he observance of Earth Day each year serves as a sober reminder that environmental sustainability cannot be treated as a peripheral ambition. At the heart of that ambition lies energy—how nations produce it, distribute it and use it to either widen inequality or spur opportunity. The energy sector alone accounts for more than three-quarters of global greenhouse gas emissions, a fact repeatedly highlighted by the International Energy Agency. But beyond emissions, energy lies at the root of a country’s competitiveness, its trade profile and the resilience of its industrial base.

The global pivot towards renewable energy is no longer a mere aspiration, it is under way. The International Renewable Energy Agency, in its latest report on global capacity, noted that the world added 473 gigawatts of new renewable power in 2024. This growth—driven almost entirely by solar and wind—was the fastest in history, marking a 15.1 percent increase over the previous year. Across economies, the shift is creating millions of jobs, reducing industrial input costs and offering countries insulation from the volatility of fuel imports.

Pakistan’s position within this transformation remains tentative. The country’s energy landscape is defined by structural inefficiencies and fiscal pressures, with electricity prices now among the highest in South Asia. These prices have pushed manufacturers—particularly in textiles and agro-processing—into off-grid solutions, largely solar. This migration, while relieving pressure on the grid, fragments the energy economy and undermines coordinated investment in long-term infrastructure. In 2024, Pakistan imported 22 gigawatts of solar panels capacity —one of the highest volumes globally—but the expansion has been uneven. Those with means have exited the grid; others continue to bear the cost of an underperforming system.

This asymmetry highlights a deeper issue: unless the transition is deliberately inclusive, it risks reinforcing existing divides. The Sustainable Development Policy Institute, in its Annual State of Renewable Energy Report, argues for reorienting solar expansion through targeted financing models for lower-income users and cooperatives. Their policy work further stresses the economic rationale for developing a local solar assembly and warehousing base. With solar equipment prices increasingly vulnerable to global supply chain shocks and currency volatility, domestic manufacturing is no longer a luxury—it is an economic necessity. Anchoring solar supply chains locally will not only reduce the import bill but also create jobs across procurement, fabrication, logistics and servicing.

Grid capacity is another limiting factor. Transmission losses still exceed 17 percent and voltage reliability remains inconsistent. For industrial investors, these are not technical issues—they are dealbreakers. Upgrading distribution infrastructure, deploying microgrids in underserved regions and rolling out smart metering are interventions that directly impact cost, downtime and production efficiency. SDPI’s pilot work in northern Pakistan, where decentralised hybrid systems are being tested, points to a scalable model that expands access while generating local employment. Such systems are particularly suited for off-grid rural districts, of which many are poised for agri-business growth if energy reliability can be ensured.

Wind energy remains a missed opportunity. While the potential exceeds 130 gigawatts in the southern corridor, policy inertia, land access constraints and regulatory ambiguity have stifled investment. A more coordinated effort—through auction-based project development and wheeling incentives for industries—can re-position wind as a viable export-aligned power source, particularly for energy-intensive manufacturing hubs. Pakistan is already under pressure from global buyers to de-carbonise its exports; facilitating low-cost, renewable captive power can allow firms to meet these benchmarks and retain international competitiveness.

At the centre of all this lies the electricity market itself. The shift to a competitive trading bilateral contracts market (CTBCM) is a major reform. If implemented effectively, this can dismantle the legacy of single-buyer inefficiencies and create a dynamic market where price signals encourage innovation, efficiency and risk-sharing. However, recent analysis cautions that unless accompanied by robust regulation and dispute resolution mechanisms, the CTBCM could replicate the same concentration of power it aims to undo. What’s needed is not just deregulation but a re-balancing—between producers and consumers and between policy ambition and market discipline.

Efforts to renegotiate contracts with independent power producers (IPPs) have shown some promise. The conversion of returns from dollar to rupee, the transition to take-and-pay models and the claw-back of excess profits are important corrections. These gains must now be directed toward building the next phase—investments in grid modernisation, storage capacity and renewable integration. Without this reinvestment loop, relief will be short-lived.

Storage remains the most underdeveloped aspect of Pakistan’s energy architecture. Without it, the country will struggle to stabilise intermittent renewables. Second-life electric vehicle batteries, pumped hydro and even hydrogen-based systems must be brought into the planning horizon. The SDPI has been working on demonstration projects and frameworks that support public-private models for localised storage, particularly in industrial zones and logistics parks. These are areas where every minute of outage translates into economic loss, making them ideal candidates for early adoption.

Green finance is the enabling layer beneath all of this. At present, Pakistan’s financial system lacks the depth to support scaled renewable deployment. SDPI’s collaboration with development finance institutions and the State Bank of Pakistan has already resulted in frameworks for ESG-linked loans, blended finance and green bonds. But execution remains limited. Unless these financial tools are routinised through commercial banking channels and de-risked through partial guarantees, the private sector will remain on the margins.

Every reform suggested above—from solar localisation to wind procurement, from market deregulation to storage integration—has direct implications for Pakistan’s economic trajectory. Lowering the cost of energy improves industrial margins and export pricing. Expanding access generates rural employment and triggers local enterprise development. Creating a diversified energy portfolio signals stability to investors and reduces fiscal stress from imported fuels. A modern, responsive energy sector becomes a magnet for capital—not a liability to be subsidised.

The opportunity before Pakistan is not just to decarbonise, but also to industrialise differently. Clean energy, if governed well, can drive an economic turnaround that has eluded the country for decades. But this requires clarity of purpose, institutional maturity, and above all, policy coherence. The frameworks exist. SDPI’s Clean Energy Transition Programme has mapped out scenarios, policy pathways and implementation models that link renewable energy to the broader economic reform agenda. The gap now is not technical or financial—it is political and operational.

Earth Day should not be a time for promises. It should be a moment for recalibration. The country’s energy future, and with it its economic prospects, will be decided not by capacity additions alone, but by whether that capacity leads to cheaper power, more jobs and investor confidence. If it does, Pakistan’s energy transformation will be more than symbolic—it will be strategic.

The writer is an associate research fellow at SDPI. He can be reached at ahad@sdpi.org. The article doesn’t necessarily represent the views of the organisation