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Pakistan

Overview

Pakistan's energy transition was kick-started in 2003 when the Alternative Energy Development Board (AEDB) was established with the aim of scaling up renewable energy resources in the country (IEA, 2026). However, several roadblocks such as inconsistent policies, delayed payments due to circular debt, currency volatility and grid limitations are hindering progress. At the same time, fiscal constraints and high energy prices have resulted in a rapid uptake of distributed solar with 17 GW of solar PV installed in the country in 2024 (IEA PVPS, 2025). While this decentralised solar boom has reduced costs and curtailed fossil imports, Pakistan still needs a balanced approach that includes consistent policies, strengthened grid infrastructure and risk-mitigation measures to meet its ambitious target for achieving 30 percent of its power generation from non-hydro renewable energy sources by 2030 (Enerdata, 2030). 

Key barriers and solutions

Pakistan has locked itself into expensive long-term conventional fuel contracts which as a key barrier in limiting the effective space for VRE in planning models, such as the Indicative Generation Capacity Expansion Plan (IGCEP). It will be vital for Pakistan to consider phasing out such contracts and introduce flexibility provisions in remaining contracts to reduce lock-in effects and facilitate the integration of renewables. On the market design front, National Electric Power Regulatory Authority (NEPRA) and the Independent System Market Operator (ISMO) are working to adopt a Use-of-System Charge (UoSC) framework that is market-driven and explicitly supportive of renewable energy, ensuring that the evolving commercial architecture does not disadvantage renewable generators. The lack of a well-structured and consistent procurement mechanism, and policy uncertainties – such as frequent changes to the upfront tariff regime and subsequently the sudden removal of the upfront tariff scheme entirely, followed by delays in initiating auctions – further complicate renewable deployment while contributing to an instable energy market, thereby undermining investors’ confidence. PPAs continue to show poor bankability due to delayed payments owing to circular debt and inadequate enforcement of regulations on the curtailment of wind and solar. As far as the planning and permitting regime is concerned, lengthy permitting processes and regulatory overlaps between provincial and federal agencies delay renewable project deployment. Establishing clear legal frameworks, improved spatial planning, meaningful community engagement and early integration of their perspectives in project planning can help address gaps in planning and permitting. The relatively weak electricity grid infrastructure is another key barrier. The existing network lacks the capacity and flexibility needed to absorb large amounts of intermittent power generation, posing a major barrier to expanding renewable energy in the country. While Pakistan's people-rooftop solar boom is highlighted as a global success story, it has raised new operational challenges for the distribution sector. Although the Transmission System Expansion Plan (TSEP) was recently rolled out, it fails to focus on enhancing flexibility, faster grid expansion as well as adopting smart grid technologies and batteries capable of adapting to the variable output of renewable sources. Additionally, while the Competitive Trading Bilateral Contract Market (CTBCM) has laid the foundation to liberalise the market, its full implementation is yet to be realised. Pakistan’s energy roadmap lacks a clear pathway to achieving net-zero emissions and a comprehensive fossil fuel phase-out strategy. Despite these barriers, the country's first Integrated System Plan (combining demand forecast, TSEP and IGCEP) projects a VRE share exceeding 27%, with net metering alone accounting for 8.2%, signalling a formal acknowledgment of distributed renewables as a core component of the national energy mix (NEPRA,2025). However, this ambition is yet to be matched by clear regulations or market-based interventions capable of translating ambition into implementation. At the same time, the Senate and National Assembly finance committees have rejected a proposed 18% GST levy on solar panels, which will help maintain the affordability and competitiveness of distributed solar energy (Arab News, 2025). In terms of actively promoting a “just transition approach” – this is currently not a key priority for policymakers. Additionally, the co-benefits to be gained from renewable energy – such as reduced air pollution, job creation and energy independence – have not been fully explored.

Assessment Results

Legend: Low Barriers Medium Barriers High Barriers