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Business Recorder
03-05-2025
- Business
- Business Recorder
Coal-fired plant in Gwadar planned: CPPCL cites ‘snags' and ‘challenges'
ISLAMABAD: Chinese firm M/s CIHC Pak Power Company Limited (CPPCL), which plans to establish a 300 MW coal-fired power plant in Gwadar, has raised serious concerns over several critical challenges — including the approval of insufficient costs, exchange rate losses, and difficulties in converting foreign currency. In a letter addressed to Shah Jahan Mirza, Managing Director of the Private Power and Infrastructure Board (PPIB), CPPCL Chairman Zhao Bo stated that the company submitted the required Performance Guarantee (PG) on March 21, 2025, in compliance with PPIB's requirements. This extended the validity of the Letter of Support (LoS) to March 31, 2028, fulfilling all obligations under the LoS and PPIB's directives. Subsequently, on April 14, 2025, the company received a notice from PPIB requesting payment of the Financial Closing Date extension fee. Gwadar coal-fired power project in limbo over tariff dispute CPPCL emphasized that Clause 5 of the 2019 LoS clearly stipulates that 'delays caused by Government of Pakistan (GoP) entities' and 'events beyond the reasonable control of the Power Company' are valid grounds for exemption from the Financial Closing Date extension fee. Based on this clause, and after thorough evaluation, PPIB had approved the submission of the PG at the original amount — without requiring a doubled guarantee. 'In our previous communications with the Ministry of Planning, Development & Special Initiatives, and PPIB, we have detailed the reasons for the delays, including force majeure events and government-related delays, all of which are beyond the Power Company's reasonable control,' said Zhao Bo. He further argued that Clause 6 of the 2018 Fee Regulations must be interpreted in conjunction with Clause 5 of the LoS. According to him, PPIB's unilateral enforcement of the 2018 Fee Regulations violates key legal principles such as: (i) lexspecialisderogatlegigenerali (special law overrides general law),(ii) the principle of contractual reciprocity, and(iii) Pakistani laws and regulations that prohibit holding a party liable for losses without direct causation. Chairman Zhao warned that if PPIB enforces encashment of the PG solely due to non-payment of the extension fee, it would be a misuse of Clause 3 of the LoS, which limits PG encashment to scenarios involving 'failure to achieve the Financial Closing Date or execute agreements.' He also pointed to Clause 3A of the 2018 Fee Regulations — titled 'Exemption from Fees and Charges' — which applies to the LoS extension fee for this project. The regulation, effective July 1, 2022, states that power companies and sponsors are exempted from such payments if the delay in milestone achievement is due to timeline adjustments under IGCEP or attributable to government entities or factors beyond the sponsor's control. However, the exemption does not apply if the delay is also attributable to the power company or sponsor. Regarding the fee payment, CPPCL noted that the project has already incurred approximately $22 million in development costs, far exceeding NEPRA's approved cap of $10.5 million for development and owner management fees. Additionally, over $1 million has been paid in PPIB processing fees. Imposing further charges, the company argues, would severely impact the financial viability of the project. Nevertheless, to prevent further delays and safeguard the broader interests of the China-Pakistan Economic Corridor (CPEC), the company said it will pay $150,000 as a 'payment under protest' for the extension fee. This payment is made without prejudice to its right to: (i) seek compensation for excess costs through NEPRA with PPIB's support; (ii) recover unjust charges and related losses through legal or other means, and (iii) claim refunds under Clause 5 (Refund Clause) of the PPIB Fee Rules. The company also reiterated that despite receiving tariff approval with PPIB's support, it continues to face major challenges — including insufficient project cost approvals, exchange rate losses, currency conversion hurdles from the State Bank of Pakistan, tariff payment delays, and financing uncertainties. These challenges, it said, render the project commercially unviable in its current form. 'The true purpose of the LoS is to facilitate project advancement through PPIB's support,' the company stated, urging PPIB to act swiftly to resolve the issues that are threatening the project's commercial viability. The company affirmed its readiness to assist in finding solutions. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
Kohala Hydropower Project: Chinese co urges Pakistan govt to extend LoS
