Distributed solar is driving up Pakistan's electricity demand, bringing huge social and economic benefits.
Consumer-driven solar installations in Pakistan triggered a 21% surge in overall national electricity demand between fiscal years 2023 and 2025, according to a recent analysis by energy research organization Renewables First. Over the two-year period, total electricity consumption expanded by 33 terawatt-hours (TWh), driven entirely by distributed solar generation while grid-supplied power contracted by 3%. As a result, decentralized solar scaled its share of the national electricity generation mix from 10% to 28%.
The rapid adoption of decentralized solar added 27 gigawatts (GW) of system capacity over the two-year span, bringing total operational distributed solar deployment to 38 GW as of June 2025. This two-year addition matches the combined generation capacity of every coal, oil, and natural gas power plant ever constructed in the country. The capacity expansion expanded Pakistan's overall electrification rate—the share of total final energy demand satisfied by electricity—from 17.0% in FY23 to 21.7% in FY25, placing it near the global average of 22.0%.
Electricity generation from distributed solar systems grew from 15 TWh in FY23 to 51 TWh in FY25. The shift occurred alongside a 5.2% expansion in real gross domestic product. While total electricity demand increased by 21% over the period, non-electric energy consumption across oil, natural gas, coal, and liquefied petroleum gas (LPG) grew by only 2%, demonstrating that decentralized solar satisfied virtually all net growth in primary energy demand.
The study estimates that as of June 2025, residential installations represented 44% of total installed distributed solar capacity, followed by industrial users at 26%, agricultural operations at 21%, and commercial enterprises at 9%. An estimated 7 million out of 40 million households—roughly 18% of the national total—currently operate solar systems, with an average capacity of 2.4 kilowatts per system. Rural households account for 73% of solar-owning homes despite representing 60% of the overall population.
Residential electricity consumption grew by 32% over the two-year period, with residential solar output expanding from 7 TWh to 23 TWh while residential grid power draw grew by 6%. Lower daytime electricity costs have enabled increased adoption of home appliances, particularly cooling equipment. The domestic market for air-conditioning units expanded at a 7.4% annual rate in 2025, up from 5.8% in 2021.
Industrial electricity demand increased by 22% between FY23 and FY25, supported by roughly 10 GW of mostly behind-the-meter industrial solar capacity. Industrial solar output tripled from 4 TWh to 13 TWh, directly replacing declining consumption of fossil fuels. Industrial natural gas consumption dropped by 15% between FY23 and FY25, following earlier declines between FY21 and FY23 where industrial coal use fell 62%, oil fell 23%, and natural gas fell 25% due to fiscal levies on captive power generation.
Commercial electricity demand grew by 39% over the two-year window, marking the fastest sector-specific growth. Commercial solar generation rose fourfold from 1 TWh to 4 TWh across 3.3 GW of installed capacity, while commercial grid power purchases grew by 8% alongside a 24% increase in commercial natural gas use. Commercial solar capacity now supplies roughly 15% of the sector's total final energy demand.
In agriculture, distributed solar capacity reached 8.1 GW, with approximately 80% deployed in off-grid configurations. Solar generation in the sector rose from 3 TWh to 11 TWh. This 8 TWh increase displaced 3 TWh of grid electricity—causing agricultural grid demand to drop by 38%—and supplied 5 TWh of new demand as electric pumps replaced diesel equipment. The share of solar-powered tubewells rose from near-zero in 2022 to 61% in 2025, while diesel-powered tubewells fell from 79% (1.20 million units) to 28% (0.48 million units). Total operational tubewells expanded 16%, from 1.52 million to 1.76 million units, avoiding an estimated 1.9 billion liters (1.6 million tonnes of oil equivalent) of annual diesel fuel consumption.
The economic viability of decentralized solar remains driven by significant cost advantages over alternative generation sources. According to data cited from the Institute for Energy Economics and Financial Analysis, residential solar paired with medium-scale battery storage generates electricity at approximately 20 Pakistani rupees (PKR) per kilowatt-hour (kWh). By comparison, retail grid electricity for commercial and upper-tier residential customers averages PKR 40 per kWh, while diesel-generator power costs approximately PKR 120 per kWh based on fuel prices of PKR 380 per liter.
By producing power at the point of consumption, decentralized generation avoids grid transmission and distribution losses, which average roughly 22% nationwide. Consequently, 1.00 unit of distributed solar power delivers the functional equivalent of 1.28 units of utility-scale grid power. In addition to mitigating daytime power outages, decentralized solar deployment offset more than $12 billion in cumulative oil and gas import costs through February 2026, with projected additional import savings of $6.3 billion expected by the end of the year.
Originally reported by ember-energy.org on Jun 25, 2026.
