According to The Economist, Pakistan has become the world’s second largest importer of solar panels, with imports from China increasing almost fivefold to 16 gigawatts between 2022 and 2024. In the first nine months of 2025 alone, Pakistan imported another 16 gigawatts, with cumulative solar imports expected to match the national power system’s installed capacity by year-end. This solar boom has caused grid power consumption to drop by 12%, creating a “utility death spiral” where falling utility revenues push up bills for remaining customers, prompting more solar adoption. Energy Minister Awais Leghari has begun negotiations with China to restructure coal project agreements while seeking expertise for grid modernization, as Pakistan becomes a crucial test case for China’s willingness to lead rather than just supply the global south’s energy transition.
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The Inevitable Grid Crisis
What The Economist describes as a “utility death spiral” represents just the beginning of Pakistan’s infrastructure challenges. The fundamental issue isn’t solar adoption itself, but the mismatch between distributed generation and centralized grid management. Pakistan’s power distribution companies face a perfect storm: fixed infrastructure costs for maintaining transmission lines, substations, and legacy generation capacity remain unchanged while their customer base and revenue streams shrink. This creates an unsustainable financial model that will eventually require either massive government bailouts or complete grid restructuring.
The situation mirrors early-stage disruptions seen in Germany’s Energiewende and California’s solar boom, where utilities struggled to adapt to rapid distributed generation growth. However, Pakistan faces additional complications from its existing energy sector debt burden, much of it from Chinese coal projects. The irony is stark: China’s solar exports are undermining the viability of China’s coal investments in the same country.
China’s Strategic Dilemma
China faces conflicting interests in Pakistan that reveal broader tensions in its global energy strategy. On one hand, Chinese solar manufacturers benefit enormously from Pakistan’s import boom, creating valuable export markets for their oversupplied domestic production. On the other hand, China’s state-owned banks and construction companies have billions tied up in coal power projects that become increasingly uneconomical as solar penetration grows.
The real test isn’t whether China will provide technical assistance for grid modernization—that’s relatively straightforward. The critical question is whether China will fundamentally restructure the financial terms of its coal investments to reflect the new energy reality. Previous Belt and Road energy projects have typically featured take-or-pay clauses and sovereign guarantees that protect Chinese investors regardless of actual electricity demand. Renegotiating these terms would set a precedent affecting Chinese investments across the global south.
The Local Manufacturing Mirage
Pakistan’s hope for Chinese investment in local solar manufacturing faces severe economic headwinds. Chinese solar manufacturers operate at massive scale with vertically integrated supply chains and significantly lower energy costs. Even with potential tariff protection, Pakistani manufacturers would struggle to compete on price with Chinese imports. The experience of other developing countries attempting solar manufacturing, from India to South Africa, shows that without substantial long-term subsidies and technology transfer, local production often remains uncompetitive.
More realistically, Pakistan might develop assembly operations for solar panels using imported Chinese cells and modules, but this provides limited economic benefit and keeps the country dependent on Chinese technology. True local manufacturing would require billions in investment and years of development—time Pakistan doesn’t have given the rapid pace of its solar revolution.
The Political Instability Wildcard
Pakistan’s chronic political instability represents the biggest risk to successful energy transition. Grid modernization requires consistent policy, regulatory certainty, and long-term planning—all challenging in a country that has seen multiple governments in recent years. China has become increasingly wary of Pakistani political risk, as evidenced by slowed investment in other sectors following security concerns and policy reversals.
The solar boom itself creates new political challenges. As more middle-class and affluent Pakistanis go solar, the remaining grid customers—typically poorer households and small businesses—face escalating electricity costs. This could create social tensions and political pressure for subsidies or price controls that further distort the energy market. Successful management requires sophisticated policy making that has been elusive in Pakistan’s volatile political environment.
The Battery Storage Reality Check
While Energy Minister Leghari correctly identifies battery storage as the next frontier, the economics remain challenging for most Pakistani consumers. Current lithium-ion battery systems, even from Chinese manufacturers, represent a significant additional investment beyond solar panels themselves. For the retirement income households described in The Economist’s account, adding battery storage could double their solar system costs.
More realistically, we’ll see hybrid approaches where consumers use solar during daylight hours and grid power at night, with only wealthier households investing in full energy independence. This partial grid defection still creates revenue problems for utilities but avoids complete system collapse. The declining cost curve for battery storage suggests this will change within 5-7 years, but that timeline may be too long for Pakistan’s struggling utilities.
Broader Global Implications
Pakistan’s experience provides crucial lessons for other developing nations facing similar energy transitions. The rapid, consumer-driven adoption of solar demonstrates that energy transformation can happen bottom-up rather than top-down. However, it also shows that without coordinated grid planning and utility reform, rapid distributed generation can create systemic financial crises.
For China, Pakistan represents both an opportunity and warning. Successfully managing Pakistan’s transition could showcase Chinese leadership in global energy transformation. Failure could demonstrate the limitations of China’s current approach—exporting technology without accompanying policy expertise and financial flexibility. The outcome will influence how other global south countries approach their own energy relationships with China, making Pakistan’s solar revolution a case study with implications far beyond its borders.
