Almost 87% of Investment in Pakistan’s Solar Energy is Chinese
The significant difference between developed, developing, and underdeveloped countries is their energy production and sufficiency to fulfill their country’s needs. For any country to progress, enormous amounts of energy are needed. Pakistan is a developing country with a considerable population and is facing a terrible energy crisis at the moment.
Pakistan’s energy crisis has gotten seriously out of hand because it only generates a small amount of hydropower. Current electricity production by hydel power plants is insufficient to meet the nation’s needs. Renewable energy sources need to be considered to mitigate the energy crisis. Solar energy is one of the most cost-effective energy options currently available in the modern world.
China Leads the Solar Energy Race
Currently, China is leading the race in solar photovoltaic (PV) energy. As of 2021, China has an installed solar power capacity of over 300 Giga Watts. China has boosted its solar power capacity enormously over a decade. It went from only 4.2 Giga Watts in 2012 to 306.56 Giga Watts in 2021. In 2024, solar PV demand is expected to total 125.2 Giga Watts worldwide.
Whereas the United States (ranking 2nd in the solar PV race) has initiated a process to apply taxes on solar products from China and Taiwan, which has sparked trade disputes worldwide.
China-Pakistan Plan in the Energy Sector
As we all know, Pak-China friendship is as old, and time tested, or at the very least it appears to be. Both countries have always enjoyed close relations, and this friendship has only strengthened over the years. One of the proofs of this friendship is the solar energy plan of both the countries.
At the end of 2020, the Director of the CPEC authority, the Pakistani Minister of Energy, and the Chinese Ambassador to Pakistan held a meeting to discuss plans and partnerships in the energy sector for 2021. The two nations intend to make sizable investments in renewable energy, particularly solar energy, to come out of the energy and environmental crises.
Pakistan may see increased government and Chinese investment in solar energy, indicating that now is the time to switch to solar on a large scale.
China’s Investment in Pakistan’s Energy Sector
Currently, $125 million, or nearly 87% of the $144 million total foreign investment in Pakistan’s solar PV plants, comes from China. Chinese companies are more likely to use their solar industry knowledge to its fullest potential because they are experienced investors in Pakistani PV plants.
Investments can also perk from China’s pledge to support green energy in developing nations and move away from coal-based energy production. Following the Integrated Generation Capacity Expansion Plan (IGCEP) of 2021, the Pakistani government has set high targets for solar PV capacity.
Pakistan’s First Solar Energy Plant
Among 530MW of cumulative generation capacity in Pakistan, Quaid-e-Azam Solar Park, the first-ever power plant produces 400 MW (75%). It can generate solar energy in Pakistan. It is owned by the Punjab government and built by China Tebian Electric Apparatus Xinjiang New Energy Co.
The plant’s initial goal was to produce 100 MW of electricity for Pakistan, and it now has 400,000 solar panels covering 200 hectares of flat desert. Since 2015, three new projects have added 300 MW of power generation capacity. According to China Economic Net (CEN), AEDB has several projects planned for the Quaid-e-Azam Solar Park, with a total reported capacity of 1,050 MW.
Moreover, Chinese companies are leading suppliers to several PV projects in Pakistan, serving as solar mini grids in Khyber Pakhtunkhwa along with the ADB Access to Clean Energy Program. The tribal districts of Jandola, Orakzai, and Mohmand’s solar mini-grid stations are nearly finished. The business community will soon access reliable, affordable, green, and clean energy.
Subsequently, the Pakistan Solar Energy Market is expected to record a CAGR of 2.5% from 2022 to 2027. Up to now, the operational Solar PV plants’ average utilization rate is 19%, far from the over 95% utilization rate in China, representing enormous opportunities to be tapped.
Ambitions of the Pakistani Government
As experienced PV plant financiers in Pakistan, Chinese companies are more likely to leverage their learning in the solar industry further. Additionally, they stand to gain from China’s commitment to promoting green energy in developing nations and moving away from
coal-based energy production.
