to the energy sector: real estate companies and electronics firms started flipping panels, with the biggest traders bringing in up to 250 megawatts’ worth every month, according to Usman Ahmad, chief executive officer at solar distributor Nizam Energy Pvt.  
Driving the demand were households and factories producing everything from cement to apparel, who have suffered frequent blackouts in the past due to the unreliable grid.   
Speculation that the grid will collapse is “extreme,” but the reduction in demand is indeed a concern, Pakistan’s Power Minister Awais Leghari said in an interview. Utilities “have to be a little more sensitive to the demands of customers in terms of reliability and tariffs,” he said. “We all realize that the status quo can’t prevail.” 
For Murtaza, the decision to switch to solar on his farm near Lahore was an easy one. It will take him less than a year to recover the cost of installing the panels, and his electricity bill has plunged by 80 per cent, he said. With the savings, he’s able to plant three crops a year instead of two.  
“I have never seen such a big change in farming. Ninety-five percent of farmland has switched to solar in this area,” he said, pointing to his photovoltaic array towering over piles of harvested corn cobs. The panels are now cheaper than the frames they’re supposed to be mounted on, so some farmers just lay them on the ground, he said. 
Despite the hubbub, it’s hard to tell how much of the imported equipment has actually been installed due to a paucity of official data. A satellite data analysis carried out in April by Norwegian firm Atlas revealed around 400 solar plants across the country, clustered mostly in industrial hubs. But many more installations went undetected, the geospatial analysis firm said. Most panels have been deployed almost equally across homes, factories, and farms, solar distributors say. 
The growth of solar in Pakistan has been interesting because it happened so fast and without any subsidies, said Jenny Chase, an analyst at BNEF. However, the boom is likely to be followed by a bust, she said.  
For Pakistan’s government, dealing with the consequences of the solar frenzy and its aftermath, and maintaining the health of the grid and traditional power companies will be essential. For the country’s economy and the millions of people who can’t afford to install solar panels, a failing electricity network would be disastrous.  
“The solar onslaught is happening in a very unsafe, very unregulated way,” said Amin Sukhera, chief executive officer of Sky Electric, a Pakistani solar firm. “The people who are running the grid, they do not know what kind of imbalance it’s creating when other people attach solar connections. I think it’s already a pretty sick grid. I fear it may get more sick.”

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First Published: Nov 22 2024 | 11:00 PM IST

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