Pakistan’s energy landscape is undergoing a seismic shift, a solar revolution driven not by visionary policy but by desperation. Skyrocketing electricity tariffs, up 155% since 2022, and relentless power cuts stretching up to 18 hours in some areas have pushed households across the socioeconomic spectrum to embrace rooftop solar systems. According to Ember, a global energy think tank, from less than 2% of the energy mix in 2020, solar power surged to 24% in the first five months of 2025, overtaking gas, coal, nuclear, and hydropower to become the nation’s dominant energy source. 

This rush to solar, fueled by public frustration with an inefficient national grid, is transforming how Pakistan powers itself. Yet, beneath the sheen of this renewable triumph lies a stark reality: the marginalised, the pauper who bear a disproportionate burden in this transition, caught between the promise of energy independence and the crushing weight of economic inequity.

The allure of solar power is undeniable as with electricity bills sometimes surpassing rent, households are fleeing the grid’s unreliability. The national power sector, saddled with Rs. 2.4 trillion in debt as of March 2025, is a relic of mismanagement, plagued by costly gas imports sold at a loss and fixed-payment contracts with independent power producers. The grid’s inefficiencies: 18% transmission and distribution losses against a target of 11.4% and a vicious cycle from underutilised plants have driven per-unit costs to unsustainable heights. 

This, along with commercial and transmission losses, has a lion’s share in the overall financial dryness, leading to capacity payments alone ranging from Rs12 to Rs15 per unit, making grid electricity 87-140% pricier than in neighbouring countries. Ipso facto, for many, solar power offers an escape as its costs now just 10 cents/watt, down from 24 cents in 2024, courtesy 2–4 years payback, driven by a 42% global price drop in 2023, SBP’s 6% renewable energy (RE) financing (supporting 1,726MW) and cheaper Chinese equipment.

The class divide and aging grid 

The shift to solar energy, however, is not a tide that lifts all boats. For lower-income households, the upfront cost of solar adoption represents a near-insurmountable barrier as a modest setup, including panels, an inverter, the mounting structure and cables, generally costs around Rs180,000 ($630). These families, already battered by inflation and erratic incomes, must resort to extreme measures like selling cherished possessions, borrowing at high rates or diverting funds from basic needs like food and education if they want to shift to solar energy.

In a country with one of the lowest human development index (HDI) rankings, the financial strain is palpable in stories of sacrifice where the promise of long-term savings clashes with the burden of immediate hardship.

The government’s actions have worsened this divide. Most notably the blanket 10pc tax on imported solar equipment imposed via Finance Act 2025, raising prices for those least able to pay. Unlike wealthier households who can absorb costs, the poor face a cruel paradox as on the one hand, the unaffordable grid pushes them toward solar while on the other hand, they can’t afford this alternative for being a luxury for them. As more wealthy households shift to solar power, grid electricity sales have dropped, forcing higher tariffs per kWh on remaining users, primarily low-income households still tethered to the grid.

This solar surge, while necessary, threatens sector sustainability by leaving the poorest to shoulder the burden of fixed capacity payments and growing system losses.

The national grid, aging and designed for centralized distribution, is ill-equipped for the decentralised solar boom. Solar has created a mid-day dip in grid demand (7 AM to 4 PM), while evening demand surges as solar users without battery storage revert to the grid, straining the system. This has caused a 2.5 GW “noon demand hole”, forming a duck curve.

Further, the rapid adoption of battery energy storage systems (BESS), projected to reach 8.75 GWh (26% of the projected peak demand) by 2030, adds another layer of complexity. The batteries promise greater energy independence and Pakistan imported 1.25 GWh of lithium-ion in 2024 alone.

However, their rising popularity can destabilise the grid if not managed properly as reduced daytime demand inflates per-unit costs for grid-dependent consumers. For the lower classes, who cannot afford batteries, this means reliance on a grid that grows ever more expensive and unreliable.

Tariff regime reforms a must 

As per Renewables First, a think tank for energy and environment, the industrial and agricultural sectors, too, are reshaping the energy landscape, but their gains underscore the poor’s plight. Industries, facing tariffs as high as 17 cents per unit, have turned to captive solar generation, with over 1GW installed, slashing grid demand from 34 TWh in FY22 to 31 TWh in FY23. Agriculture, with 1.5–2 million tube wells, is solarising rapidly, especially in Punjab and Balochistan, where initiatives aim to replace grid power with solar. 