ISLAMABAD: Chinese company M/s Kohala Hydropower Company Limited (KHCL) has requested the government to formally issue a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW run-of-the-river Kohala Hydropower Project until September 30, 2027 as it has fulfilled all requisite formalities, sources within the company told Business Recorder. The Kohala Hydropower Project is a priority initiative under the China-Pakistan Economic Corridor (CPEC) framework. The original LoS was issued by the Private Power and Infrastructure Board (PPIB) on December 31, 2015, facilitating the successful negotiation and execution of key project agreements. Subsequently, the LoS validity was extended until September 30, 2027, as per the decision taken during the 144th meeting of the PPIB Board. LoS extension stays pending: Chinese firm agrees to delay Kohala project The Power Company in a letter to Power Division, has claimed that in compliance with the conditions precedent has submitted the requisite Performance / Bank Guarantee of $ 5.62 million to enable formal notification of extension in the LoS. According to the letter the Company has legitimate expectations for, issuance of extension in the LoS, premised on the following grounds :(i) the Project is being developed under CPEC Framework Agreement of November 08, 2014 between Government of China and Government of Pakistan, GoP's Power Generation Policy, 2002 and the AJ&K Power Generation Policy, 2002, reflecting its strategic significance and multi-jurisdictional transnational character; and (ii) the Company has executed all principal project agreements, including, Implementation Agreement (IA) with the Government of Pakistan on May 6, 2021, Tripartite Power Purchase Agreement (TPPA) with CPPA-G and NTDC on June 25, 2020, AJ&K Implementation Agreement (AJ&K IA) and Water Use Agreement (WUA) with the Government of AJ&K, on April 23, 2020; and Tripartite Agreement (TPA) between the Company, Government of Pakistan and Government of AJ&K on Jun 25, 2020. The Company has acquired approximately 4,607 Kanals of land for public purpose in connection with the Project's development, including activities related to financing, engineering, procurement, construction, operation, and maintenance on a Build-Own -Operate-Transfer (BOOT) basis. Compensation has been fully paid to the affected population in accordance with applicable laws. The Power firm further stated that as per the assumptions of the IGCEP 2022-2031 (Section 5.2) which were duly approved by the Council of Common Interests (CCI), a project is considered as 'committed' if it has obtained LoS from PPIB as of December 2020 for private sector projects and/or power generation projects which are listed under Federal Government's international bilateral or multilateral commitments The Project, in view of the specified criteria, is categorized as 'Committed Project' under the applicable and valid IGCEP 2022 - 2031, which stands duly approved by the NEPRA Authority through determination of February 1, 2023. The NEPRA Authority in its findings' in the approved IGCEP noted that emphasis has been placed on utilization of indigenous resources whereby more than 77% of the installed capacity will be based on the said sources. The NEPRA Authority further 'directed' the stakeholders that in the changing global dynamic there is a need to even further increase the use of indigenous resources of energy and same are made on priority. China Three Gorges argues that the Project has valid authorizations, approvals and consents, from the Government of China, Government of AJ&K and Government of Pakistan, to proceed under and pursuant to the Legal Framework and Contractual Framework. After explaining the background, the Chief Executive Officer of Kohala Hydropower Company, Liu Yonggang has submitted that the Project is fully compliant with and aligned to policy perspectives, contractual terms, and regulatory framework. Accordingly, the Project has satisfied all the conditions precedent for further advancement and development. 'We earnestly seek the esteemed support from Power Division in facilitating the prompt issuance of the formal notification for the extension of the LoS by PPIB until September 30, 2027. This timely action is pivotal to ensuring the uninterrupted progress of the $ 2.5 billion investment by China Three Gorges in the Kohala Hydropower Project-one of the most strategically important initiatives under the CPEC framework,' said the CEO. On October 4, 2024, Managing Director PPIB, Shah Jahan Mirza, through a letter informed the CEO of the Company that the Company's request regarding extension in the Financial Closing (FC) date of LoS of 1124 MW Kohala Hydropower Project was considered by PPIB Board in its 144th meeting held on September 18,2024. The Board decided to extend the FC date in the LoS of the project for 36 months period i.e. up to September 30, 2027 subject to extension of existing Bank Guarantee three months beyond the extended validity date of the LoS. MD PPIB had advised the CEO Kohala Hydropower Company to extend the validity of the banks guarantee up to December 31, 2027 and submit detailed bar chart identifying major milestones and timelines of various activities to be carried out up to FC i.e. September 30, 2027. Copyright Business Recorder, 2025
Business Recorder
28-04-2025
- Business
- Business Recorder
Kohala Hydropower Project: Chinese co urges govt to extend LoS
