In this episode, I speak with Mustafa Amjad and Waqas Moosa about Pakistan's extraordinary solar boom — nearly 30 gigawatts of panels have flooded into the country since 2020! We explore how punishingly high grid electricity prices combined with dramatically cheaper Chinese solar panels have created a bottom-up energy revolution that could become the blueprint for energy transitions worldwide.
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David Roberts
Hello everyone, this is Volts for February 26, 2025, "Pakistan's solar boom." I'm your host, David Roberts. There is something quite remarkable taking place in Pakistan right now. Though the precise number is difficult to pin down, it appears the country has imported something close to 30 gigawatts worth of solar panels since 2020. In a country with a total installed grid capacity of around 45 gigawatts, that is seismic. What's even wilder is the recent jump — from 2.9 gigawatts of imports in 2023 to 16 in 2024, with 2025 on pace to beat that. It's still ramping up.
And to be clear, almost none of it is utility-scale solar farms. These panels are going on roofs, barns, and irrigation canals. What has prompted this explosion of distributed solar is some combination of punishingly high prices for grid power and solar panels getting very, very, very cheap. A glut of Chinese overcapacity means that the price of panels in Pakistan has gone from 24 cents a watt to 10 cents a watt in just the past year or two. Distributed solar is breaking over Pakistan like a tidal wave, despite utilities and a grid that do not seem entirely prepared for it.
So, who's buying all this solar? What are they doing with it? How do the utilities view it and what are they going to do about it? To talk through all this and more, I've contacted two experts. Mustafa Amjad is the program director at Renewables First, an energy think tank based in Islamabad. Waqas Moosa is the current chair of the Pakistan Solar Association and the CEO of Hadron Solar, which sells and installs solar systems across Pakistan.
These gentlemen have been on the ground and seen the country’s solar boom close up. They have thoughts on how it’s happened, what it means, and how to keep it going, and I can't wait to talk to them.
With no further ado, Mustafa Amjad and Waqas Moosa, welcome to Volts. Thank you so much for coming.
Mustafa Amjad
Thank you so much, David.
Waqas Moosa
Thank you, David, for having us.
David Roberts
I want to start with you, Mustafa. Before we even get to the solar, I was reading this report that your think tank put out on all this and the crucial background here is that the price of grid power in Pakistan is rapidly rising. Although, as far as I can tell, the level of service is not rising, the level of reliability is not rising, but the price is rising very, very quickly. So before we even get to the solar, why is that happening?
Mustafa Amjad
In the 2010s, we were struggling with undercapacity, so the solution that the government thought, you know, to solve the electricity crisis, was to put on more capacity and that all of that capacity mostly came through thermal power projects or IPPs. We installed a lot of local coal, imported coal power projects. We started our investment in RLNG projects. All of those came online in 2020 or early 2020s or late 2010s, and they added a lot of capacity payments to the cost of electricity. Yet, with COVID coming in, with the Russia-Ukraine crisis in play, the cost of imported fuel, both imported coal and RLNG rising, and then generally Pakistan's currency crisis, what it meant was we had to go into an IMF program.
The government was asked to remove all kinds of subsidies that were provided to different consumers. So, all of a sudden, we saw a jump of almost 155% in electricity tariffs over the past three years. And that was unprecedented, right?
So, people were actually paying more for their utilities or electricity essentially than they were paying for rent for a house in a metropolitan city. So, that was what the change meant in terms of the livelihood of people. Essentially, bad investments, bad decisions taken by the government, overcapacity, dependence on imported fuel. In an era where people were actually moving, governments were actually planning for renewables and with renewables, Pakistan continued investing in utility-scale thermal projects. And that was essentially what added a lot of capacity payments that had to be then recovered from the bills and the tariffs.
David Roberts
Right. So, these contracts with these fossil fuel plants require capacity payments to be made whether or not the plants are running.
Mustafa Amjad
Yes.
David Roberts
Whether or not they're producing anything, and you have overcapacity. So, a lot of them aren't producing anything, but you're still making capacity payments to them.
Mustafa Amjad
Yeah, so some of them are way too underutilized. So, we had some RLNG projects come online a couple of years back, and their utilization rate is somewhere around 5 to 10%. We have imported coal power projects that essentially didn't run the whole of the last summer because we had hydro available. And with the solar rush effectively in play, the demand on the grid is not increasing, or it's cliffing. So, that in itself is a parallel crisis which is growing at the utility level. Yet, for the people of Pakistan, with the solar coming in, the prices of electricity are going down.
So, it's a win-win situation if you are considering it from a public perspective. But from the government's perspective or from the utility perspective, it's a crisis that is brewing.
David Roberts
I want to talk a little bit later about what the utilities can do, what they can do with all those fossil fuel power plants. So, this is just the context then: It's not that Pakistan is short on power capacity, it has more power capacity than it has demand. It's just big, expensive fossil fuel power plants. So then, in the face of this, in comes this flood of cheap Chinese solar panels. So, Waqas, maybe turn to you, you're out there installing solar panels for people. I have sort of two questions. One is, who are these people?
Like what kinds of people are buying this solar and what are they using it for? And number two, sort of what are they telling you about why they're buying it? Is it pure economics here?
Waqas Moosa
So, I mean, just to add on to the point which has already been mentioned, it's sort of like a perfect storm coming together at the same time. So, on the one hand, you have rising electricity costs because the capacity charges are going up. It's like, you know, you had a wedding party and you were expecting a lot of guests over, so you booked 10 cars or 15 cars and then so many guests did not arrive. So now, you still have to pay for the rent of those cars, right? So, you can save on the fuel costs.
So, that's what the power plants are. So, you know, you've got these huge power plants put in place and suddenly there is not enough consumption. You can say the anticipated growth did not come in, there was a flaw in the planning, or there were some hidden agendas in terms of, you know, putting those in. Obviously, there's always a mix of these things. So, we end up with a situation where today, I think, I was reading the State of Industry report for NEPRA, which is the power regulator in Pakistan for 2024, and in some cases, 60% of the unit cost of electricity is being driven or is being derived from the capacity charges.
