Powering Growth: How Pakistan can Turn Renewables into an Economic Engine By Iqra Manzoor

Iqra Manzoor

PhD Scholar & Associate Researcher

Center of Research and Innovation in Maritime Affairs (CRIMA)

Minhaj University Lahore

Pakistan’s energy transition is no longer a climate option it is an economic necessity. The country spends more than US $ 17 billion dollars annually on fossil fuel imports, while industries grapple with high electricity tariffs, frequent outages, and supply chain instability. In this backdrop, the rise of renewables particularly solar, wind, and the promise of green hydrogen offers a way to cut imports, stabilize the economy, and unlock new growth opportunities.

Pakistan’s Renewable Landscape: A Rapid Shift

In the first nine months of FY 2024–25, Pakistan’s renewable energy capacity nearly doubled from about 2,867 MW to 5,680 MW, driven largely by net-metered rooftop solar. By March 2025, more than 280,000 consumers across homes, businesses, farms, and industries had installed solar under the net-metering program. Net-metered capacity crossed 5.3 GW by August 2025, making solar one of Pakistan’s fastest-growing power sources.

Government projections are equally bold. By June 2026, solar is expected to contribute 8,444 MW with nearly 90% coming from net-metering. If achieved, renewables (hydel, solar, wind, bagasse) will provide about 50% of Pakistan’s total generation mix, significantly reducing reliance on imported thermal fuels. At the same time, hydropower and nuclear are adding stability. Hydel already contributes ~25% to the grid, while nuclear contributes ~12%. The combined push toward renewables and nuclear means Pakistan is moving toward a low-carbon but reliable power mix

Government Push & Policy Initiatives

Several initiatives have supported this transition:

1. Net-Metering Policy (2017, amended 2023–25): Encouraged households and businesses to generate and sell surplus solar power. Although the government is reviewing buy-back rates (currently PKR 27/unit), the program remains the backbone of Pakistan’s rooftop solar boom.
2. Alternative and Renewable Energy Policy 2019: Targeted 30% renewables by 2030, providing tax relief, duty exemptions, and investor incentives.
3. Annual Plan 2025–26: Sets a target of 2,800 MW new capacity by June 2026, with 2,633 MW from solar net-metering, alongside new transmission projects, transformer upgrades, and rural electrification programs.
4. CPEC & Foreign Investment: Under the China-Pakistan Economic Corridor, several wind and solar projects are underway. Pakistan is also exploring Saudi investment in green hydrogen as part of the Saudi Green Initiative.

Global Momentum: Lessons for Pakistan

The world is moving fast on renewables.

1. China installed 217 GW solar and 76 GW wind in 2023, bringing its total renewable capacity to more than 1,400 GW. It is now the global leader in clean energy exports, from solar panels to batteries.
2. India has reached 82 GW solar capacity in 2024 and is targeting 500 GW renewables by 2030. It has already cut coal imports by nearly 10%, reducing its fuel dependency.
3. Saudi Arabia is investing billions in green hydrogen at NEOM, using 4 GW of solar & wind to produce 600 tonnes of hydrogen daily making it a future hydrogen export hub.

Compared with these global leaders, Pakistan’s installed solar and wind capacity is modest. Yet, its untapped solar potential is 2.9 million MW, and the Sindh wind corridor alone could produce 50,000 MW. These figures prove Pakistan has resources comparable to global giants it only needs the right investment climate and execution.

Why Renewables Make Business Sense

If scaled properly, renewables can transform Pakistan’s economy in five ways:

1. Reduce Import Bill: Cutting oil, coal, and LNG imports will save billions annually, stabilizing foreign reserves.
2. Lower Industrial Costs: Clean, cheap solar and wind power can reduce the cost base for textiles, chemicals, fertilizers, and steel helping Pakistan stay competitive in export markets.
3. Job Creation: From panel installation to inverter assembly and maintenance services, renewables can create tens of thousands of jobs across urban and rural Pakistan.
4. Green Exports: Future export markets, especially Europe, are pushing carbon-border taxes. Green hydrogen and renewable-powered manufacturing could give Pakistani exporters a premium advantage.
5. Attract Climate Finance: Multilateral lenders and investors prefer green projects. Expanding renewables opens doors to green bonds and concessional financing, easing Pakistan’s capital crunch.

Challenges on the Road Ahead

Despite momentum, hurdles remain:

1. Grid Weakness: Without investment in smart grids, storage, and transmission, variable solar and wind will strain the system.
2. Policy Uncertainty: Frequent changes in net-metering buy-back rates or solar duties risk slowing investor and consumer adoption.
3. Financing Barriers: High interest rates and currency volatility make it difficult for households and businesses to afford upfront renewable investment.
4. Local Industry Gaps: Most panels and inverters are imported, leaving Pakistan vulnerable to exchange rate shocks and global supply disruptions.
5. Bureaucratic Delays: Slow approvals for renewable projects discourage large-scale investors.

The Way Forward: Policy Recommendations

1. Set Long-Term Renewable Targets: Legally enshrine 30–40% of electricity from solar and wind by 2030, alongside a clear hydrogen export roadmap.
2. Maintain Incentives: Keep net-metering attractive while gradually introducing storage incentives. Avoid sudden, sharp cuts to buy-back rates.
3. Promote Local Manufacturing: Offer tax breaks, joint ventures, and financing to develop solar panel assembly and battery production plants in Pakistan.
4. Invest in Grid Modernization: Upgrade transmission and distribution, expand storage, and establish Renewable Energy Zones for industrial clusters.
5. Green Hydrogen Strategy: Fast-track feasibility and pilot projects for hydrogen production, with partnerships under CPEC and the Saudi Green Initiative.

Conclusion

Pakistan’s renewable journey is picking up speed. With solar set to become the country’s second-largest power source by 2026, Pakistan is closer than ever to a sustainable energy mix. But to make renewables the engine of economic growth, the government and private sector must align on long-term strategy, policy stability, and investment in infrastructure and local industry. The global energy transition is rewriting economic fortunes. If Pakistan seizes the moment, it can reduce its import bill, stabilize the rupee, create green jobs, and position itself as a competitive, climate-smart economy. If it delays, the world will not wait and Pakistan risks missing its place in the renewable revolution.

Iqra Manzoor

PhD Scholar & Associate Researcher

Center of Research and Innovation in Maritime Affairs (CRIMA)

Minhaj University Lahore