ISLAMABAD: Chinese company M/s Kohala Hydropower Company Limited (KHCL) has requested the government to formally issue a notification extending the Letter of Support (LoS) for the $2.5 billion, 1,124 MW run-of-the-river Kohala Hydropower Project until September 30, 2027 as it has fulfilled all requisite formalities, sources within the company told Business Recorder. The Kohala Hydropower Project is a priority initiative under the China-Pakistan Economic Corridor (CPEC) framework. The original LoS was issued by the Private Power and Infrastructure Board (PPIB) on December 31, 2015, facilitating the successful negotiation and execution of key project agreements. Subsequently, the LoS validity was extended until September 30, 2027, as per the decision taken during the 144th meeting of the PPIB Board. LoS extension stays pending: Chinese firm agrees to delay Kohala project The Power Company in a letter to Power Division, has claimed that in compliance with the conditions precedent has submitted the requisite Performance / Bank Guarantee of $ 5.62 million to enable formal notification of extension in the LoS. According to the letter the Company has legitimate expectations for, issuance of extension in the LoS, premised on the following grounds :(i) the Project is being developed under CPEC Framework Agreement of November 08, 2014 between Government of China and Government of Pakistan, GoP's Power Generation Policy, 2002 and the AJ&K Power Generation Policy, 2002, reflecting its strategic significance and multi-jurisdictional transnational character; and (ii) the Company has executed all principal project agreements, including, Implementation Agreement (IA) with the Government of Pakistan on May 6, 2021, Tripartite Power Purchase Agreement (TPPA) with CPPA-G and NTDC on June 25, 2020, AJ&K Implementation Agreement (AJ&K IA) and Water Use Agreement (WUA) with the Government of AJ&K, on April 23, 2020; and Tripartite Agreement (TPA) between the Company, Government of Pakistan and Government of AJ&K on Jun 25, 2020. The Company has acquired approximately 4,607 Kanals of land for public purpose in connection with the Project's development, including activities related to financing, engineering, procurement, construction, operation, and maintenance on a Build-Own -Operate-Transfer (BOOT) basis. Compensation has been fully paid to the affected population in accordance with applicable laws. The Power firm further stated that as per the assumptions of the IGCEP 2022-2031 (Section 5.2) which were duly approved by the Council of Common Interests (CCI), a project is considered as 'committed' if it has obtained LoS from PPIB as of December 2020 for private sector projects and/or power generation projects which are listed under Federal Government's international bilateral or multilateral commitments The Project, in view of the specified criteria, is categorized as 'Committed Project' under the applicable and valid IGCEP 2022 - 2031, which stands duly approved by the NEPRA Authority through determination of February 1, 2023. The NEPRA Authority in its findings' in the approved IGCEP noted that emphasis has been placed on utilization of indigenous resources whereby more than 77% of the installed capacity will be based on the said sources. The NEPRA Authority further 'directed' the stakeholders that in the changing global dynamic there is a need to even further increase the use of indigenous resources of energy and same are made on priority. China Three Gorges argues that the Project has valid authorizations, approvals and consents, from the Government of China, Government of AJ&K and Government of Pakistan, to proceed under and pursuant to the Legal Framework and Contractual Framework. After explaining the background, the Chief Executive Officer of Kohala Hydropower Company, Liu Yonggang has submitted that the Project is fully compliant with and aligned to policy perspectives, contractual terms, and regulatory framework. Accordingly, the Project has satisfied all the conditions precedent for further advancement and development. 'We earnestly seek the esteemed support from Power Division in facilitating the prompt issuance of the formal notification for the extension of the LoS by PPIB until September 30, 2027. This timely action is pivotal to ensuring the uninterrupted progress of the $ 2.5 billion investment by China Three Gorges in the Kohala Hydropower Project-one of the most strategically important initiatives under the CPEC framework,' said the CEO. On October 4, 2024, Managing Director PPIB, Shah Jahan Mirza, through a letter informed the CEO of the Company that the Company's request regarding extension in the Financial Closing (FC) date of LoS of 1124 MW Kohala Hydropower Project was considered by PPIB Board in its 144th meeting held on September 18,2024. The Board decided to extend the FC date in the LoS of the project for 36 months period i.e. up to September 30, 2027 subject to extension of existing Bank Guarantee three months beyond the extended validity date of the LoS. MD PPIB had advised the CEO Kohala Hydropower Company to extend the validity of the banks guarantee up to December 31, 2027 and submit detailed bar chart identifying major milestones and timelines of various activities to be carried out up to FC i.e. September 30, 2027. Copyright Business Recorder, 2025
