Solar Energy Holds The Key To Reduce Dependency On Imported Fuel |
Pakistan faces an intensifying energy crisis amid the ongoing Middle East war involving Iran, the United States, and Israel, with no signs of de-escalation in sight. Brent crude prices have surpassed $100 per barrel, and government projections warn of a monthly oil import bill climbing to $600 million—or $7.2 billion annually if the conflict persists.
This surge, fuelled by the effective closure of the Strait of Hormuz since late February, could drive prices to $120 per barrel, expanding the current account deficit by $5–7 billion and further stoking inflation.
On the other hand, energy demand rebounds strongly, projected to grow 3–4% annually through 2029, bolstered by industrial resurgence and population expansion. Solar innovations offer a vital buffer against these pressures.
With energy imports draining a fifth of foreign reserves, the next three years demand bold reforms to enhance self-sufficiency and cushion against escalating fiscal strains.
Early 2026 electricity demand has shattered records, with January generation up 12.1% year-on-year to 9,140 gigawatt-hours, reversing prior stagnation. Following 2.6% average annual growth from 2020 to 2024, expectations now point to 3–4% yearly rises through 2029, mirroring GDP projections of 3.6% for fiscal year 2026 and around 3% thereafter.
Consumption may reach 126–128 terawatt-hours this year, advancing to 140–150 terawatt-hours by 2029 under standard scenarios. Climate influences exacerbate this, as a 1°C temperature rise could elevate peak summer demand by 8.5%, intensifying seasonal disparities where summer loads double winter ones.
Energy intensity is expected to drop from 11% in 2026, aided by efficiency initiatives that could moderate overall resource demands.
Sectoral analysis reveals varied trajectories. Residential consumption, at 49–50% or about 40 terawatt-hours in early 2026, anticipates 2–3% annual growth to 2029, propelled by appliance proliferation and household electrification.
However, off-grid solar may constrain grid share to 45–48%.
Industry, comprising 26–30% at 28–35 terawatt-hours, shows robust momentum. Late 2025 increases of 35–58% signal 5–7% yearly expansion to 2029, as lower tariffs attract captive users, adding 280 connections and boosting output.
In fiscal year 2025, petroleum imports totalled $15.94 billion, down 5.8% year-on-year due to solar offsets and reduced volumes
In fiscal year 2025, petroleum imports totalled $15.94 billion, down 5.8% year-on-year due to solar offsets and reduced volumes
Agriculture, at 8–9% or 9–11 terawatt-hours, encounters grid reductions—down 11% year-on-year in 2025—from solar tubewells. This shift could trim its portion to 7% by 2029.
Commercial demand holds at 9–10% or 10–12 terawatt-hours with 2–3% growth.
Transportation, however, remains Pakistan's Achilles' heel in energy dependence, accounting for roughly 80% of petroleum consumption. This underscores the sector's near-total reliance on imported oil for mobility.
In the first eight months of fiscal year 2025–26, oil consumption rose 4% to 10.96 million metric tonnes. Motor gasoline increased 4% to 5.13 million tonnes, while diesel rose 6% to 4.76 million tonnes.
These fuels primarily power road transport, which saw a 4.5% rise in fuel use during July–December. This heavy oil dependence exposes the economy to global shocks, as transport’s fuel needs drive the bulk of petroleum imports.
The costs run into billions annually and perpetuate trade deficits.
The solar surge and electric vehicles (EVs) hold transformative potential to disrupt this oil stranglehold. Pakistan's rooftop solar boom, with 45–50 gigawatts imported by 2026, is already outpacing daytime grid requirements in cities like Lahore.
It could supply 20% of electricity by year-end.
Paired with battery storage—imports reached 1.25 gigawatt-hours in 2024 and could hit 8.75 gigawatt-hours by 2030—this enables affordable, renewable-powered EV charging. It reduces reliance on grid electricity and aligns with solar peaks to minimise costs.
Under the New Energy Vehicle Policy 2025–2030, Pakistan targets 30% EV sales by 2030, scaling to 90% by 2040 and 100% by 2060. This shift is supported by subsidies for two- and three-wheelers and plans for 3,000 charging stations nationwide.
The broader climate transition requires an estimated $566 billion investment, including electrification.
Local initiatives, such as BYD's $200 million Karachi plant starting production in mid-2026, could accelerate adoption. Incentives may slash EV operating costs by 30–40% compared with internal combustion engines.
If adoption reaches 20% market share, petroleum needs could fall by 15–20% by 2029. This synergy—solar providing cheap, clean power for EVs—could save billions in oil imports and lower emissions.
It may also ease pressure on the national grid. However, challenges remain, including infrastructure gaps, high upfront costs, and policy execution.
Renewables, at 5% in fiscal year 2025, are projected to climb to 10–15% by 2029. Battery storage is expected to scale to 29.8 gigawatt-hours by 2030 to improve reliability.
These shifts enabled 45 liquefied natural gas cargo deferrals in late 2025. The energy mix still emphasises hydro at 29–30% and nuclear at 18–19%.