The Pakistani government has high standards for solar PV capacity under the Integrated Generation Capacity Expansion Plan (IGCEP) of 2021. As a result, Chinese companies investing in solar PV plants in Pakistan can anticipate government support. The collaboration would support both nations’ dedication to the socioeconomic growth of the entire region.
The Necessity of Self-Sufficiency in Power Generation
In Pakistan, an insufficiency of power leads to surging electricity tariffs. And foreign exchange expenditure on imported energy aggravates the country’s need to be more self-sufficient in power generation. Currently, thermal power still takes up the bulk of Pakistan’s energy mix, accounting for 59% of the total installed capacity.
Importing the fuel on which most of Pakistan’s power plants run has put a heavy burden on the treasury. The nation should therefore concentrate on the resources that are being produced here. If solar panels are placed on every roof, those who experience heat waves and load shedding will be able to turn out their own electricity at least during the day, and if any extra is produced, they will be able to sell it to the grid.
Cost-Effective Energy Source
Solar PV is significantly more cost-effective than imported energy, RLNG, and gas as renewable energy sources without fuel requirements. It should be noted as the World Bank estimates that Pakistan only needs 0.071% of its total land area, mainly in Baluchistan, to reap the benefits of solar energy. All Pakistan’s current energy needs can be met with solar power alone if this potential is utilized.
Solar Energy Consumption Trend
The booming growth trend of Pakistan’s solar consumption shows an increasing number of companies and organizations are catching the tide. AEDB Certified Solar System Installers increased by about 56% as of March 2022. Solar installations using net metering increased by 102% and power production increased by 108%, respectively.
It speaks for both government support and consumer demand and supply. More than 2,000 schools in Khyber Pakhtunkhwa and 10,700 in Punjab have installed solar panels since late 2016. Punjab schools that were equipped with solar power collectively saved around Pakistani Rupee PKR 509 million (USD 2.5m) annually, representing around PKR 47,500 (USD 237.5) being dedicated per school annually.
Currently, installing solar panels in 4,200 schools in Punjab and over 6,000 schools in Khyber Pakhtunkhwa is in progress, a KASB analyst told CEN.
The Case for European Solar Panels
While there is nothing wrong with China’s investments in Pakistan’s energy industry, it is a well-known fact that countries that have an over-dependency on one nation for vital infrastructure always tend to do poorly, as far as national sovereignty is concerned. This is the reason why Pakistan cannot and should not box itself in when it comes to something as vital as energy supplies. China, though reliable as a partner, is on a collision course with the West, and this is at odds with Pakistan’s stated position of neutrality. Therefore, to avoid becoming a puppet in any larger geopolitical game, Pakistan needs to diversify its partners in all fields, not least of all solar.
This is why Integra Solar Pakistan has, in partnership with our Australian and European partners, been working towards the integration of European solar panels. Manufactured by the best companies in the world, these panels enjoy improved quality over most Chinese offerings, they last longer and are priced competitively. An added benefit of this is that Pakistan will diversify its partnerships and will not negotiate from a position of weakness in the future. We have seen this occur in the past, vis-à-vis Iran and Saudi Arabia. To ignore the signs for the future would be willful ignorance. This is why Integra Solar is all about diversification and all for adopting European brands on a large scale.
To conclude, the need for solar energy is apparent, and the market is growing rapidly. With Chinese investments and the Pakistani government’s, thus far stable, commitment to solar power, the future of solar energy in Pakistan appears to be bright. The trend of solar energy consumption in Pakistan is increasing at a rapid pace due to the many advantages that it offers.
Solar energy is a cost-effective, renewable, and clean energy source that can help Pakistan reduce its dependence on imported energy and save on foreign exchange expenditure. The Chinese government has also supported Pakistan’s solar energy plans and has invested in many solar energy projects in the country.
Indeed, China is the leading investor in Pakistan’s solar energy sector, with Chinese companies investing nearly 87% of the total foreign investment in Pakistan. This is good news for the industry, but it is also cause to be wary for the reasons mentioned above. Pakistan should be serious about diversifying its partners to secure our future and the future of our children.