Solar Power Shields Pakistan From the Hormuz Energy Crisis 

While many Asian countries are facing a second energy crisis in just five years, Pakistan has emerged as one of the world’s fastest-growing markets for solar power, enabling it to protect its economy and enjoy reliable, clean and affordable energy. However, Pakistan’s transition to a more resilient energy system hasn’t happened through climate-driven or state-led green policies. Instead, it was driven by market forces — a testament to other countries that reaping the benefits of the clean energy transition isn’t a complicated political process that requires long-term planning, international climate finance or industrial policy, but one that can happen naturally, even without support.  

CREA and Renewables First: The Solar Boom in Pakistan Shields It From the War in Middle East 

A joint report by the Centre for Research on Energy and Clean Air (CREA) and Renewables First has revealed that, by accelerating its solar transition, Pakistan has avoided over USD 12 billion in oil and gas imports between 2021 and February 2026, which would otherwise have gone to meet domestic energy demand.

In just a few years, the country’s electric grid has transformed from negligible solar power to an expected 20% of its electricity from solar by 2026. The decision to spend the last few years quietly building resilience demonstrates Pakistan’s forward-thinking approach to prepare for the very scenario that the global energy sector is suffering from right now — the shutting of the Strait of Hormuz. The strait is the main route for oil exports from major Middle East producers, including Saudi Arabia, Iraq and Iran, and the only route for LNG from Qatar and the UAE to enter global markets. 

Dependence on Oil and Gas Imports

Although Pakistan still ranked third globally in liquefied natural gas (LNG) dependence on Hormuz-transiting cargoes as a share of total consumption, and fifth for oil in 2024, the accelerated deployment of solar power, including rooftop panels installed across homes, farms and factories, has significantly reduced LNG demand, evident from the government’s active renegotiation of import terms under its long-term LNG contracts.  

“The Strait of Hormuz remains one of the world’s most dangerous energy chokepoints, but Pakistan has been quietly reducing its exposure for years,” explains Lauri Myllyvirta, co-founder at the Centre for Research on Energy and Clean Air. “Its rooftop solar boom has slashed its import bill and is now acting like an insurance policy against the oil and LNG shocks rippling out of the Gulf.” 

Rooftop Solar Panels

The team behind the analysis has found that Pakistan will continue to reap the rewards of rooftop solar power installations. Based on futures prices as of March 12, the experts estimate that Pakistan could save a further USD 6.3 billion by the end of the year if prices remain elevated.

According to the report, Pakistani authorities are also encouraging workers and students to restrict travel and work online to reduce oil demand. Without affordable power from installing solar panels, this option wouldn’t have been possible, and the country would have had to rely on more imported gas. Other measures that Islamabad has adopted to save fuel and lower public spending in response to the energy crisis include suspending ministers’ salaries and adopting a four-day workweek.

Market Forces Brought Pakistan’s Solar Revolution

The analysis by CREA and Renewables First notes that Pakistan’s solar story wasn’t built by design but by market forces and consumers. Unlike other countries that imposed tariffs on Chinese solar imports, Pakistan took the opposite approach, maintaining a zero-rated tax regime on solar PV imports from 2013 until mid-2025. As a result, the country went from under 1 GW of solar PV imports in 2018 to over 51 GW by early 2026, representing one of the fastest consumer-led energy transitions on record. 

The other market driver that has enabled the solar boom in Pakistan was the decline in solar manufacturing costs in China, the main engine behind Pakistan’s transition. According to the report’s authors, by 2024, Chinese panels were landing in Pakistani ports at prices that made rooftop solar cheaper per unit of energy than grid electricity. 

In fact, as of 2025, Pakistan was the third-largest market for Chinese imported solar panels, with the price per watt falling to USD 0.08. As a result, TransitionZero estimates a range of 22.57 GW to 32.49 GW for Pakistan’s total distributed solar capacity.

Pakistan Has Learned Its Lesson, And Now the Rest of Asia Should Too 

Pakistan’s solar surge has gathered pace since the 2022 energy crisis. Over the past few years, many Pakistani cities have endured up to 10 hours of severe load-shedding, with power blackouts in some rural areas lasting up to 18 hours. Not only was energy unreliable, but electricity bills, which usually accounted for 15-20% of an average Pakistani household’s income, jumped by up to 200%. During the peak of the energy crisis, Pakistan’s coal import reliance resulted in delivery costs as high as USD 419 per tonne, prompting power generation costs of up to USD 0.19 per kWh compared to between USD 0.05 and USD 0.07 per kWh for hybrid renewable energy systems consisting of solar, wind and battery energy storage. 

In some parts of the country, protests against the power generation sector and the energy department over soaring living costs even turned violent.

During the crisis, Pakistan felt firsthand the drawbacks of relying on imported fossil fuels, as a deal for five tankers’ worth of LNG was terminated and the deliveries were rerouted to wealthier buyers at three times the price. The government had no choice but to source replacement gas deliveries at prices at least 230% higher than normal. Ultimately, this drained its foreign exchange reserves and pushed the country close to default, prompting an intervention by the International Monetary Fund.