Express Tribune
20-04-2025
- Business
- Express Tribune
Shining a light on Pakistan's solar boom
Human beings have always found ways to adapt when they've had to. Every time we've run into a shortage or a crisis, whether it's food, water, or energy, we've come up with something new. It's just how we've always moved forward by figuring things out when the pressure's on. Electricity is a good example. What started out as a curiosity became something we can't function without. Over time, we've found different ways to produce it some better for the planet than others. As the world leaned heavily on fossil fuels, the downsides started catching up with us. Rising costs, environmental damage, and just the plain fact that they won't last forever pushed scientists and governments to start thinking differently. That's where solar, wind, and water came in cleaner ways to power our lives. Out of these, solar really started to take off. Panels got cheaper, technology improved, and suddenly, it wasn't just big companies or countries dabbling in solar. Regular people started installing them, too. In Pakistan, this shift has been picking up speed. What used to seem like a luxury is now starting to feel like a real solution. According to Ember's Global Electricity Review 2025, Pakistan was actually the biggest importer of solar panels in 2024 bringing in 17 gigawatts' worth. That's double the amount from the year before. It's a big leap, and it says a lot about where we're headed. This change didn't happen on its own. It's a mix of things government support, better prices, and people realising that we need cleaner, cheaper energy. And if things keep moving in this direction, Pakistan could end up becoming a serious player in the solar energy game. To understand the significance of Pakistan's solar surge, it's essential to look at the country's energy landscape and how it has evolved over time. Pakistan's energy sector has traditionally been dominated by fossil fuels, but the government has been actively promoting renewable energy sources to reduce dependence on imported fuels and mitigate the impact of energy crises. Pakistan's energy evolution Pakistan's energy landscape has undergone significant changes in recent years, driven by the government's efforts to diversify the energy mix and promote renewable energy sources. Historically, the country has relied heavily on fossil fuels, but the need for diversification has become increasingly apparent. According to Shah Jahan Mirza, Managing Director at Private Power and Infrastructure Board (PPIB), the government's efforts are focused on ensuring affordability, sustainability, energy security, and energy access for all. "The Government of Pakistan (GOP) has been endeavouring to bring in transformational changes in the power system in order to ensure affordability, sustainability, energy security and energy access for all," he told The Express Tribune. The government is also cognizant of its global commitments towards climate change mitigation and Sustainable Development Goals. Mirza emphasised that utilisation of indigenous sources of power generation is the topmost priority of the government. Pakistan is blessed with a huge renewable energy resource potential, particularly solar energy. "Pakistan is blessed with a huge renewable energy resource potential particularly solar energy," Mirza noted. "The continuous technological advancements coupled with decreasing cost of renewables, in particular wind and solar energy, make them the most viable options for large scale energy production." The government's renewable energy targets and policies have played a crucial role in promoting the growth of solar energy in Pakistan. The first renewable energy policy was announced in 2006, which kick-started the development of renewable energy projects in the country. Mirza highlighted the significance of this policy, stating, "The Government announced the first renewable energy policy in 2006 that kick started the promotion and development of renewable energy projects in Pakistan. The policy resulted in attracting private sector investment in wind, solar and bagasse based power generation projects." The policy also envisioned net-metering-based solar installations, which have seen a sharp rise in recent years. "The RE Policy 2006 also envisioned net-metering based solar installations for which NEPRA announced the requisite regulations in 2015," Mirza said. Today, there are over 302,409 net-metering-based installations with an installed capacity of 4,492 MW. The government has set ambitious targets for renewable energy, aiming to achieve 60 per cent of its generation capacity through indigenous clean energy technologies by 2030. The National Electricity Policy 2021 and the National Electricity Plan (NEP) 2023-27 outline the strategies and actions for attaining the desired outcomes for the power sector. Mirza emphasised that the government has set in place the necessary policy framework for ensuring the supply of reliable, secure, efficient, and affordable electricity and making a transition towards clean energy resources. To support the continued growth of solar energy, the government plans to continue its