LNG reliance wanes as solar drives clean energy future: report

KARACHI: After decades of reliance on imported and local fossil fuels, Pakistan is shifting towards cheaper and cleaner alternatives.

In FY24, shrinking energy supplies and declining consumption defined Pakistan’s energy landscape. Weak demand and rising fuel costs are driving a gradual move away from fossil fuel dependence.

The Pakistan Energy Market Review (PEMR) 2025 by Renewables First, an energy think tank, reveals that the country’s primary energy supplies declined for the second consecutive year in FY24, while final energy consumption dropped sharply due to affordability constraints and weaker industrial and agricultural demand.

Crude oil production has fallen by 25 per cent over the past decade, while domestic gas output continues to decline, increasing reliance on costly imported LNG. Coal consumption is also falling, with most remaining demand now being met through locally mined coal rather than imports.

Despite this shift, pressures persist. LNG imports are straining foreign reserves, as industries move away from them due to high costs. Imports are now being redirected towards households, further inflating electricity bills. Long-term LNG contracts have created a surplus at a time when industrial and captive consumption is falling. Combined with the rupee’s volatility against the dollar, these factors are adding stress to the energy system — a trend also highlighted in LNG reliance wanes as solar drives clean energy future.

“LNG served as our fallback fuel, but it is only a temporary bridge,” said Huma Naveed, data analyst at Renewables First. “This mismatch between supply and demand calls for planners to integrate the country’s growing use of renewable energy into future energy strategies.”

Gas-sector circular debt climbed to Rs3.2 trillion by March 2025, underscoring the urgent need for reforms across the gas supply chain — an issue closely tied to broader energy and climate diplomacy and market reforms.

The energy market is undergoing a consumer-led transformation as the country moves beyond short-term fixes towards a lasting shift from fossil fuels to renewables. Non-fossil energy supplies — including hydel, nuclear and solar — have grown by nearly 50 per cent since FY21, while fossil-based supplies have continued to decline. Coal’s share in the energy mix is shrinking, driven largely by market dynamics as rising costs make it less competitive.

The transition spans multiple sectors. The industrial sector has seen the steepest drop in fossil fuel use, with industrial energy consumption falling 21 per cent year-on-year (YoY) in FY24. EV incentives are nudging transport towards electrification, while farmers are increasingly turning to solar-powered tube wells to cut diesel and grid dependence — trends supported by deeper data analytics insights.

Rabia Babar, data manager for energy and climate at Renewables First, reflected on this broader shift: “We are witnessing a structural reset as power, agriculture, transport and industry turn to solar solutions instead of costlier fuels. The question now isn’t whether fossil fuels will decline, but how fast clean technologies can replace them.”

Together, these changes reveal an energy system in motion, one where solar energy is emerging as the foundation for future growth. Since 2017, Pakistan has imported over 50GW of solar PV capacity, enabling households, farms and industries to reduce costs and improve reliability — a development documented across Renewables First publications.

While this transformation offers much-needed relief, the report warns that it also requires decisive policy action. Reforms in the gas and power sectors — including tariff rationalisation, improved distribution efficiency and open-market access — are essential to contain circular debt. At the same time, policies must ensure that solar adoption remains accessible and equitable for all consumers.