The Global Energy Shock
The outbreak of war between the United States/Israel and Iran has shaken the world’s energy markets since the start of early 2026. The war sparked attacks on energy infrastructure and, crucially, a disruption to shipping through the Strait of Hormuz, the passage that has historically seen about a fifth to a third of the world’s seaborne crude oil trade. The outcome was one of the most dramatic oil-supply crises in history. The price of crude was trading around $60/bbl prior to the war and rose to more than $100/bbl within a few weeks, and by April 2026 some benchmarks were being quoted as much as $60/bbl above pre-war levels. Though some respite has been seen in the oil price forecasts following periodic ceasefires, forecasters have raised the price outlook of the full year 2026 significantly higher from the pre-war estimates.
The repercussions have not been limited to the Middle East. In less than a few weeks, gasoline and diesel prices increased in more than 100 countries at the beginning of the war, and Pakistan, as a country that depends on imports, was one of the worst-affected. As a group, developing economies have been hit by greater inflation and weaker growth than they would have been without the war, mostly fuelled by higher electricity, transport, and fuel prices—and most relevant here—higher electricity prices.
The reasons behind the difficulty of this being part of the Pakistan electricity bill.
Imported fuel—furnace oil, LNG, and coal—has been the key to Pakistan’s power sector for years, as it fuels a big portion of its thermal generation capacity. This dependency establishes a direct transmission mechanism: as global crude and gas prices increase, domestic electricity generation costs increase, and consumers are impacted by this via price changes in fuel costs and revisions to the tariff each quarter.
This is no unprecedented or specious issue for the Pakistani households and businesses. Even before this year’s oil shock caused by the war, the cost of grid electricity had risen to about PKR 44 per unit in 2024 from about PKR 9 per unit in 2015. We are seeing that by 2026, residential consumers paid between approximately PKR 65 and 80 per unit during peak hours. Add a spike in imported fuel costs due to the war and the already weak power sector, which is also plagued by circular debt, transmission losses, and currency devaluation, and the pressure on electricity tariffs escalates rapidly.
In short, Pakistan is importing a lot of the fuel that it consumes for electricity production, and a war thousands of miles away in the Persian Gulf has within weeks become a higher bill in Lahore, Karachi, and Peshawar.
Solar PV can be used as a structural hedge, not just a cost saver.
Solar energy is just that weakness. Solar does not just happen to be affordable in good years: it takes a household or business out of the fuel-import price chain altogether. However, once a system is in place, “fuel” (sunlight) will be free, shipping will be free, and there will be no risk of conflict in the Strait of Hormuz.
Pakistan has an exceptional opportunity to take advantage of this trend:
Enormous natural potential. The World Bank estimates that Pakistan’s solar potential is about 40 GW, much more than the nation is exploiting.
In Pakistan, solar power has matured from being a small-scale technology to the main pillar of the national grid: solar power generation exceeded 6 GW, and net-metered solar power in Pakistan is over 25% of the total electricity generation in 2025. From 2024 to 2025, Pakistan was importing an estimated $1.4 billion worth of solar panels from China, with this figure reflecting just one year.
Falling equipment costs. During the past few years, solar panel prices in general, and China’s in particular, dropped considerably thanks to a massive oversupply, making solar energy even more competitive in installation costs than energy from fossil fuels.
Regulatory data indicates a double-digit increase in net-meter solar generation in early 2026, driven by households and businesses seeking to access rooftop solar power to overcome tariff increases and the impact of load-shedding.
The core benefits for Pakistan are as follows: The core benefits for Pakistan are given below:
1. Protection against the effects of imported fuel price volatility. Each kWh produced by rooftop or utility-scale solar is a kWh that doesn’t have to be imported from a furnace oil, LNG or coal supplier, so it isn’t subject to disruption in Strait of Hormuz, OPEC+ decisions or currency devaluation against the dollar.
Direct relief from load-shedding: Solar, particularly with batteries, provides the households and businesses with generation capacity that is not dependent on a stressed national grid; hence, the economic cost of load-shedding is reduced for industry, agriculture (tube wells), and small businesses.
Although there have been some policy changes recently (discussed below), most residential solar installations in Pakistan break even within 3-5 years, and electricity costs become effectively zero with the remaining useful life of the solar panels, which is 15-20 years.
At the macro level, every unit of demand fulfilled by distributed solar is a unit that Pakistan does not have to pay for in imported fuel and foreign exchange—an important point to consider for a nation that often faces foreign exchange and balance-of-payments issues due to rising demand.
The removal of furnace oil and coal generation helps decrease air pollution in big cities and cuts Pakistan’s carbon emissions, contributing to the government’s own renewable energy goals.
Resilient homes and factories, especially those with solar, are less vulnerable to future tariff shocks and outages, which is increasingly a consideration in property values and industrial competitiveness.
A word of caution: Policy is moving underneath solar adopters’ feet.
The economics of solar in Pakistan is very good, but far from permanent and should be understood before investing. The regulator (NEPRA) of Pakistan shifted the old 1:1 net metering system (which provided a credit to exported solar units at almost the same rate as electricity from the grid) to a ‘net billing’ system in February 2026. The electricity rate paid by the consumers for importing electricity (PKR 22–27 per unit) is significantly higher than the rate they will get for exporting electricity to the grid (PKR 10–13 per unit) in net billing.
For the new solar adopters, the most lucrative strategy is now to rethink the size of their new solar system and make it large enough to power the day’s air conditioners, water pumps, and other high tickers, then maximize the self-consumption by pairing solar with battery storage to shift daylight power into the evening. Systems are still being sized mostly for their own use and are still achieving about a 3-4 year payback period even with the new rules.
This change does not make solar look less attractive; quite the opposite, this is why the essence of solar in Pakistan is that it helps reduce electricity dependency on the grid and imported fuel rather than contribute electricity to the grid.
Recommendations Going Forward
For domestic buildings and small businesses: Use right-sizing systems to size according to peak demand during the day instead of over-sizing systems for export credits, or consider implementing new export-rate economics with batteries—depending on budget.
For policymakers: Persistent support for the various schemes of subsidies to support all low-income groups, as in the case of Punjab and Sindh, and rationalization of net billing approvals of various DISCOs and stable and predictable long-term rules because policy uncertainty alone deters the investment needed in solar power.
Industry: Large-scale solar and hybrid solar/energy storage systems deployed at industrial facilities can significantly decrease the impact of the volatility of fuel-based fees on competitiveness—especially given the continued uncertainty in global oil markets.
Conclusion
Pakistan’s electricity prices have been again showcased as being directly connected to volatile global fuel costs due to the recent surge in global oil and gas prices because of the war. That’s not a short-term or fad weakness—if the next geopolitical event occurs from another source, it will hit the same power sector, which is subject to dependence upon imports. It’s true that solar power is the fastest-growing slice of Pakistan’s electricity generation pie, and it holds the true and increasingly real answer to that exposure; it turns an ongoing, unpredictable fuel import bill into a largely fixed, one-time kind of investment. While the specific incentive structure (net metering versus net billing) may change, the logic and rationale behind why Pakistan should encourage a continued strong adoption of solar energy (residential, commercial, and utility) have only strengthened over time.