So, you know, 60% is overheads and only 40% is the actual energy cost. So that's one area.
David Roberts
Yikes.
Waqas Moosa
Cost is going up. On the other hand, we also have an infrastructure issue in terms of the — so, you know, with power there are two things: there's the production cost and then there's the distribution cost. Generally speaking, these decisions, these power sector decisions, are taken by politicians and bureaucrats to some extent. But, you know, politicians frequently drive those policy level changes. Putting up big power plants is always easy. You know, it's something which is visible, it's a huge infrastructure. You can brag about how many megawatts or how many gigawatts of power you put in. And I remember in the 2013 elections, this was a big issue, the rolling blackouts.
We have this term, load shedding. You might have heard of this in South Africa as well, where, you know, when there is a short capacity, some areas get cut, rolling blackouts kind of thing. It's sometimes scheduled, sometimes it's unscheduled. So we had that as an issue. There was a lot of investment going into the production side, but not enough investment going into the distribution side. And because of that, and with an aging infrastructure of the grid, we also had frequent power outages. So from a common man's perspective, on the one hand, electricity prices are going up.
On the other hand, even when electricity is available or when you're willing to pay the higher prices, there might be, you know, there used to be days in 2013, 2014, 2012 in the early 2010s, you can say, where we had 8 hours, 10 hours, 12 hours blackouts in urban areas and even larger, longer blackouts in the rural areas. So there's, on the one side, this problem. A lot of people are trying to find alternatives. So that's where solar kind of came in. At the same time, the prices of solar are going down.
So, it's like this whole multiplier effect kind of thing. Everything is coming in place at the same time. And then the second question. So, with all of these things coming in, it kind of created a momentum for solar. And the last couple of years, as the prices of solar panels across the world have gone down with the supply glut and also improving technology, and as we've seen with all other technologies, mobile phones, the processors and speed of your cameras and stuff like this. So, the solar panels have also improved drastically in the last five, ten years.
Every year is like another capacity or another milestone achieved in terms of efficiencies. So, we're getting all of these things coming in, and people are starting to find that the return on investment on solar projects, you know, started from five years, then went to four years, three years. And now, in some residential scenarios, you know, we have a one year, one and a half year kind of payback, which is very attractive. So, that makes a lot of sense. The second question which you asked me was, "Where is it going?" So, it's pretty much going across the board.
We are seeing large industry put in solar because they want a consistent supply and they want to save on their electricity costs. Over there, it's primarily a financial decision. So, they're putting in large plants, 1 megawatt, 2 megawatt, 15 megawatts, even for their own captive usage, which they're using themselves. We're seeing this in residential customers. People who have houses are putting up solar panels on their rooftop and becoming sort of independent of the grid. So, that's the second area where we're seeing that. We're seeing this a lot in rural areas. In rural Pakistan, a lot of the economy is agriculture-dependent.
So, we need a lot of water. And the water is usually pumped out from the ground. So, it's groundwater which is pumped out. So, a lot of these pumping solutions, agriculture pumps, we call them tube wells in Pakistan, they require a lot — usually they run on diesel generators or sometimes on electricity. So, a lot of the solar panels are going there as well. And then you have those areas which were completely off grid or very seldom on grid, you know, remote rural areas where the grid has not reached. So, we're getting a lot of people.
And it's amazing to see this. You know, you have people in residential areas where their electricity bills have dropped 80%, 90%, or even 100% in many cases. So they love it. They're telling their neighbors, and when their neighbors are seeing it, they want to know more about solar. And, you know, everybody's seeing this success story. We're seeing this in rural areas. So you go to a village and it's amazing. You know, you go and there's like this tire shop, somebody who's repairing tires for a motorcycle or for a cycle. And the guy opens the shop in the morning, he picks up the shutter, and then he brings out a solar panel and, you know, sort of attaches it with a stick and makes it stand straight.
And there are two wires going into a battery, and they're there giving him the light for his small bulb and maybe a fan.
David Roberts
Are you selling a lot to people who previously had no access to electricity? Because there are 40 million people in Afghanistan who have no electricity access at all. Are they getting any of this solar?
Waqas Moosa
Yes, they are. I mean, not me personally. I mean, as Hadron Solar, we are more focused on the urban and the small commercial kind of segments. But I also, I'm part of the Pakistan Solar Association. In fact, I'm the chairman of the Pakistan Solar Association in this term. So we have a lot of companies who are focused on rural area solutions as well, where they're doing solar projects. And some of them are with NGOs, some of them are direct, some of them are with microfinance institutions where they develop these small packages. I remember there was this story which one of our microfinance guys was telling me.
There's a concept of dowry in Pakistan. You know, when there's a marriage, the bride's father usually, or the bride's family, would put together some appliances and, you know, the durable goods kind of thing, and they would make it as a gift to the newly married couple and then they settle in. So recently, we've started seeing solar systems or smaller solar systems like a 3-kilowatt inverter with, you know, maybe four or five panels. And it's become like something which is sometimes included in the dowry itself.
David Roberts
Incredibly useful for a new family, right?
Waqas Moosa
It's probably more useful than the washing machine or a television. So, it's something which has become acceptable. So, we do supply equipment to these rural areas as well. So, there is like, you know, wholesalers or markets where they can go and buy panels. And then the local electricians are very creative and, you know, they would go in and do the installations. And solar is not that difficult to install, especially the smaller systems.
David Roberts
In the US context, one of the criticisms of solar and wind is that you can't run industry on this because it's only generating during the day and industry needs a steady supply. So, it's funny to hear that businesses are turning to solar in order to get a steadier, more reliable supply. So, does that mean they're just running it during the day while the sun is out? They're just sort of tying their production to the sun being out?
