Pakistan's Rooftop Solar Surge Hollows Out Its Grid
Distributed solar now supplies 28% of Pakistan's electricity after absorbing all demand growth in two years, leaving grid utilities with shrinking volumes and rising fixed costs.
Pakistan's rooftop solar boom has reshaped the country's power sector faster than any government programme in its history. Distributed solar accounted for 28% of electricity generation in the financial year to June 2025, up from just 10% two years earlier, according to a report published Friday (2026-06-26) by Ember and Renewables First.3
That shift matters for the grid. Electricity demand rose 21% between FY2023 and FY2025 — an increase of 33 terawatt-hours — but grid generation fell 3% over the same period. Every unit of new demand was met by distributed solar, leaving the incumbent power system with lower volumes and largely unchanged fixed costs.3
The pace of installation has been the defining feature. Renewables First estimated Pakistan's distributed solar capacity at 38 gigawatts as of June 2025, of which 27 GW was added in the past two years alone — equivalent to the total nameplate capacity of every coal, gas and oil plant ever built in Pakistan. Distributed solar generation itself more than tripled to 51 TWh from 15 TWh over the period.3
The explanation for that velocity lies in affordability. China's manufacturing ramp has driven panel costs to levels that allowed low-income households — those previously exposed to expensive grid power and frequent outages — to justify the switch. Pakistan imported another 16 GW of panels in the first nine months of 2025, according to the Economist.1 Power consumption from grid-connected supply fell by around 12% even as total electricity use expanded.1
Residential demand tells the sharpest story. Electricity use in the household sector rose 32% between FY2023 and FY2025, according to the report — growth driven by new electrification rather than additional consumption by existing grid customers. Pakistan's electrification rate reached 21.7% in FY2025, up from 17% two years earlier, approaching the global average of 22%.3
Accounting for transmission losses and theft from the grid, distributed solar supplied 32% of Pakistan's electricity in FY2025. "Pakistan has a thirst for energy, and solar is providing it," said Dave Jones, chief analyst at Ember.3
Islamabad has noticed the structural shift and moved to slow it. A 10% sales tax on imported solar panels was introduced in June 2025. The effect has been negligible. The cost differential between grid power and amortised rooftop solar remained sufficient for households and businesses to absorb the additional levy, and import volumes showed no material slowdown.1
The grid economics create a compounding problem. Utilities are collecting less revenue from a customer base that is partially defecting to self-generation, while fixed costs for operating transmission lines, distribution infrastructure and backup thermal capacity are unchanged. Lower grid demand does not automatically reduce grid costs, and the revenue shortfall has to be recovered from a shrinking pool of grid-dependent customers.
What changes next will depend partly on storage. Rooftop solar generates through daylight hours; demand for cooling, which drove the initial surge among households enduring summer temperatures above 50 degrees Celsius, continues through the evening. Pakistan has so far added solar capacity far faster than battery storage, meaning grid draw in the evening peak hours persists even as midday grid demand has largely disappeared. The Asian Development Bank's $70 billion regional initiative, announced in April (2026-04-26), includes cross-border power grid investment that could over time provide balancing capacity — but the timeline stretches to 2035.2
The immediate constraint is whether utilities can restructure their tariff base quickly enough to remain viable as rooftop penetration, already at 38 GW, continues to grow. At the current pace of installation, distributed solar could approach the total capacity of Pakistan's grid-connected fleet within a few years — a transition speed the utility sector has had no prior model to prepare for.3