policy and regulatory support. "The Government is continuing its support towards the growth of solar energy through policy and regulatory framework," Mirza said. Solar energy will remain a main component of new large-scale capacity additions in the future, and the government is promoting distributed generation through renewables, both in grid-connected and off-grid modes. "Solar energy, being one of the cheapest sources of power generation, would remain a main component of new large scale capacity additions in the future," Mirza noted. The government is also promoting micro and mini grids based on renewable sources for provision of electricity to off-grid population. Mirza highlighted that the initiation of the whole electricity market under the CTBCM regime would also pave the way for more renewable energy-based installations. "The initiation of the whole electricity market under the CTBCM regime would also pave the way for more renewable energy based installations," he said. As Pakistan continues to transition towards a more sustainable energy future, the growth of solar energy is expected to play a vital role in meeting the country's energy demands. With the government's supportive policies and regulatory framework in place, the stage is set for solar energy to become a major player in Pakistan's energy landscape. Solar or bust Solar energy has been quietly but steadily transforming Pakistan's energy mix over the past few years. What once felt like a niche or long-term goal is now becoming a practical solution for households, industries, and even the government driven by a mix of incentives, falling costs, and a growing awareness of climate change. One of the major reasons behind this shift is policy support. From tax exemptions to net metering, the government has created space for solar to grow. Net metering, in particular, has been a game-changer. It allows homes and businesses to produce their own electricity through solar panels and sell the excess back to the grid bringing down electricity bills and making the investment worthwhile. According to NEPRA, over 302,000 net-metering connections are now active, generating more than 4,400 MW of clean electricity. In Karachi, Faizan Ahmed installed a 10kW solar system at his home in Gulshan-e-Iqbal. Three months later, not only was the system running all his household appliances including air conditioners and heavy electronics but he was also selling surplus electricity back to the grid. 'We didn't expect this kind of performance,' said Faizan. 'Even after running everything at home, we still had extra units. By the third month, we started selling electricity back to K-Electric, and the amount was adjusted in our bill. After six months, our bill actually went into negative. That's when I realised solar isn't just saving us money, it's earning for us too.' It's not just Karachi. In Lahore's Johar Town, Fatima Khurram and her family switched to solar a year ago. Rising electricity costs were becoming unsustainable, and frequent load shedding was an added frustration. 'We had a 7kW system installed through a local vendor,' shared Fatima. 'The initial investment was heavy, but within five months, we saw the savings. No more load shedding issues, and our bills dropped from Rs. 45,000 a month to just a few hundred rupees or nothing at all when we generate more than we consume.' She adds that in summer, when ACs run for longer hours, solar covers the load effortlessly. 'It's peace of mind. I feel like we've taken control of our power,' she added. Of course, not everything is perfect. Zeeshan Rehman, a resident of Karachi who installed an 8kW solar setup last year, says that while the system has significantly reduced his dependency on grid electricity, there's some frustration with how energy companies handle buy-back rates. 'We sell our extra units to the grid at Rs. 11 per unit,' he explained. 'But when we buy back electricity at night or during cloudy days, it's charged at Rs. 30 or more per unit. That part feels unfair. Still, the overall benefit of solar can't be denied. We spent around Rs. 1 million on the system, and we expect to recover that investment in three to four years. More importantly, we're not dependent on the supply from the company anymore.' This sense of energy independence is growing in urban and semi-urban areas across the country, where erratic supply, rising bills, and fuel costs have made solar an increasingly attractive option. There are two main billing systems for solar energy users in Pakistan - net metering and gross metering The net metering is the more common method. It lets users consume the solar energy they produce first, and any extra units are sent back to the grid. These exported units are then adjusted against the electricity taken from the grid meaning your bill reflects the 'net' difference. This system has helped many users bring their electricity bills down to nearly zero. Whereas in the gross metering, all the solar energy generated is exported to the grid, and the user continues to buy electricity from the company as usual. The exported solar energy is paid at a fixed rate. This setup is less common for residential users because it