Waqas Moosa
To some extent, yes. I mean, but looking at it from a background of the industry, a lot of them already have a secondary source of power on their own site. So it's like captive power plants. Either they're diesel-based generators or furnace oil-based generators or typically gas-based generators which use LNG or RLNG form of fuel, so what we do is then we do mixing of this. And that's something which I believe is innovation. I remember reading about the PV diesel or PV genset controllers which sort of manage the mix of these energies where the generators are running more efficiently because solar is tied in.
And this is something which, when we saw in the European markets, we realized that this is something which we were doing and it was so intuitive and it was something which was so easy for us to catch on to because this is something which was almost already happening. I mean, we'd sort of created these. So, we have a lot of suppliers who are doing these controllers who put together the equipment, the sensors, and the controller equipment, and they're able to sort of combine the solar power, the PV input, with the diesel generators or the grid. So, we have multiple sources.
And that's something which I think — I mean, it's, you know, as they say, necessity is the mother of invention. So where there is a necessity, the need is created. And this is something which we're seeing a lot happening and that's how they power this. And of course, now in the last, let's say, year or so, the holy grail is being completed with the batteries.
David Roberts
Yes, well, that was my next question is how many of these, I mean, in your current practice, what percentage of the solar systems you're installing? Are you installing batteries alongside?
Waqas Moosa
When we talk about residential systems, I mean, it's not that difficult to incorporate a battery. So, you can say that maybe 40 to 50% are already thinking about it or have already done it. I mean, previously, it used to be more of on-grid solar solutions without the battery. But in the last couple of years, we've seen a lot more inquiries for batteries and we're sort of studying battery technology. Batteries were something which were very common in Pakistan because of the outages. So, you know, people are used to the idea of having a main circuit in a house.
In Pakistan, one of the interesting things is that, in the way, for example, in California, they say that you cannot live without a car. This is what I've heard. I mean, I haven't had a chance to experience this.
David Roberts
Sadly, true.
Waqas Moosa
Yeah, so similarly in Pakistan, you cannot have a house without a UPS or a backup supply because, you know, you never know when the light would go out or when there would be a blackout. Sometimes it would be regular, sometimes it would not be. They might announce nine to three and they just decide to go from nine to six or they might not announce it at all. And you just live with it, you take it in your stride. So all houses already have some sort of backup solution available, otherwise, you won't be able to get work done.
So, offices will also have either generators or battery-based backup options. Because of that, there's already this trend of having these backup systems at homes and then having a secondary circuit. So, you know, you have a main circuit which powers your whole home. And then for the critical requirements, like for example, if you want to have an air conditioner and you know, the summer is quite hot in Pakistan. So, you'd have air conditioners which would be plugged into or which would have a generator supply coming in. So, maybe if you have five air conditioners in your house, like those split units, maybe two of them would be also covered by a generator.
Or, if you really like it, you'll have all of them. So, those people are now shifting from those generators towards those battery-based solutions. So, on residential, it's pretty much, I think, in the next year or so, especially as we expect some changes in the net metering regulations, that we will start seeing a lot more of the battery — maybe 80, 90% of the systems will start being integrated with the batteries. On the larger size, the factories and the bigger projects on that segment, which is a big segment of the overall power requirement, batteries are now coming in.
So, previously, batteries would just play the role of a bridge. Once the power goes out, you need 10 minutes to switch on the generator, but you can't stop your production or the process is such that there will be wastage if there's an interruption. So, they have a 10-minute or 15-minute battery backup. But now, a lot of them would start using batteries more. And then the batteries, they're also starting to see the other benefits of the batteries. And that's something which we're exploring for our customers. I would say that 80% of my commercial customers or industrial CNI customers are asking about batteries.
Not many of them have done it yet, but they've started exploring and they've started looking at the options.
David Roberts
That's interesting. So, Mustafa, let's talk a little bit about how all this is affecting power utilities. So, what's one very interesting thing that's going on alongside this, as all these solar panels flood in, power demand in Pakistan is actually falling, at least sort of like utility demand. And so, there's some question. You know, I read these, I read these reports and papers. It's a lot of math going on, trying to figure out exactly why power demand is going down. But at least some part of it, some big chunk of it, is that a lot of grid demand is shifting over to solar panels.
So, if you have these utilities with these big contracts with these old fossil fuel power plants that are already producing this expensive power that is driving people to solar, and then you drive people to solar, which means the cost of the power plants is then getting split by a smaller group of ratepayers, which makes the cost go up, which drives more of them to solar, which makes the costs go up, et cetera. This is the much-discussed utility death spiral that everyone worries about all the time. It seems like that's what's in front of Pakistan's utilities. So, how are they thinking about this?
How are they responding to all this?
Mustafa Amjad
So, that's exactly what it is, right? It's a utility death spiral in effect. And talk to global experts and they have their fingers crossed to pilot this in Pakistan, but that's the situation. So, I think it's important to understand that electricity in Pakistan, like most other countries, is a commodity, not a public service. Right. So, what is transpiring in Pakistan isn't something that is happening because of the government. It's despite the government in a lot of instances. Yes, the government had a lucrative net metering policy in place with excellent, you know, buyback rates for the overproduction of household solar systems.
But the government's forecasts, for instance, didn't really, you know, see this much addition of solar power coming in at the pace and the scale. So, what sets Pakistan apart from other solar transitions in the past versus solar journeys for other countries in the Global South is the speed and the scale of this transition. This is a very rapid, people-led, and market-driven, you know, solar revolution essentially. And to put it into context, I think the government puts out an annual indicative generation capacity expansion plan every year. And the last one had forecasted the addition of almost 3 gigawatt solar net metering for the next 10 years.
You know what the number of net metering is right now in Pakistan? It's almost 4 gigawatts and it's increasing at the rate of 300 megawatts per month.