These sectors benefit from economies of scale and access to financing, advantages unavailable to low-income households. The ripple effects are evident. Pakistan State Oil reported a 30pc drop in diesel sales over the past two years, partly due to solar adoption in agriculture, while industrial self-generation thrives on cheaper coal and oil. For the marginalised, such systemic shifts offer little relief, as they remain locked out of the capital-intensive solar market.

To ensure a just and sustainable energy transition, Pakistan must overhaul its current incremental tariff framework, which remains deeply regressive. The existing slab-based system disproportionately benefits wealthier households, especially those with partial or hybrid solar setups who consume just enough grid electricity to qualify for subsidies while enjoying the benefits of self-generation.

At the same time, it nudges higher-consuming affluent users toward solar, fueling a vicious cycle of high prices leading to lower demand, which, in turn, drives prices even higher.

A shift toward means-tested programmes like the Benazir Income Support Programme (BISP) would ensure that subsidies are directed to those most in need, instead of using monthly consumption as a flawed proxy for poverty.

A reformed approach should embrace modern tools and pricing structures that reflect real costs and promote equity. This includes adopting marginal pricing to align tariffs with actual system usage, introducing capacity subscription charges to fairly recover network costs, and implementing time-of-use tariffs that encourage efficient consumption patterns. 

The distribution companies (DISCOs) reforms must prioritise reducing transmission and distribution (T&D) losses, improving bill recovery, and strengthening governance. Persistent underperformance should be met with clear penalties under oversight of National Electric Power Distribution Authority (Nepra) to ensure accountability. Additionally, there is a need to revamp the regulator too.

A bottleneck analysis of its governance system and sluggish processes is essential. The findings should then be translated into actionable reform

Overhaul of the structure 

At a structural level, planning must transition from a generation-led approach to demand-driven models, aligning the Indicative Generation Capacity Expansion Plan (IGCEP), Integrated System Plan (ISP), and Integrated Energy Plan (IEP) with broader national economic development goals.

Accelerating grid modernization is also crucial—this includes leveraging AI, upgrading aging infrastructure, and investing in utility-scale storage. Simultaneously, policy must support micro-grids and community-level distributed generation, particularly in rural or off-grid areas, as an organic progression of Pakistan’s energy architecture.

Decoupling tax collection from electricity bills is a necessary step to improve transparency, relieve the public of a failed fiscal burden, and simplify an otherwise labyrinthine tariff structure. And the circular debt crisis must be tackled systemically through timely and targeted debt resolution mechanisms.

A recent positive step is the government’s 2025 plan facilitated through the Pakistan Banks Association (PBA), which involves Rs1.29 trillion in bank borrowings, including Rs683 billion to settle PHPL (Power Holding Private Ltd) debt and Rs612 billion in fresh, concessional loans (KIBOR - 90 bps). There is also a pressing need to eliminate the remaining stock of circular debt and implement measures to prevent its further accumulation.

Further, meaningful subsidy reform is the key. Cross-subsidisation should be gradually phased out in favour of cost-reflective tariffs, while introducing performance-based subsidies tied directly to DISCO operational efficiency.

Meanwhile, the stalled rollout of the Competitive Trading Bilateral Contracts Market (CTBCM), which holds promise for market-driven renewable energy integration, continues to delay much-needed structural reform. Policymaking must therefore strike a careful balance between advancing grid integration and ensuring equity, access, and affordability for all consumers.

Pakistan’s solar boom, a model for the Global South, is a double-edged sword. It showcases the power of market-driven transitions, with 39GW of solar imports over five years dwarfing the 780MW of utility-scale projects.

Still, it also lays bare the inequities of a system where the poor are left to fend for themselves. The poor’s plight is not just financial but existential, as they grapple with a choice between crippling grid bills and an unaffordable leap to solar. Without targeted subsidies, accessible financing, or robust consumer protections, the marginalized risk being left behind in this energy revolution.

The solar rush, for all its promise, underscores a bitter truth: progress, unchecked, can deepen the chasm between those who can afford to adapt and those who cannot.