Pakistan Is Only the Beginning of the Cheap Solar Revolution

Pakistan has long had a severely troubled economy, and a central part of the problem is its electric grid. Much of it was constructed back in the 1960s and has not been maintained or updated regularly. In the 1990s, the government enticed foreign companies (mostly from China, ironically, in light of current events) to build more power plants by promising to subsidize them even if they were not running at full capacity. But it did not invest sufficiently in transmission capacity, leading to inflated electric bills to pay for idle plants while power went undelivered. Conditions on a recent loan from the International Monetary Fund and rising fuel prices led to even further increases.

As a result, despite electricity that now costs 23 cents per kilowatt-hour — or close to twice the U.S. average in a country less than one-tenth as rich per person, where half the population subsists on $4 per day or less — rolling blackouts are common, and even the occasional country-wide grid collapse, as happened in January 2023. The power bill costs more than rent for some Pakistanis, and about anyone who can afford it has a diesel generator backup. A recent report from the Pakistan Credit Rating Agency estimated that the country’s coal consumption would double by 2030, in line with the government’s strategy to reduce fuel imports by boosting domestic production.

But things are changing, and fast. Pakistan imported a whopping 13 gigawatts of solar panels, mostly from China, in just the first half of 2024, mostly for rooftop installations for homes and businesses. That’s a mind-boggling amount of new solar for a country that only had about 50 gigawatts of installed generation capacity in total in 2023.

In the short term, solar imports are likely to cause some problems, particularly for the poorest Pakistanis. But past that, things might get a lot better.

As the Financial Times reports, the solar boom is leading to slashed utility payments, further threatening the rickety and debt-laden grid system. Poorer Pakistanis who can’t afford to buy panels are increasingly left holding the ever-more-expensive bag. Many will likely refuse to pay their power bill or simply not be able to afford to. Some provinces have resorted to handing out panels for free to poor folks. If I had to guess, I would imagine sooner or later the extant utility system will go bankrupt, and most or all of Pakistan’s investment in fossil-fuel generation will be written off. That will no doubt cause all manner of painful and lingering side effects.

But there is a promising potential future visible, should Pakistan manage to get clear of its entanglement with fossil fuel power. As noted above, for decades it has been trapped in a sandpit of underinvestment, policy mistakes, corruption, economic chaos, and austerity. The government couldn’t get it together to build and maintain a traditional power grid, leading to slanted foreign investments and IMF bailouts with stringent conditions, leading in turn to eye-watering prices for unreliable power. Meanwhile, economic problems caused in part by unreliable electricity fueled inflation and a collapsing currency that drastically increased the price of imports.

Fuel imports are one of the largest expenses for even prosperous countries. For places like Pakistan, they are a punishing economic drain. Paying for vast amounts of imported coal, gas, and oil in scarce foreign currency is hard enough in good times, but it’s disastrous when one’s currency has depreciated by about 40% over two years.

Dirt cheap solar power could ameliorate or solve many of these problems at a stroke. Panels are now so cheap, even Pakistan can afford to import them by the millions — an expense, yes, but a one-time one. And while solar is inherently intermittent, and therefore not a solution to Pakistan’s reliability problems, batteries are also plummeting in price — down about 90% between 2010 and 2023 — and can help balance out supply. Cheaper batteries also mean cheaper EVs, with (as usual) Chinese models coming out at bewilderingly low prices. And because Pakistanis mostly drive motorcycles (often manufactured domestically) over relatively short distances, electrifying the personal vehicle fleet there will be far cheaper than in America or Europe; vastly smaller batteries require vastly simpler charging infrastructure.

If all goes well, this will free up vast amounts of economic capacity for Pakistan to invest in domestic development. Businesses will have stable, reliable power supplies that will justify more investment. Households will be able to upgrade their insulation, install heat pumps, and generally spend more on things other than energy. The government will be able to upgrade legacy transmission lines to accommodate solar production from the remaining hydro and nuclear plants.

Finally, of course, there is the climate benefit. Pakistan is one of the countries most threatened by climate change. Summer heat waves are bad and getting worse, to the point where murderous wet bulb events are increasingly likely. Catastrophic warming-fueled storms in 2022 caused the worst flooding in the country’s history, inundating about a third of Pakistan’s land area, killing nearly 2,000 people and causing billions of dollars in damages.

In short, a path to economic development will be opened. It is by no means guaranteed, but it will be a heck of a lot easier than trying to dig out from under the debt mountain of the collapsing coal-powered system. Look around the developing world and you’ll find there are a great many nations in similar situations.

Ethiopia, for instance, has abundant solar and hydro potential, but much of its rural population is not connected to the grid. Researchers there expect both grid-connected and off-grid solar projects to proliferate over the next five years, and modest government subsidies have already catalyzed a rapid switch to electric vehicles. On the other side of the continent, solar installations in the region are projected to grow at a compound annual rate of about 30% through 2030. In Nicaragua, which has historically generated much of its power from imported oil, both rooftop solar and utility-scale solar are increasing, with President Daniel Ortega signing an agreement with a Chinese firm for a major new project earlier this year.

Developing nations still face innumerable obstacles, from unfavorable trade deals to political instability to corruption. But for many, dependence on imported carbon fuels and their wildly gyrating prices has been a shackle on their economies. Those that can shake it off will find it much easier to climb up the development ladder.