David Roberts
Oh my goodness. Can I actually jump in here? Because this brings up another question, which is: Do we have a good sense of all these solar panels flooding into the country — because that's sort of how we're measuring this, just by the number of panels coming in — do we know how much of these solar systems are ending up grid-connected with net metering compensation versus just going to these off-grid, you know, where they're hooked up with a battery or something or just on a canal somewhere? Do we know what percentage is on and off-grid?
Mustafa Amjad
So, the only thing that we have a number for is what goes online and is grid-connected. So, you need to, you know, register your net metering connection. Even within net metering, a lot of people then get a net metering license and then they add more solar panels because the panels are so cheap. So, there is that quantum that goes unreported. So, when I say, you know, 4 gigawatts is installed, it's probably a gigawatt more because most people — as Waqas will, you know, be ready to jump in on — a lot of people have added more solar panels to their systems because solar panels were dead cheap.
And then, the payback periods are amazing, right? For each consumer class. Waqas mentioned less than a couple of years for residential consumers, for agricultural it is pretty similar because the conversion is essentially from diesel to solar. For industries, the equation is completely different with, you know, carbon border adjustment mechanism coming in with, you know, a lot of impetus to go green for export-oriented industries. So, there are always, you know, lots of those situations that are playing towards people moving more towards solar at the grid level.
David Roberts
You just mentioned this, but I just want to underline it because I think it's an interesting background fact here. It's like one of the things that's going on is international buyers, consumers want cleaner, greener supply chains and there are all these sort of like regulations and stuff going on around supply chains internationally. So, any business that's selling into international markets, apart from any environmental anything, just as a business matter, needs to clean up its supply chain to compete in these global markets. I thought that was an interesting point.
Mustafa Amjad
Yeah, so that's exactly it, right? And this is the business or the industrial side of the equation. At the utility level, now coming back to your first question, which was, "How is the utility perception about this?" Unfortunately, net metering is still perceived as competition rather than something that can complement grid electricity, and that results in certain delays of net metering connections. Technologically, there is no challenge for more solar to come online. But again, it requires a lot of unthinking of the way we perceive electricity or electricity markets in general in Pakistan, because for the longest time we had those firm capacities, those base load plants, a 600 megawatt, 1200 megawatt producing flat electricity for the day throughout.
So, shifting from that to something very modular, something very community-led, decentralized, requires a lot of rethinking in terms of policy, in terms of execution of the transmission system. Add to it, you know, all of those expensive fossil fuel or the fuel-guzzling power plants that we've set up in the past few years or the outdated ones. Rational policies would essentially require, you know, to start thinking about closing down these expensive, little-used, you know, coal and gas projects or power stations. So, the government is thinking on those lines.
So, we are — at the expense of further investment or even alienating a lot of our future investors — Pakistan is renegotiating its IPP contracts. Yes, those contracts were terrible contracts, by all means. Those were, you know, offering excellent incentives, dollarized returns payments irrespective of consumption of electricity. So, Pakistan did retire five thermal projects early. It's renegotiating 18 other projects in various different stages, changing their terms from take-or-pay to take-and-pay. So, there is that shift happening in parallel as well. But the impact of it also, at the end of the day, the utility will have to also start planning in terms of, you know, how do we integrate all of this solar, take this as an opportunity rather than as a challenge and then, you know, avoid the utility death spiral because that's going to happen if inaction is the route that the government takes.
Case in point, Waqas mentioned with batteries coming in. So, if the government, you know, goes s hush on solar panels, what people will do essentially is move away from the grid altogether because the business case will keep on improving.
David Roberts
Are there signs that they're going to revise net metering to lower the rate? Because I imagine they're kind of panicking right now, and so maybe that's kind of the first thing they can think of to do.
Waqas Moosa
Yeah, that's true.
Mustafa Amjad
That's definitely in the works. The government is quite adamant they're going to reduce, or almost halve, the rate of, you know, net metering buyback. Having said that, I think it wouldn't affect the market much, to be fair. There is enough adoption. The business case is such that even with the revised repeating rates, the payback would perhaps go up by a year or two. And at the end of the day, the next challenge for the solar revolution is to make it just and inclusive. Right. So the next step that we want out of this revolution is to make sure that those that require to move away from the grid or would benefit the most from moving away from the grid are also made a part of this revolution.
And there are some wonderful use cases, by the way, some wonderful stories on the ground. I was in Peshawar last week and there was this person who had set up a solar system at the back of a truck and they were sharing it between different households. So, in the morning, it was connected with one house for two hours, then the other, then the next. I saw a picture where somebody had just covered the circumference of their house. So, you know, forget about efficiency or making sure that the solar panels are facing the sun. All they did was, you know, just cover the circumference of their house with solar panels.
So, these are the kind of things that are happening on the ground. It's something that we should focus more on in making this journey more inclusive and making sure that, you know, those that would actually benefit the most from leaving this grid are also made a part of this transition.
Waqas Moosa
And that's the most important thing which we need to communicate and which we are trying to communicate, you know, as the Pakistan Solar Association, and definitely Renewables First as well. Last month, on the 30th of January, we had a conference about the solar rush. And, you know, it's like based on the gold rush. And we're trying to sort of share the insights with the regulators and the people in charge or the people who are making the policy. And, you know, we do expect that net metering rates would be revised. This is something which we've seen across the world and I think this is, this is fair.
It's something which we agree with. Obviously, we need to create, everybody needs to share from the benefit of the solar rush. However, we have to keep in mind that there's this elephant in the room. It's called the battery. So once the battery comes in and, you know, that's something which again, as the Pakistan Solar Association, we've been, I think, four years ago, we published a paper, "Utility 2.1, what the future of the grid is going to look like with distributed solar generation." And, you know, we are anticipating, obviously we are closer to the field so we can see the battery technologies and maybe we have optimism.
That's why we're in the solar industry, and that's why we're talking on this podcast. So, we have this belief that there's going to be improvement in battery technology. Now, it's coming to light. Today, we're hearing these words, you know, the duck curve and the utility death spiral being spoken of in the power corridors of Pakistan, which we've been trying to tell them about for the past four or five years. So, that's something which is good, but now we need to educate them, and we need to tell them that, "Look, if you reduce the buyback rate too much, you're going to sort of, you know, people are going to start installing batteries in their house."
