China powers Pakistan's green energy ambitions amid IMF's loan conditions

Business Standard

2 days ago

Bootstrapped Pakistan has been slapped with 11 new conditions by the International Monetary Fund (IMF) for the release of its next tranche of bailout programme. One of the conditions ties Pakistan's access to the Resilience and Sustainability Facility (RSF) to its efforts to tackle climate change and promote clean energy for long-term economic stability. And Pakistan looks no further than its 'iron brother' China to meet this need.
Lucky Cement, one of Pakistan's largest cement manufacturers, now has Chinese wind turbines and solar panels supplying over half of its energy needs at its Karachi plant. This shift has significantly reduced the company's carbon footprint, cutting carbon dioxide emissions by 60,000 tonnes annually, the Financial Times reported on Monday.
Chinese solar panel prices have dropped sharply in recent years, while electricity costs from Pakistan's grid have risen. In response, Islamabad imported solar panels with a total capacity of around 19GW last year, the Financial Times quoted Jenny Chase, lead solar analyst at BloombergNEF, as saying. She estimates Pakistan is still importing panels capable of generating 1GW to 3GW each month this year—enough to power a city of millions.
China's role in Pakistan's energy transition
At the heart of this renewable energy transition is China, which has been Pakistan's largest investor in the energy sector. Since 2005, China has invested over $68 billion in Pakistan, with energy projects accounting for 74 per cent of that total.
The China-Pakistan Economic Corridor (CPEC), launched in 2015 as part of Beijing's Belt and Road Initiative, has been the driving force behind this investment, particularly during its first phase, which focused on coal-based power generation. Of the 13 GW of power added to Pakistan's grid, 8 GW came from coal, while renewable sources like solar and wind contributed just 1.4 GW. But now both countries are looking to up the investment in green energy projects.
Notable among the projects under the CPEC framework include the Quaid-e-Azam Solar Park in Pakistan's Punjab region. Wind projects in Sindh and hydro plants in the north further diversify the energy mix, supporting the goal of 30 per cent renewables by 2030.
Demand for Chinese batteries
While a shift to Chinese wind turbines and solar panels has helped companies like Lucky Cement to reduce its carbon footprint, it still relies on fossil fuel generators to ensure a stable energy supply. To address this gap, Lucky Cement is investing 1.5 billion Pakistani rupees ($5.3 million) in Pakistan's largest battery energy storage system (BESS), supplied by China's Contemporary Amperex Technology Co Ltd (CATL). The 20.7 MW system will store renewable energy for use during off-peak hours or in case of grid instability, and it will be capable of powering 20,000 homes for one hour when fully operational.
As the prices of wind, solar, and battery technologies continue to fall, Lucky Cement expects a faster return on its investment, allowing the company to further increase its use of clean energy. Karachi-based Diwan International has reported a 33 per cent drop in the price of 5 kWh BYD batteries, making them more accessible to wealthier households, mosques, and businesses.
The challenges
However, the widespread adoption of renewable energy in Pakistan is not without its challenges. While solar power is becoming more affordable, battery storage remains costly, limiting its reach to lower-income households. The Pakistani government has taken steps to address these issues, including slashing industrial tariffs and offering surplus grid power to sectors such as crypto mining and AI data centres.
Despite these measures, the divide between wealthier users shifting to solar and poorer households struggling with rising bills continues to widen. Moreover, attracting clean energy investment in Pakistan has become more difficult. Since the pandemic, only $4.86 billion of Chinese energy capital has flowed into Pakistan, much of it directed towards a single nuclear project in Chashma.
Lucky Cement's shift to renewable energy supports the IMF's push for cleaner, more sustainable energy. This move also benefits Chinese companies, as they play a key role in supplying the solar, wind, and battery technologies driving Pakistan's green energy future.