Pakistan’s focus shifting towards renewables from fossil fuels

ISLAMABAD: Pakistan’s energy market is undergoing a consumer-led transformation as the country moves beyond short-term fixes toward a lasting shift from fossil fuels to renewables. Non-fossil energy supplies, including hydel, nuclear, and solar, have grown by nearly 50 percent since FY21, while fossil-based supplies have continued to shrink.

After decades of reliance on imported and local fossil fuels, Pakistan is shifting toward cheaper and cleaner energy choices. In FY24, shrinking energy supplies, declining consumption, and rising fuel costs have driven a gradual move away from fossil fuel dependence, according to the Pakistan Energy Market Review (PEMR) 2025 by Renewables First.

The report reveals that Pakistan’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 dropped by 25% over the past decade, and domestic gas output continues to decline, increasing reliance on expensive imported LNG. Coal consumption is also falling, with most remaining demand now met through local coal rather than imports. LNG imports are straining foreign reserves as industries move away from costly gas, with these imports now being redirected toward households, adding to already high electricity bills. Long-term LNG contracts have created a surplus at a time when industrial and captive consumption is falling. Together with the rupee’s volatility against the dollar, these factors are adding stress to the energy system. Gas-sector circular debt climbed to Rs3.2 trillion by March 2025, highlighting the urgent need for reforms across the gas supply chain.

Solar energy is offsetting fossil fuel use as Pakistan’s energy market transitions. Coal’s share in the energy mix is declining due to market dynamics, as rising costs make it less competitive.

The report highlights that the transition extends across sectors. The industrial sector has seen the steepest drop in fossil fuel use, with industrial energy consumption falling 21% year-on-year in FY24. Electric vehicle (EV) incentives are nudging the transport sector toward electrification, while farmers are switching to solar-powered tube wells to reduce diesel and grid dependence.

Together, these changes reveal an energy system in motion, one where solar energy is becoming the foundation for future growth. Since 2017, Pakistan has imported over 50 GW of solar PV, enabling households, farms, and industries to reduce costs and improve reliability.

While this transformation brings much-needed relief, the report stresses that decisive action is still required. Reforms in the gas and power sectors — including tariff rationalisation, improved distribution efficiency, and open-market access — are crucial to containing circular debt, while policies must ensure solar adoption remains accessible and equitable for all consumers. With solar adoption accelerating, Pakistan’s energy landscape is entering a new phase, driven by citizens and defined by resilience and reform.