When there is a battery on the other side of the meter, you're out of the game. You know, you need to sort of, as the distribution company or as the power sector, understand that you're in the business of selling electricity. It's not in the business of selling the electricity which you produce; it's selling and buying electricity. It's a distribution company. So, you know, why don't you put in the batteries and start thinking about letting the market play itself?
David Roberts
Even in sort of wealthy markets, it's not a small thing to integrate a bunch of distributed solar into the grid. It requires a little bit of control technology and you need some pretty high-tech equipment so that it's on the grid. Everything is speaking to one another and there's a lot of modernization involved, and these utilities are facing the need to do that in an incredibly short period of time.
Waqas Moosa
Unfortunately, that's true. But, you know, this is what's happening. So, what solar and batteries have done to the power sector is something like what YouTube, Twitter, and TikTok have done to the media world. Everything has just turned on its head and it's going to happen whether you like it or not. You know, solar has kind of democratized power generation. Everybody is now a producer as well as a consumer. So, what happens is that some of our existing models will need to be upended, some of them will need to be changed. Obviously, we cannot do everything overnight, but, you know, we can start working on pilot projects and start looking at how things are going to happen.
In a way, we are fortunate, you can say. I mean, I'm always the glass half full kind of guy, the optimistic guy. So I say, you know, "Yes, we've got these capacity charges and we've got this huge, you know, boatload of plants which are active and we've got a lot of electricity. But on the other hand, if you look at the per capita consumption of electricity in Pakistan, it's still bottom third." You know, it's amongst the lowest in the world. So we have a lot of way to go. So in a way, it's kind of a blessing that this decision has already been taken.
You know, we've gotten these power plants already there. Now, the only thing which is missing is the growth. So now, you've ordered pizza for 200 people. So, it's, you know, let's open, let's invite the neighbors, let's get everything going. And what does it mean practically? I mean, of course, everything needs to be rooted into practicality. And this is something which we are working hard as the Pakistan Solar Association, Renewables First, other think tanks, and other organizations to educate. And I think this is something where a lot of the other countries in the world can also sort of like get a crash course.
In a way, Pakistan, by luck or by design. I mean, definitely not by design, but like, you know, mostly by luck. We are in a situation where, you know, we're sitting on the doorstep of China. So, when there's a panels glut, one of the first countries that gets it is Pakistan. We have the electricity crisis and, you know, as I said, the perfect storm is here. The batteries are just coming around the corner. The market is already very used to working on batteries. So, all of these things will increase the adoption even further. So, we are going to see a situation where the utility business is going to be stressed heavily by the new business model, which is the solar and battery and kind of business model.
And what does Pakistan do? It's something which a lot of others, maybe not the fully developed countries, but you know, there's a lot of countries behind us on the development scale. A lot of them can learn and sort of see what we do and we need to sort of do these things well. So, I can see, for example, one big area obviously is economic growth. You know, if you have growth, electricity consumption will increase. And you know, we have these power plants coming in and solar kind of complements them. That's kind of the most difficult part.
It's difficult to get consistent growth. I mean, that's something which we do know, and there are people working on it, and obviously, we hope that they'll do a good job on it. But second, there are other things which we can do, you know. So, for example, we also have a lot of gas consumption in Pakistan. Natural gas, we use that for power plants, we use that in homes. So, you know, in terms of gas usage, for example, there is the usage in space heating. So that's something which, if you increase the gas prices and make it — you know, we also import gas, so we spend dollars on that as well.
So, if we can save those dollars, increase the price of gas, and you know, the invisible hand of Adam Smith, which will, once you let the prices be natural — and it's already happening, I'm seeing this. So, for example, when gas prices have gone up, space heating and water heating have already kind of started to shift towards electric. We're seeing this trend, new houses being built with electric-based heaters instead of having gas connections in all rooms. We're seeing this in Europe as well. I don't know if, I'm not really sure.
David Roberts
Yeah, that's everywhere.
Waqas Moosa
It's happening everywhere. Cooking is something for which we use a lot of gas. That's something which, you know, in the world, there's a lot of electric usage, so that's something we need to build on, educate people about. And again, I think if we increase the prices, that kind of takes care of half the problem. You know, if your food doesn't taste very good when it's cooked on electric ovens, but when it's cooked on gas, it's better. But when you increase the prices, the taste will also change. So that's something which we'll see.
The third big one, and I think this is one which we really need to push on now, is the EV revolution. And you know, when we say EV, for a lot of us, EV means four wheels, because that's the — but the real EV in Pakistan and a lot of the developing market is the two-wheelers and the three-wheelers. You know, I was reading somewhere, I think with, discussing with Mustafa, that about 60 to 70% of our fuel consumption is on two-wheelers and three-wheelers. And those are so easy to electrify. We're seeing this and again, this is something which is happening already.
It's not something in isolation, and we need to push this. So, basically, we're trying to engage the policymakers, the government, the regulators, and push them towards it. Don't be afraid of solar. Solar is your friend.
David Roberts
Maybe this is obvious to you, maybe you're already saying this, but like sending less money out of the country to buy fuel, you know, if you're not sending it out of the country, it's staying in the country and all things being equal, that means more economic growth, right? I mean, if you're after growth, one great way to get growth is to stop wasting money on importing fuel.
Waqas Moosa
And then, you know, when we increase consumption of electricity for charging these motorcycles, scooters, and tuk tuks, and we increase electricity consumption for the gas requirement and the heating requirement, what happens is your capacity charges problem also kind of solves itself. Because as you increase consumption, the capacity gets divided. So you play the problem on the other side. And that's where the utilities, we want them to focus on. Yes, we understand that there's some imminent crisis and, you know, yes, net metering regulations need to be changed, but we have to keep that in context that, you know, net metering based connections are maybe taking 20% or 30% of the solar capacity, as Mustafa was saying.
