Distributed energy market in Pakistan

Pakistan is a developing country with a population of approximately 240 million that is facing many energy related challenges, including

  • insufficient transmission capacity to meet demand
  • high technical & commercial losses
  • an over-reliance on fossil fuel imports
  • lack of water/wastewater structure

As part of its efforts to address these challenges, the government abolished the generation license requirement for net metering in November 2021.This resulted in a large increase in roof top solar installations.

Pakistan’s energy mix is comprised of:

  • natural gas
  • furnace oil
  • hydropower
  • coal
  • wind
  • nuclear energy

China has announced that it will allocate about USD34 billion to energy projects in Pakistan as part of its Belt and Road initiative.

International financial institutions (IFIs) such as the World Bank, ADB, Islamic Development Bank (IDB), and Asian Infrastructure Investment Bank (AIIB) are funding a wide range of major infrastructure projects. There are billions of dollars in investments for projects related to:

  • Hydropower
  • solar energy
  • electricity transmission and distribution upgrades
  • water and wastewater treatment. Through its revised Energy Policy, Pakistan plans to increase the share of renewable energy to 30% of total power generation by 2030 (18000 MW). In addition, a target of 30% renewable energy should be accounted for by large-scale hydropower.

In September 2022, Pakistan approved the National Solar Energy Initiative to produce 10,000 MW of electricity through solar energy projects.

Key opportunities for Canadian clean-tech companies in Pakistan’s energy sector

  • Hydropower: Pakistan plans to add up to 10 GW of hydropower capacity by 2030 through the phased completion of six under construction hydropower projects. The projects are mostly funded by the IFIs. They will provide opportunities in:
    • Engineering
    • Procurement and construction (EPC)
    • Consultancy
    • Operation and maintenance (O&M)
  • Solar: According to the Mordor Intelligence report, Pakistan’s off-grid rooftop solar energy market is estimated to increase at a compound annual growth rate of about 50% (from 1.30 GW in 2023 to 9.77 GW in 2028). There are opportunities for the supply of:
    • Solar equipment
    • Panels
    • Information technology (IT) solutions for grid efficiency improvement 
    • Smart Grid 
    • Battery solutions
  • Transmission: Pakistan experiences a loss of around 20% in its transmission and distribution systems, the highest in the South Asian region. In response, the government is working with ADB to spend USD 720 million to upgrade the country’s transmission infrastructure via ADB’s Proposed Multitranche Financing Facility.
  • Independent Power Projects (IPPs): Pakistan has around 90 IPPs in operation or under development. Almost all twenty-six wind power projects operating in the country (producing 1335 MW) are IPPs. On the other hand, there are currently only two solar power IPPs. Pakistan continues to try attracting foreign investment into wind and solar IPPs by offering favorable tariffs and other government incentives.

Industry highlights

42 Gigawatts (GW) Installed Capacity.

#3 Pakistan’s ranking in hydropower growth in the 2020 International Hydropower Association.

65% Clean energy target to be achieved by 2030. 30% via clean energy (solar/wind) and 35% via hydropower.

30% Electric Vehicle (EV) target for transport vehicles by 2030.

340 Megawatts (MW) Canadian cleantech investment in wind energy. 100 MW operational while 240 MW is being developed.

90% Electrification rate.

20% Transmission and distribution losses.

91 IPP projects developed or under development.

CAD 2.8 billion IFI funding for clean energy projects.

CAD400 million IFI funding for grid upgradation.

Notable challenges for Canadian cleantech companies in Pakistan

  • Regulatory risks (inconsistency across jurisdictions, unpredictability in enforcement) and bureaucratic hurdles
  • Strong competition exists from China, Europe, and United States suppliers
  • Limited Export Development Canada (EDC) coverage and corruption

Pakistan's business landscape

Pakistan's business landscape presents both opportunities and challenges, characterized by a mixed economy, a large and growing population, and a focus on emerging industries. Pakistan is also facing issues like macroeconomic instability, corruption, and a difficult financing environment. 

The country has a mixed economy, with both state-owned enterprises and private sector involvement.

  • Large and growing population: The young population (65%) presents a large domestic market and potential workforce
  • Emerging industries: Pakistan has a growing service sector with opportunities in emerging industries. 
  • Favorable business law: Pakistan has a nominally open foreign direct investment (FDI) regime
  • Tax incentives: Pakistan has tax incentives for the clean energy sector and certain businesses
  • Labor arbitrage: The relatively weak currency provides strong labor arbitrage opportunities
  • Digitalization and infrastructure development: Pakistan is increasingly focusing on digitalization, infrastructure development, and foreign investment to create a more conducive business environment

Upcoming projects and events

  • Barrick Gold’s $6 billion copper and gold mining project, with an energy component of 300 MW
  • World Bank funded $4.6 billion Dasu Dam hydropower project
  • ADB funded grid upgradation and modernization program worth $200 million

Summary

Pakistan has a growing cleantech sector, offering potential in:

  • Wind
  • Solar
  • Hydro
  • Energy efficiency

 In addition to large-scale power generation projects, more companies in Pakistan are turning to renewable energy. This shift is driven by rising electricity costs and frequent power outages, as businesses seek to lower operating expenses and avoid downtime caused by brownouts and blackouts.

Overall, Pakistan's business environment is complex and dynamic, with both significant opportunities and considerable challenges.

For more information on cleantech in Pakistan’s energy market please contact Zohaib Khan (Trade Commissioner), zohaib.khan@international.gc.ca.

Additional Information

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