doesn't allow them to offset their own consumption directly, and the rate paid by the power company is usually lower than the rate at which it sells electricity. Still, the adoption of solar energy is on the rise. A recent report by UK-based think tank Ember revealed that Pakistan imported 17 GW worth of solar panels in 2024 twice the volume of 2023. Industry insiders expect solar to make up at least 10 per cent of the national energy mix by 2030. Pakistan's rooftops are transforming into a sea of blue as solar panels sprout up everywhere. Ubaid Ullah, an energy expert in Karachi, notes, "If you look at satellite images of any Pakistani city, all the roofs appear blue." Individual necessity and market forces, rather than government policies or foreign investment drives this rapid shift. According to Ember, most new solar installations are off-grid or behind-the-meter, flying under the radar of official statistics and leaving the national grid scrambling to keep up. Amjad warns, "The role of the grid has to massively adapt to remain relevant. Rooftop solar is fast becoming the preferred energy provider." Without large-scale solar auctions or public investment, the infrastructure and regulatory systems are struggling to keep pace. Experts caution that this decentralised energy revolution could lead to instability without better planning and oversight. The "utility death spiral" is already unfolding in urban centers, where users are turning away from the public grid, eroding its financial base, and exacerbating challenges during peak evening hours. Despite these challenges, Pakistan's example offers valuable lessons for other Global South nations. Harjeet Singh, adviser to the Fossil Fuel Non-Proliferation Treaty Initiative, emphasises, "This isn't simply about decarbonisation anymore; it's fundamentally about ensuring energy access, driving economic stability, and strengthening energy security from the ground up." As the shift towards distributed, clean energy accelerates, battery storage is expected to follow a similar grassroots trajectory. According to Renewables First's study, "The Great Solar Rush in Pakistan," Pakistan's solar boom is driven by a consumer-led model, with 15 GW of solar panels imported from China in the past fiscal year, resulting in a 10.4 per cent drop in grid electricity demand. The study highlights the need for grid modernisation and revised demand forecasts to support decentralised energy generation. As Dave Jones of Ember Energy notes, "Pakistan's model demonstrated how a booming solar market could offer a transformative path in places like South Africa, Brazil, and Nigeria, offering alternative for decentralised and people-led energy transitions." With Pakistan's solar capacity expected to grow from 1.41 GW in 2024 to 9.53 GW by 2029, the future of energy in Pakistan and beyond looks bright. As the shift towards distributed, clean energy accelerates, Pakistan's example offers valuable lessons for other Global South nations. With the right mix of policy support, affordability, and public awareness, solar is no longer a far-fetched idea. It is already becoming part of everyday life. And as more people like Faizan, Fatima, and Zeeshan share their stories, it's clear that this isn't just about cutting costs it's about taking charge of your own power and contributing to a cleaner, more sustainable future. But what does this mean for Pakistan's economy? Impact on economy The growth of solar energy in Pakistan has significant implications for the country's economy and environment. According to Dr. Junaid Ahmed, Senior Research Economist at the Pakistan Institute of Development Economics (PIDE), solar energy presents Pakistan with a strategic pathway to lower electricity generation costs, improve supply reliability, and increase productivity gain across sectors. One of the key economic benefits of solar energy is its potential to contribute to Pakistan's GDP growth. Dr. Ahmed explains that by substituting high-marginal-cost thermal generation, solar reduces the overall cost base specifically for energy-intensive industries and SMEs, which are disproportionately affected by power outages and tariff fluctuations. "These efficiency gains translate into higher capacity utilisation, improved industrial competitiveness, and increased investment activity," he told The Express Tribune. 'Over the medium term, solar contributes to capital deepening and raises energy efficiency per unit of output, directly supporting total factor productivity, one of the crucial factors of sustained economic growth.' Solar energy can also help reduce Pakistan's reliance on imported fossil fuels, which is a significant drain on the country's foreign exchange reserves. Dr. Ahmed emphasises that solar energy offers a strategic response to Pakistan's structural reliance on imported fossil fuels, a key source of external sector vulnerability. "Solar significantly reduces foreign exchange outflows and mitigates exposure to global energy price volatility by substituting recurring fuel imports with capital-intensive, domestically sourced infrastructure that requires one-time investment," he said adding that this rebalancing of the energy mix supports current account sustainability, eases pressure on foreign reserves, and contributes to a more stable balance of payments. 