*

Affluent Pakistanis buy cheap Chinese solar panels to

counter

rising electricity tariffs

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Solar revolution creates energy gap between wealthy and

middle

class

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Solar setups rarely configured to send excess power back

to the

grid, so masses don't benefit

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Electricity companies that lost wealthy clients raise

prices on

others to cover fixed costs

By Ariba Shahid, Sudarshan Varadhan, Charlotte Greenfield

KARACHI, April 29 (Reuters) - Amid the forty-degree heat

that paralysed the coastal city of Karachi in April, Saad Saleem

blasted his air-conditioning with near-abandon.

Electricity tariffs have surged, but the affluent

entrepreneur has been unbothered since he spent $7,500

installing solar panels on his bungalow's roof as part of a

solar boom in Pakistan.

Saleem bought his modules two years ago, as the

International Monetary Fund and economically beleaguered

Pakistan were hammering out a preliminary bailout program. Under

the deal, Pakistan sharply raised power and gas tariffs to

support struggling suppliers in the heavily-indebted sector.

Pakistanis now pay more than a quarter more on average for

electricity, setting off a scramble to install solar modules.

Solar made up over 14% of Pakistan's power supply last year,

up from 4% in 2021 and displacing coal as the third-largest

energy source, according to U.K. energy think-tank Ember. That

is nearly double the share in China, the world's top supplier of

solar panels and a global leader in green technologies, and one

of the highest rates in Asia, according to Reuters' analysis of

Ember data.

But the explosion in solar uptake has left out many in

Pakistan's struggling urban middle class, who have been forced

to cut back on electricity in face of soaring bills, according

to interviews with more than two dozen people, including energy

officials, consumers and power-sector analysts. Most of the

nation's solar panels aren't connected to sell excess capacity

to the grid, so the benefits of cheap and reliable power aren't

widely shared.

The flight of affluent Pakistanis with solar access from the

national grid has dealt a further blow to those relying on

pricey conventional sources of power. Electricity companies that

lost their most lucrative clients have been forced to

additionally hike prices on their shrinking pool of customers to

cover operating costs, according to Arzachel, a Karachi-based

energy consultancy.

Some observers also blame financial stress in the energy sector

on deals Pakistan made with China for Beijing to finance

billions of dollars worth of power-generation contracts, many of

which involve coal-fired plants. Pakistan is behind on many of

the payments and has been in talks with China about extending

the time it has to repay the debt.

Countries like South Africa also face widening energy gaps after

affluent residents adopted solar power. But analysts are

watching Pakistan particularly closely due to the pace at which

the nation of 250 million has taken to sun-based energy.

"This could serve as a cautionary tale as to how regulation

and policy needs to keep up with technological change and

rapidly evolving economics," said Haneea Isaad, an

Islamabad-based energy finance specialist at the Institute for

Energy Economics and Financial Analysis.

In an interview with Reuters, Pakistan power minister Awais

Leghari acknowledged the energy gap but noted that tariffs have

come down significantly since June 2024, when the IMF approved

reductions.

He also pointed to heavy uptake of solar by rural

Pakistanis, many of whom previously had limited access to the

grid. Many non-urban Pakistanis have installed small solar

setups to meet their power needs, which are typically far lower

than those of their city-dwelling counterparts.

"Pakistan has actually gone through a solar revolution," he

said. "The grid is going to get cleaner by the day, and this is

something that we've achieved as a nation that we are proud of."

The IMF did not return requests for comment.

ENERGY DIVIDE

Just a few miles away from Saleem's upscale neighbourhood,

Nadia Khan has restructured her life to cut electricity costs.

The air-conditioning in the home maker's apartment is rarely

used and she's stopped ironing most of the clothes worn by her

family of five, citing the price of power.

Khan's family is not alone in cutting back: Only 1% of

paying consumers used over 400 units of power in 2024, per

Karachi-based consultancy Renewables First, down from 10% before

the pandemic.

Like others among Pakistan's masses of apartment dwellers

without space to install solar modules, Khan has been shut out

of the revolution.

The roofs of many apartment buildings are designated for

water storage and other sanitation purposes, while owners of

rental buildings have little incentive to invest in solar

connections for their tenants.

"We get some sunlight indoors but I can't seem to think of a

way to go solar," she said. "Why must people living in

apartments suffer?"

Meanwhile, land-owning Pakistanis have benefited from the

glut of Chinese-made low-cost solar modules shut out of the West

by high tariffs.

China exported 16.6 gigawatts of solar capacity to Pakistan

last year, according to Ember, about five times as much as in

2022. The average cost per watt of solar-module capacity

exported also fell 54% in the same period.

However, most solar setups aren't configured to send spare

power back to the grid, limiting their benefit to the wider

public. Renewables expert Syed Faizan Ali Shah, who advises the

government on solar adoption, has said that less than 10% of

solar consumers sell excess power to the grid.

Experts and government officials blame high costs and

sanctioning delays. Connecting a solar module to the grid

usually takes between three and nine months, said Renewables

First energy expert Ahtasam Ahmad, prompting many to not

bother.

Converting power generated from a solar panel for

transmission to the grid also requires equipment like inverters,

which typically cost between $1,400 and $1,800, or roughly half

the median household income in Pakistan.

SUNK COSTS

Pakistan conglomerate Interloop has installed hundreds of

solar modules next to its cowsheds in Punjab province that help

provide the electricity keeping its 9,300 livestock cool and

their milk chilled.

The investment in solar has been a lucrative one for

Interloop, which typically breaks even on solar installation

costs after three to four years. Basic operating costs are about

three quarters less than payments to the grid, said Interloop

energy manager Faizan Ul Haq.

The money Interloop saves also reflects a gaping hole in the

accounts of Pakistan's power companies.

Even though industrial groups and wealthier Pakistanis now

consume less grid power, suppliers' costs haven't changed

proportionately. Fixed expenses like fuel contracts and upgrades

to transmission architecture accounted for about 70% of supplier

expenditure in the year to June 2024, according to an Arzachel

estimate.

To cover costs, suppliers have raised prices on their

remaining customers, who have already faced repeated increases

as a result of the IMF deal.

Fixed costs of 200 billion rupees were shifted to non-solar

consumers in the 2023-2024 fiscal year, meaning they paid 6.3%

more per kilowatt-hour than they otherwise would have, according

to Arzachel data.

Solar panel imports have increased since, meaning grid

demand is likely to continue dropping, forcing remaining

customers to pay more.

"Pakistan's experience demonstrates a crucial lesson: when

governments fail to adapt quickly enough, people take charge,"

said Ahmad of Renewables First.