Pakistan's electricity demand has soared 21% in just two years. Rapid electrification is positively impacting all sectors of Pakistan's economy. thanks to growing deployment of distributed solar, estimated at 38 GW as of June, 2025. In 2025, 44% of solar deployment was residential, followed by industry (26%), agriculture (21%) and commercial users (9%). It is stimulating demand for a variety of products ranging from air conditioners and refrigerators to washing machines and electric scooters/motorbikes. As a result, Pakistan’s Large-Scale Manufacturing (LSM) sector grew by 6.5% in the fiscal year, rebounding from a –0.69% contraction the previous year. The fiscal year saw a 61.66% surge in automobile production.
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| Impact of Solar Energy Revolution in Pakistan |
Soaring electrification is accelerating sales of electric vehicles and home appliances in Pakistan. Electric vehicle adoption is exploding in the two-wheeler sector due to soaring fuel costs and the new Pakistan Accelerated Vehicle Electrification (PAVE) program. Electric-bike registrations surged by 322% year-on-year with cumulative sales reaching 125,511 units by May, capturing over 10% of the monthly two-wheeler market. In the first half (H1) of 2026, Haier achieved an all-time record by selling 690,000 AC units—surpassing its entire sales volume for the full year of 2025. Haier alone commands over 45% of the total market share in Pakistan. The country's refrigerator market accounts for 56% of its major household appliances sector. Market penetration sits around 51-56%, with unit sales expected to surge 20% to 339,000 units in CY26.
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| Solar Deployment in Different Sectors. Source: Ember |
Mass deployment of solar energy is helping Pakistan's economy become more resilient to external energy shocks, such as the Strait of Hormuz crisis. It is making energy affordable for the ordinary folks. Increased energy availability and security are transforming almost all sectors of the economy, which is not reflected in the official statistics provided by the Pakistan Bureau of Statistics.
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- "Rapid electrification is positively impacting all sectors of Pakistan's economy.. It is stimulating demand for a variety of products ranging from air conditioners and refrigerators to washing machines and electric scooters/motorbikes."
ReplyDeleteThe positive impact of "electrification" on the economy ultimately depends on whether its powering the expansion of domestic production and exports, or whether its simply accelerating consumption of imports. For instance, how much of these A/Cs, refrigerators, washing machines and EVs on sale are "manufactured" from domestic sources (as against CKD assembly and imports)?
If the net outcome of "electrification" were to drive up the country's import bills more than its export earnings and remittances, the net impact on the economy would be negative with yet another balance of payments crisis and IMF bailout.
On a general note, higher consumption (or even higher living standards) does not necessarily equate to sustainable economic growth or stability. An example of this seeming paradox is Kerala, my home state. Kerala has very high living standards in comparison to other Indian states and likely tops the country in the per-capita consumption of electricity, food and industrial items, and other consumer products. But the state is a net importer of nearly all consumables and contributes very little to the country's exports. Much of Kerala's affluence is instead supported by remittances sent by legions of Keralites who work outside, either abroad in other countries or in other industrialized states of the country. (Kerala has a very high proportion of expatriates in relation to its population.) The state government here is essentially bankrupt with its only source of revenues being sales of lottery and liquor, and taxes on fuel. It borrows money to pay salaries and pensions to state govt employees and to fund social welfare programmes. This is in stark contrast to the neighbouring Tamil Nadu state which, while less affluent than Kerala, is a highly industrialized state that contributes a large part of country's GDP and industrial exports.
ReplyDeleteIf Kerala were a country, even with all its affluence it is highly likely it would have been right behind Pakistan in the queue for an IMF bailout. Being part of a larger country that supplies it with all the essentials is all that sustains Kerala's consumption-driven economy and help support its relatively affluent lifestyle.
Now, one might argue Kerala is only a state in India and its situation cannot be compared to an independent country. Though Kerala is the smallest and least populated state of southern India, it still has a population that is bigger than Sri Lanka and Nepal. (In fact, with its reputation of high social development and living standards, and dependence on worker remittances and tourism as sources of revenue, Kerala's social and economic situation can in many ways be compared to that of Sri Lanka.)
So, the bottom line - beware of higher consumption and demand, if that were sustained by imports rather than domestic production and export revenues.
Riaz,
ReplyDeleteI hope you are doing well and fully recovered.
A great article, as always.
I have my own stories of electrification. What it has done, what i think it will do because I have been visiting Pakistan about three times a year.
Will chat someday.
ReplyDeleteJalil,
I’m doing well.
I’d love to your first hand account of the impact of fast electrification in Pakistan.
Electrification in developing countries catalyzes socioeconomic growth by enhancing public health, boosting agricultural and business productivity, and improving educational outcomes. By replacing polluting fuels, it prevents respiratory illnesses, while grid access powers reliable refrigeration for clinics and allows children to study after dark.The profound advantages of electrification extend across several vital pillars of development:Public Health and Environment: Access to electricity eliminates the need for kerosene lamps and indoor wood-burning stoves, significantly reducing severe household air pollution and dangerous burn hazards. It also enables 24/7 emergency services, safe vaccine storage, and the operation of water pumps to provide clean, potable drinking water.Education and Gender Equality: Electric lighting extends study hours for students, particularly in rural areas. Furthermore, it reduces the time women and girls spend gathering traditional, manual fuels (like wood and dung), allowing them to pursue education or formal employment.Economic Development: Electrification powers microenterprises, cold storage for farmers, and modern manufacturing. While short-term income gains are often localized, studies on universal access projects (like those modeled by the UNDP Data Futures Exchange) estimate massive long-term GDP growth.Modern Transportation (E-Mobility): Transitioning to electric two-wheelers, three-wheelers, and buses in urban centers drastically lowers operating and maintenance costs for low-income commuters compared to traditional internal combustion engines.
ReplyDeleteJust to clarify, the gist of my comments above was not regarding the benefits of electricity over fossil fuel burning with regards to environment and public health, but the statement in the writeup that highlighted increasing demand for A/Cs, refrigerators, washing machines etc as evidence of the positive effect of "electrification" on the economy. My take is that for a country in Pakistan's economic situation that faces recurring balance of payments issues over import bills exceeding the ability to pay for it, such increase in sales of household appliances can only be considered beneficial for the economy if the increasing demand is met via domestic production rather than imports. I do not know whether these A/Cs, refrigerators and washing machines sold in Pakistan are domestically "manufactured" with parts mostly sourced from local suppliers, or "assembled" locally from mostly imported parts, or imported "as is" (i.e CBU). If it is the latter two, the net effect on the economy would be the drain of forex reserves.
DeleteAs for EVs, in Pakistan's case it seems most of the electric cars and scooters sold in the country are either Chinese imports (CBU or CKD) either under their original Chinese branding or rebranded under Pakistani names. Perhaps such dependency on Chinese imports for "electrification" of transport isn't a big issue for Pakistan from the perspective of strategic autonomy (unlike for India), but unless the drain of forex reserves through such imports is offset by an equivalent or more reduction in oil import bills it could put strain on the country's balance of payments situation. In India, there is an ongoing debate whether encouraging EV sales actually make sense from a strategic perspective if it only serves to replace dependency on imported oil with an even more problematic dependency on Chinese battery tech, particularly so since the manufacture of ICE powertrains have been largely localized in India. As of now, Indian EV makers largely design and manufacture the vehicles domestically, but the battery cells that power them still come from China which skews bilateral trade in China's favour even more.