'By lowering the import intensity of energy generation, solar also reinforces macroeconomic stability, particularly during commodity price volatility or periods of constrained external financing' In addition to its economic benefits, solar energy also has significant labor market implications. Dr. Ahmed notes that solar expansion is labor-intensive, particularly in installation, maintenance, and localised component manufacturing. "It generates employment across skill levels and regions, supporting inclusive job creation in both urban and rural settings," he said. Moreover, solar supports SME growth by ensuring reliable energy, especially in areas with limited grid access or load shedding, enabling businesses to grow and contributing to more employment opportunities. However, Dr. Ahmed also notes that there are structural challenges that need to be addressed to scale solar energy effectively. "A key structural challenge lies in existing power agreements with Independent Power Producers (IPPs), which guarantee fixed capacity payments regardless of actual demand," he said. "As solar adoption grows and reduces net grid demand, these contracts become increasingly inefficient raising costs, distorting tariffs, and adding to the circular debt burden." To scale solar effectively, IPP contracts must be restructured to reflect current demand realities and facilitate the integration of renewables. But for this transition to really take off, Pakistan needs to equip people with the right skills. That means more training programs, certifications, and technical education to create a workforce that can meet the growing demand. Dr. Ahmed says, 'Pakistan must invest in workforce development through skill training, certification, and technical education to fully capture these labor market benefits.' At the same time, energy reliability is still a huge issue in many parts of the country. Solar offers a real solution here not just backup during loadshedding, but independence from the grid for those who want it. For small businesses and households, that kind of control over electricity can be a game changer. But investing such a huge amount is not easy for everyone, to solve this issue there are many financing options available in the country. Solar accessibility The benefits of solar energy are hard to ignore – clean power, lower electricity bills, and a reduced carbon footprint. But for many individuals and businesses in Pakistan, the high upfront cost of installing solar panels remains a major hurdle. That's slowly starting to change. Banks are stepping in to make solar energy more accessible through tailored financing options. Asim Qureshi, Head of Products and Analytics, Retail Banking at JS Bank, says the banking sector is now actively supporting a wide range of customers. 'Banks are providing solar financing options for consumers, small and medium enterprises, commercial businesses, and the agriculture sector,' he explains. But affordability isn't the only thing on a bank's checklist. When evaluating solar financing applications, banks take a close look at the applicant's financial history. 'Credit worthiness is evaluated based on the credit history, income documentation/audited financials, and equity contribution,' Qureshi adds. Of course, the lending landscape isn't without its challenges. One persistent issue has been the high customer rate largely influenced by the Key Interest Benchmark Rate (KIBOR). Fortunately, the situation is improving. 'Customer rate was high due to high KIBOR but this has started becoming competitive due to the decreasing trend of KIBOR,' he notes. To protect themselves and their customers from potential risks, banks are also taking several precautionary measures. These include working exclusively with reputable solar solution providers and conducting on-ground surveys to better understand demand and supply trends. 'We have a well reputed solution providers on the panel of approved vendors which provide pre and post installation services to the customers,' Qureshi says. A bright future Pakistan's solar energy revolution is transforming the country's energy landscape, driven by a combination of government incentives, decreasing costs, and growing awareness of climate change. The emergence of Pakistan as the largest importer of solar panels in 2024 is a testament to the rapid growth of the solar industry in the country. Solar energy is not only reducing electricity bills for households and businesses but also creating employment opportunities, improving energy security, and contributing to a more sustainable future. With the right policies and financing options in place, solar energy has the potential to drive sustainable development in Pakistan, reducing the country's reliance on imported fossil fuels and mitigating the impacts of climate change. As Pakistan continues to harness the power of the sun, it is likely to play an increasingly important role in the country's energy mix, paving the way for a cleaner, greener, and more sustainable future for generations to come.