A lot of the solar is being installed in places where there's no net metering. So, they might be connected to the grid and consumption is going down. So, even if you change the net metering policy, if you change the net metering policy and there is somebody who's installed solar in his house, they might just increase the amount of solar they have and you can control it if it's going to come on the grid or if they try to sell it back. But, you know, once the batteries come in, they might just say, "You know what, okay, it's okay, you can keep your — I mean, I will not sell it back to you."
David Roberts
You can imagine. I mean, obviously, this would be, I think, a terrible way to respond to all this. But like, you can imagine the government just sort of panicking and trying to just cut off imports. I mean, is there any talk about just trying to cut this off before it drives more crisis?
Waqas Moosa
That's what we're trying to avoid. There's always people on the fringe who might come up with ideas like this. But we're very, very optimistic that this is a fringe only. They might change some policies. For example, I mean, we were hearing about the possibility of imposing a tax on solar panels, for example. So that's something we'll fight tooth and nail, obviously. Mustafa will help us on that, but we'll educate them that, you know, there is, it's always a matter of if you tax solar, you're kind of reducing — and you know, if the demand goes down by 10%, I mean, let's say you put a 10% tax and demand goes down by 10%.
So, that 10% which you saved with a breakeven of two years and a life of 10 years, so the 10% that you saved today is going to end up costing you five times that over the next 10 years in terms of the fuel which you could have not imported, you know, and the petrol which you did not import and use electricity for that. So, I think we have enough sensible people. You always hope that.
David Roberts
They're fuel-saving machines. Maybe that's how you pitch them. Mustafa, I know you talk to policymakers a lot. Do you have, I don't know, like in your back pocket, a set of like two or three sort of top reforms that you would like to see the government make to sort of, you know, to make this into a positive experience rather than a bust?
Mustafa Amjad
Yeah, so in Pakistan, electricity is still very vertically integrated as a subject. It's government-owned. There are conversations of privatization across the board. So, for distribution companies as well. And that is exactly something that is also driving the question of, you know, maintaining the health of the utility or maintaining the profitability of distribution companies. Something that the IMF is also, you know, peddling and in tandem suggesting that let's slow down the solar revolution. Let's manage the solar revolution. So you can actually privatize these companies first and then let it be a private problem. But nonetheless, there is that competitive market and a model that is in discussions in the works that Pakistan is shifting towards.
So, opening up the market, allowing more competition would actually better manage the supply and the demand question. I think that's one step that would be necessary. Secondly, I think electrify everything. That's something that already mentioned. It's a huge, huge market, by the way, for EVs. So, Pakistan just put out an EV policy draft last month. So, that's something that once approved can definitely drive a demand for electric vehicles.
David Roberts
You must have access to cheap Chinese EVs too, right?
Mustafa Amjad
Everything. Chinese batteries, Chinese solar panels. Even our coal power projects are Chinese, by the way. Just a heads up. So yeah, China is always going to play a huge role since there's an FTA zero-rated imports coming through. That is going to be a huge factor with EVs as well. I think the industrial electrification and decarbonization, that's another huge avenue. Pakistan's primary consumption off the grid right now is the domestic sector. That isn't necessarily the case in a lot of developing countries. I think that's something that we need to reverse quite urgently. So, more productive load with better building designs, better energy efficiency.
So, it's going to require a lot of lifestyle change. But at the same time, I think it requires a lot of proactive action at the government's end. Grid modernization is another major challenge. Integrating renewables is a challenge, like you said, rightly so, it requires a lot of proactive planning, some excellent markets, some robust systems, peak shaving and whatnot. So, all of that needs to be done in a very short span of time for Pakistan to actually come out of this utility death spiral. The challenge is huge for sure, but it's not something that cannot be addressed.
And then, I think Pakistan is an excellent market, by the way, to also pilot early coal retirements. So, ETFs, just energy transition partnerships, it's a market ready for that conversation for sure. That's another area that could be identified. But the key message is: just drive demand.
David Roberts
Seems like it must be complicated, these contracts. It's complicated to figure out exactly how to retire these things and if so, who pays for them? Are the people of Pakistan going to get stuck with the bill if these things shut down early, or are those talks underway?
Mustafa Amjad
So, the business case is there, right? It would make a lot of economic sense. You are going to pay for capacity payments irrespective of the next 10, 15 years and these plants will have minimum to no dispatch because of solar, because of no demand increase. So, there is business sense, let's pay them off one time and then recover the cost. But at the same time, you have to understand it's Pakistan. There are always going to be competing economic interests and obviously, you have better uses for that money. So, that is where international finance can definitely play a role.
And my final, I think, conversation that Waqas very briefly talked about, but this is a very new energy transition model as well, David. So for the longest time, the blueprint of energy transition was conceived as something that the IFIs (International Financial Institutions) will drive or MDBs (Multilateral Development Banks) will play a role. So we will de-risk or we will make solar and wind profitable for utilities. And that would essentially drive energy transition across markets, especially the Global South. But what has happened in Pakistan, what has transpired in Pakistan, is quite the opposite, right? Pakistan was struggling throughout last year to get a single bid in a competitive auction process for a 600 megawatt utility scale solar project.
Yet, in the same window under the same economic situation and conditions, so Pakistanis were reporting, you know, almost 20 plus gigawatts of solar panels.
David Roberts
Can we, can we pause on that? Why is there not more, I mean, especially given how cheap solar is, why is there not more utility-scale solar happening? It seems like that would be cheap too. What's kind of the, what's the holdup?
Mustafa Amjad
So, Pakistan was one of those countries, by the way, that actually started its renewable journey prior to investing in a coal power project. Fun fact. So, we actually set up wind and solar projects three to four years before we actually set up a coal power project. But then again, I think the direction was set by vested interests, by a few lobbies suggesting that "Let's — RLNG is quite cheap, let's set up those projects, wind and solar is not available, it's not dependable, it's not something that is ready to be adopted at a mass scale." So, Pakistan missed the bus essentially despite being one of the first people to jump on the bus, ironically.