Major hurdles remain. Grid utilisation stands at only 34% of 46.6 gigawatts, yet idle plant payments cost 2.5–2.8 trillion rupees annually. Circular debt has also ballooned to 2.4 trillion rupees.
Transmission losses of 17–20% undermine efficiencies, particularly in the south. These inefficiencies add roughly $1.3 billion in fuel expenses each year.
Electricity tariffs at 13.5 cents per kilowatt-hour—compared with 6.3 cents in India or the United States—are accelerating off-grid transitions.
Import dynamics further heighten vulnerabilities. In fiscal year 2025, petroleum imports totalled $15.94 billion, down 5.8% year-on-year due to solar offsets and reduced volumes.
The first half of fiscal year 2026 recorded $7.99 billion in petroleum imports, a 1.26% decline. Crude imports rose 13.38% to $2.45 billion, while petroleum products fell 10.3% to $2.48 billion.
Liquefied natural gas imports plunged 28% amid cargo cancellations.
Over the first seven months, total petroleum imports reached $9.04 billion, down 4.39% overall. Petroleum products stood at $3.43 billion, liquefied natural gas at $1.63 billion, liquefied petroleum gas at $0.61 billion, and crude oil at $3.38 billion.
January 2026 alone recorded $1.06 billion in petroleum imports. This marked a 22.82% year-on-year drop and a 32.47% month-on-month decline.
These figures illustrate petroleum’s continued weight in the import basket. It accounts for roughly 30–35% of total imports.
Achieving 20% electric vehicle penetration may cut oil reliance by 15–20%
Achieving 20% electric vehicle penetration may cut oil reliance by 15–20%
Within that group, crude oil and petroleum products represent 60–70%, liquefied natural gas 20–25%, and liquefied petroleum gas 5–10%.
The 2026 crisis threatens to reverse earlier moderation. Annual petroleum imports could rise to $18–20 billion if oil stabilises around $100 per barrel.
Sensitivity analysis suggests every $10 increase in oil prices adds $1.5–2 billion to the deficit. Inflation could reach 17% by 2027 under such conditions.
Despite the Hormuz blockade, oil shipments from Saudi Arabia continue via rerouted paths, including the Red Sea port of Yanbu. This is enabled by Saudi Arabia’s Petroline pipeline.
Riyadh has also assured Pakistan of continued supplies.
Three shipments reached Pakistan on 9 March. A Pakistan National Shipping Corporation vessel carrying 73,000 tonnes of crude departed Yanbu on 12 March.
These deliveries extend refinery stock coverage to late March for facilities such as Pak-Arab and Cnergyico.
However, alternative routes carry steep costs. Longer shipping distances, war-related insurance, and surcharges may add 10–20% to premiums.
These factors amplify external pressures as the conflict drags on.
Short-term volumes may dip due to disruptions, but could rebound by April 2026 with harvesting needs. However, purchases are likely to occur at elevated premiums.
Total goods imports are projected at $65.9 billion for the fiscal year 2026. Trade deficits may exceed $30 billion.
Petroleum imports remain a central driver of these imbalances.
By 2029, without structural reforms, the petroleum bill could escalate to $20–25 billion amid continued demand growth of 3–4%. Currency depreciation and war premiums may inflate costs by 10–20% annually.
Emergency responses such as four-day workweeks or fuel rationing may provide temporary relief. Authorities have also sought International Monetary Fund approval for levy adjustments.
However, IMF-guided reforms—including tariff rationalisation and subsidy removal—have faced criticism. Many analysts argue the programme focuses excessively on revenue extraction through higher taxes and prices.
Meanwhile, structural government spending remains largely untouched.
In the energy sector alone, bloated capacity payments to idle plants represent a major fiscal drain. Circular debt continues to grow unchecked.
Reducing such wasteful expenditures could free significant fiscal space. Yet policy emphasis remains on passing higher tariffs to consumers rather than enforcing fiscal discipline.
This imbalance deepens inequality. Middle- and low-income households bear the brunt of austerity while government inefficiencies persist.
From 2026 to 2029, strategic pivots are therefore essential. Renewables could account for 58% of generation by 2030, delivering lifetime savings of $100–120 billion from solar expansion.
However, this transition requires $10–15 billion in investments for grid upgrades and storage infrastructure.
Electrification of transport and industry could also play a crucial role. Achieving 20% electric vehicle penetration may cut oil reliance by 15–20%.
Wind energy expansion and innovative uses of surplus power—such as artificial intelligence or bitcoin mining—could further optimise idle capacity.
International Monetary Fund reforms on tariffs and subsidies provide a foundation for restructuring. Yet tackling transmission losses of 18% and other inefficiencies remains essential.
Equity considerations must also guide policy. Expanding solar access through subsidies for low-income households could prevent energy transitions from widening social divides.
In sum, 2026–2029 represents a defining window for Pakistan’s energy future. Rapid solar adoption offers a path to stabilise imports and strengthen resilience.
Failure to act risks prolonged economic stagnation.
Bold reforms, however, could secure 60–70% clean energy by 2029, reduce dependence on imported fuels, and support sustainable growth in an increasingly volatile geopolitical environment.