In 2024, Pakistan emerged as a surprise solar market, importing 16 GW worth of Chinese solar modules driven by high electricity prices, the need for stable and cost-effective electricity supply in the distributed generation segment and, of course, the plummeting prices of solar panels.  

The country is likely to follow the same path this year too, having already imported 12.7 GW of solar modules within the initial 3 quarters of FY 2025 (July 1, 2024 to June 30, 2025).  

Compared to 2.6 GW each in Q1 and Q2, the volume hit 7.5 GW in Q3, according to Islamabad-based renewable energy think tank Renewables First. Import volume during Q3 FY2024 was 6.5 GW, it adds in its recently published report Leader of One or Leader of None—China’s choice for clean over coal in Pakistan.  

“While western economies, including the U.S. and those in the EU, unleashed a series of tariffs against Chinese imports, Pakistan maintained a zero-rated tax regime coupled with a supportive environment for solar and Chinese businesses, leading to high penetration of solar in the country,” reads the report. 

Yet, presenting the budget for FY 2025-26, Pakistan’s Finance Minister Muhammad Aurangzeb has proposed imposing an 18% sales tax on imported solar panels as the government seeks ways to boost the local industry.

According to local media reports, Pakistan wants to increase employment opportunities by encouraging the development of a domestic solar PV manufacturing industry and bringing down its dependence on imported products.

Renewables First points out that the government had previously attempted to tax solar panel imports. In 2022, it announced the withdrawal of the exemption from 17% sales tax and 3% additional sales tax on the import of solar power equipment in a mini-budget to appease the International Monetary Fund (IMF), leading to an uproar in the local market. The move was reversed within the year.

This time, however, the Finance Ministry has thrown in additional measures to support domestic PV manufacturing while proposing to tax imported panels. These include withdrawal of duty on solar panel manufacturing equipment, and duty reduced to zero on aluminum and silver paste for solar panels and lab testing equipment, and parts for solar inverters, among others. 

Over the last 5 years leading to March 2025, the country had imported a combined 39 GW of Chinese solar panels, with an overwhelming majority deployed by both on- and off-grid distributed generation systems, whereas only 780 MW has been installed at the utility scale.

Rooftop solar installations by homes and businesses are on the rise in the country as Renewables First counts 4.9 GW of net-metered solar capacity having been installed as of March 2025. It calls this a ‘quiet revolution’ as people opt to become power generators to secure a reliable and cost-competitive electricity supply.

As of March this year, net metering consumers had grown from around 5,000 to over 293,000, highlighting the policy’s effectiveness in scaling solar adoption. The current regime, with attractive buyback rates, has reduced payback periods for grid-connected distributed solar PV systems to just 2–4 years, as per the report.

The rapid addition of solar energy is something that Pakistan’s grid is not ready for, and requires major grid ecosystem upgrades.

Meanwhile, the report writers see Pakistan as a ‘strategic test case’ as China doubles up as a solar supplier to the country, where it has significant coal interests. “By treating Pakistan as a proving ground for managing stranded fossil assets while scaling renewable ecosystems, China has the opportunity to develop and validate transition models that could be exported across the Global South,” emphasizes the report. 

The complete Renewables First report is available on its website.