On the other hand, I think right now we are also struggling with a lot of risk associated with the market, with the government, with investing with the government, especially with IPP (Independent Power Producers) renegotiations happening. So, the investor confidence is very low in terms of negotiating with the government. The government's reputation due to the currency devaluation due to the economic crisis at hand also plays a big role in making more market-led solutions and not essentially doing contracts with the government. But there's the opportunity, I think, for a lot of Global South countries. So, this is not something that we associate with Pakistan only.
This is quite common in a lot of other Global South economies as well, or developing countries as well. And that is where I think the focus should shift for the energy transition in general as well. I think for far too long we've been focusing a lot on those top-down approaches to energy transition. Here's a model that actually tries to empower the people, democratize the system. And that's the pipe dream for a lot of us advocates, right? An energy system owned by the people that they can control, they can manage. So that's what the solar revolution in Pakistan is.
And that is why I think it becomes all the more important for this to sustain and to be not a warning sign for future revolutions, but actually a blueprint to follow. And that is where I think the PSA and our work becomes all the more important.
David Roberts
Yes, I have one more question about that. But briefly, I just have one final question for Waqas, which is among the things that are needed for this solar revolution obviously is a workforce, you know, people who are trained in dealing with solar panels and inverters and setting them up. And I imagine there's a lot of, you know, in these cases there's, there's a lot of sort of improvisation needed, a lot of different kinds of situations, a lot of different use cases. Does Pakistan have the workforce that it needs to keep up with the flood of solar panels?
Waqas Moosa
In short, the answer is "not now." But I mean, it's like as soon as we get these technicians and students ready for work, they're snapped up immediately. So, in the solar companies, there is immense competition. You know, the wages are going up. And so, an engineer who graduated in 2010, for example, so you know, in 2010, when solar was not that cool or it was not that in a thing, those engineers are behind in terms of salaries versus engineers who graduated in 2015. So, they have five years or double the experience, but they're getting paid less because the solar guys have just, they have the skill which is required in the economy and it's, it's growing and it's booming.
And I guess that's what happens when there's like a gold rush or the solar rush. This is something which we're dealing with and we need to plan this as well. We are working with the vocational training institutions, multiple vocational training institutions, who would give diplomas, who train technicians. We are also trying to come up with our own certification program for, you know, electricians who have already been working on the field in different, similar kind of areas and give them like a three month, six month, two year courses which they can take and make themselves qualified because we want to make sure that these installations are safe and they're easy to do.
It also opens up a lot of entrepreneurship opportunities, especially in these rural areas. It's typically the electrician is his own boss, so it's their own work. So, teaching them quickly about sales techniques, how to explain solar to their customers, how to do the right calculations. So, a lot of people are learning on the job, but we're also trying, not just as, I mean, Pakistan Solar Association definitely, but also there are other entities. We are seeing this again. We're trying to work with the government because there are some existing opportunities or existing network of — we're trying to update their courses.
So, they're still teaching people about poly panels versus mono panels. And we're like, "Guys, that's like last century. Let's move on and let's talk about the latest things which are coming in." But, so that's something which we're doing. In fact, we have a vision of, you know, I believe that we're lucky in the sense that we're getting to do a lot of this at home and we're getting to do a lot of this deployment and troubleshooting. And, you know, whenever something new comes in, obviously there's a lot of learning which needs to happen.
So, if we can do this right, there's a lot of other markets. Typically, you know, Pakistan exports a lot of labor to the Middle East, especially the GCC (Gulf Cooperation Council), you know, Saudi Arabia, UAE, Qatar, these markets. So, that's again, solar is another area where they're also coming into this. I mean, I was reading the statistics. Pakistan is the number one importer of Chinese solar panels for 2024 in the Asia region. I think we were at 17 gigawatts, followed in second place by India. I was looking at the numbers for Saudi Arabia. They're also at around 15 gigawatts.
So, they will need help in deploying this solar. And that's an area which, you know, so we, we can not only benefit ourselves, but based on that, be able to export manpower or expertise. And like we talked about, the idea of how factories which have daytime solar, but they have a 24/7 load profile. So, how can they merge solar with batteries and solar with genset controllers and, you know, these diesel and PV controllers which can combine these energy sources. And that's something that, again, we have a lot of expertise on because we've been doing this for the last three years.
We've burnt enough machines to know, you know, what doesn't work and what does work.
David Roberts
Well, yeah, I mean, it occurs to me that, like, the training that you would need to fit into the industry in the US or Europe is a little bit different. The training you're giving people is specific to these kinds of markets. And these are the kinds of markets where solar is booming right now. So in a sense, it's almost like a specialized form of labor.
Waqas Moosa
And that's something which we can capitalize on, we can leverage on, you know. If we look at all of Africa, very similar market segments, a lot of Asia, you know, even Middle East to some extent, there are some differences but there is like Egypt, you know, Iran perhaps, I mean Afghanistan. All of these markets have a similar kind of broken infrastructure of energy, the kind that we're living in unfortunately. So this model which we create or which we are sort of creating on the fly or we're working on as we go, that's something which can easily be replicated in other markets as well. I mean obviously the learnings can be replicated, but some of the people who got those learnings can also then go ahead and share those thinking with other people.
And even when we look at some of the more developed markets, in the developed markets, it's like, you know, they're kind of doing a watch and see approach. They're thinking and they're saying, "Okay, let's take baby steps, we'll do one step forward and then we'll do something." In Pakistan, we're like, "You know what, we're just jumping in." So we've kind of jumped into the deep end of the pool and we're learning to swim and hopefully, with the help of well-wishers and, you know, people, the sustainability and solar people around the world, we will be able to come out of the deep end, hopefully with learnings which can then be used in other parts as well.
I mean, we can have case studies and we can have things coming in that will be useful for a lot of people who are watching the solar horizon.
David Roberts
To me, that's one of the things that's so interesting and so great about solar in general is that it's so small and so modular that it just stimulates all this innovation. Not just like innovation in the manufacturing, but just innovation. Like the guy who puts the solar on his truck and shares it between houses. That's innovation. Figuring out how to do things in a low-income market. There's all kinds of innovations waiting to be had there. And then you give, you know, these kind of small holders a little bit of solar and a battery and then they become entrepreneurs, right?
And then, they're figuring out ways to make money. So, it's just so, as you say, Mustafa, so ground up rather than top down. Which brings me to my final question. Because we're short on time, but I love the vision of a bottom-up energy revolution coming to the developing world. I love that idea. I love the idea of a bottom-up; these people are getting powered despite institutions around institutions. But my question is, looking out 5, 10, 15 years, when you talk about really making the shift from developing to developed nation, when you talk about really industrializing, what is the handoff between sort of solar panels and then like enough power to run, you know, mega factories?
Like, do you see how the one transitions into the other, or how this bottom-up sort of becomes fully developed? If you see what I'm asking.
Mustafa Amjad
Yeah, that's the analyst bit. Right. So, Waqas was very right in saying what Pakistan has done is jumped into the deep end of the pool. And obviously, that has its benefits. Obviously, that's where, you know, the good water is. We enjoy swimming but, but there's also a chance of, you know, drowning much higher than compared to the shallow. And so, so, so it's very right. Pakistan will have to, you know, be very proactive in this revolution. There are models so we would now have to be some of the first adopters of some of the technology changes that are happening associated with solar.
We will have to revolutionize the system as it exists. We would not have to sail against the tide, continuing with the example of the pool, but we would need a more proactive approach. So, what could be a model that can work is using these decentralized systems, combining them with the grid, coming up with financial products or financial schemes that could actually provide the capital that is required for solarization to some of the communities that wouldn't necessarily be able to go solar, come up with solar for cities, then join them to the grid system altogether, provide a market where different consumers can actually sell to the grid as well and then use batteries. So, you can either go the California system or you could go the South Australia system.
Right, so, there is that in-between that Pakistan will have to decide. But nonetheless, these are exciting times. To be very fair, I think it's a good crisis to be in because at the end of the day, it is empowering lots of people in the country. And with the US, I think also at a very global scale with the US leadership change, it's also an opportunity for China to actually, you know, with more tariffs coming in, they are looking out for more markets for their solar panel. That would mean more solar panels going into the global south or economies or the developing countries at cheaper rates.
And that would also mean that China would have to decide between, you know, more leadership at the energy transition front, or if they still want to, you know, keep some eggs in the coal basket. So that's also a direction that, you know, they can also have to decide, probably because of the US leadership change, but nonetheless, for the solar revolution, I think it's an exciting time. Pakistan is at the forefront of it. But whatever transpires in Pakistan would essentially be something that would also happen in the Middle East, in Africa, in some Southeast Asian countries, in South American countries.
So, it's something that, if anything, should be sustained rather than taken as a challenge.
David Roberts
I was going to say "canary in the coal mine," but I guess we need a new metaphor.
Mustafa Amjad
Something to do with solar.
David Roberts
Yeah, a canary flying over the solar field.
Waqas Moosa
You know, we have now entered the renewable age, the age of renewables. You know, the Stone Age did not finish because we ran out of stone. And the Iron Age did not finish — and the fossil fuel age is not going to finish because we're going to stop using fossil fuels. But the new technology is ready to take the throne, especially with the coming in of batteries. And you asked a very interesting question. It was, "What's the point at which there is this handover from solar power to — can solar really power the whole economy?"
Especially when you look at an industrialized nation which needs so much power, the optimist in me says, "Yes."
David Roberts
Well, wouldn't we love to see it?
Waqas Moosa
Yes, and we always see these forecasts that if you look at the Sahara Desert, just like X square kilometers of the Sahara Desert is going to be enough to power the whole world. And you're always thinking these are these solar optimist guys, dreamers talking. But what we're seeing now is that we can start seeing a bigger and bigger chunk of this happening. And a lot of this is going to be based on distributed generation. And what we are starting to see now in Pakistan is how the pieces of this puzzle are fitting together. Luckily, we're sitting in a situation where we have a long way to go in terms of our electricity demand.
So, if we can, you know, even if we have a lot of capacity already deployed, if we really go up to the potential of demand, even this capacity will be short for us. You know, in another maybe five years, we will be thinking of what's the next plant to put in. And that's where we will start seeing solar and renewable contribute maybe 50 to 60% of the requirement of the energy for the country versus, you know, an ambitious goal, kind of thing where you stretch and you push, but this is going to be a realistic number where the terawatt hours consumed are going to be 50-60% from renewable and solar. So, hopefully, this happens.
And that's the vision I have. You know, every rooftop needs to have solar. Wherever there is space, just put it up.
Mustafa Amjad
Just to give some numbers to this, Waqas, by the way, so Pakistan is the fifth most populous country in the world and our consumption or per capita consumption is quite low. So, he's very right in saying, you know, Pakistan still has a long way to go in terms of driving more demand. So, there is that element of industrialization and development that will always require more electricity.
David Roberts
It's amazing what's happening, and it's amazing, you know, what could happen. So, thank you two so much, Mustafa Amjad, Waqas Moosa, thank you so much for coming on Volts and walking us through this. This is going to be, I think, just fascinating to an American audience. So, I really appreciate it.
Mustafa Amjad
Thank you so much.
Waqas Moosa
Thank you so much. It was amazing talking to David. I heard a few of the other podcasts of yours as well. Very interesting topics and I love your audience and the kind of topics which you pick up. They're like deep dives into issues which we're facing and which we're looking at, and, you know, which intrigue the curiosity. It was a pleasure.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
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