However, today the situation is different, since over the years Pakistan has delivered what years of state energy policy failed to achieve: improved energy security through reduced dependence on fossil fuel imports. The report authors note that the solar revolution drove a 40% drop in oil and gas imports between 2022 and 2024, providing a measure of relief from spiralling electricity costs for millions of households. 

Pakistan isn’t the only country benefiting from solar power to shield its economy from the situation in the Strait of Hormuz. Zero Carbon Analytics estimates that, as a result of the efforts to ramp up investments in renewables after Russia’s invasion of Ukraine in 2022, the EU deployed over 406 GW in new solar capacity by the end of 2025, while wind power grew by around 31%, reaching 246 GW. Without the growth in wind and solar output between 2022 and 2025, the EU would have spent an additional EUR 58 billion (USD 67 billion) on coal and gas imports for power generation. Importantly, Zero Carbon Analytics finds that most EU countries with above-average shares of wind and solar in their electricity mix now enjoy below-average household power prices (pre-tax).

Another example closer to Pakistan is Vietnam, which saw about 13% of its total power produced from solar and wind as of 2024. In a separate analysis, Zero Carbon Analytics finds that solar power helps Vietnam avoid a total of USD 594 million in potential coal and gas imports and the rising prices they would incur due to the Iran war. These savings, a byproduct of Vietnam’s record solar growth between 2018 and 2024, could help fund health care for about 2.2 million citizens annually.

Pakistan’s Energy Transition Story Is a Blueprint For Enhancing Energy Security and Avoiding the Macro- and Microeconomic Impacts of Fossil Fuel Import Reliance

According to CREA’s report, without the growth of distributed solar, Pakistan would have been far more exposed to the supply disruptions and price shocks now rippling out of the Middle East and hitting Asian nations such as Japan, Korea, China and India the hardest, as previously reported by Energy Tracker Asia. Unlike Pakistan, regional peers have increased oil and LNG imports, with Japan and Korea, for example, relying on fossil fuel imports to meet 87% and 81% of their energy needs, respectively. In total, Asian nations have received 84% of the oil and 83% of the LNG cargoes shipped through the Strait of Hormuz in 2024.

Experts project that the disruptions to the strait will lead to skyrocketing energy prices. Wood Mackenzie estimates that oil prices could quickly rise to “well over” USD 100 a barrel if Iran doesn’t lift the blockade of the strait. JP Morgan forecasts oil prices reaching USD 130 per barrel, matching the all-time high seen during the 2007-2008 oil shock. Iraq’s Deputy Prime Minister has warned prices could reach USD 300 per barrel. In the case of Japan, Oxford Energy estimates that, due to the lost capacity, LNG prices could surge by around 170%. 

The situation is poised to worsen further. At the time of writing, Iranian attacks have wiped out 17% of Qatar’s LNG export capacity for up to five years, threatening supplies to Europe ​and Asia, while Iraq has closed foreign-operated oilfields for the foreseeable future, driving international oil prices to their highest level in nearly four years. According to an analysis by Bloomberg Economics, if the conflict follows a severe scenario, energy prices would remain high through the fourth quarter of the year, unleashing a wave of inflation worldwide and leading to higher consumer and business costs, reduced purchasing power, higher transport and petrochemical product prices and decreased GDP growth. 

As global fossil fuel prices rise, import-dependent Asian countries will see power generation costs rise. In the case of Bangladesh, for example, Zero Carbon Analytics estimates that the country’s annual fossil fuel import bill could rise by USD 4.8 billion, a 40% increase from 2025 levels and 1.1% of GDP, if oil, gas and coal prices remain high. 

As a result, Asian governments will have to either absorb these extra costs, straining national reserves and public services, or pass them on to consumers, as in the case of the Philippines and Thailand, for example.

However, Pakistan’s solar-led strategy is expected to partially shield the country from these events, strengthen energy security and accelerate the decarbonisation of its economy.  

Pakistan’s Energy Future Looks Bright

The prospects for when Iran would lift the blockade on the Strait of Hormuz are unclear, with both sides in the conflict declaring readiness to continue the war for the foreseeable future. Paired with the fact that fuel reserves across the region are scarce, and unless there’s a sudden ceasefire in the Middle East, Bloomberg notes that the situation will worsen in Asia.

Unlike heavy import-reliant regional peers, Pakistan’s rapid deployment of rooftop solar is both saving money and providing additional power at a time when others are facing an energy security and affordability crisis.  

“Pakistan’s solar revolution wasn’t planned in Islamabad – it was built on rooftops,” explains Rabia Babar, energy data manager at Renewables First. “But as tensions around the Strait of Hormuz escalate, those panels are proving to be one of the country’s most effective energy security strategies – with distributed solar now shouldering a growing share of the country’s electricity needs.” 

Furthermore, Pakistanis aren’t consuming less energy. Just the opposite — they are consuming more, but differently, according to the report’s authors. And in doing so, they are overcoming one of the country’s biggest vulnerabilities — the dependence on an import bill for fossil fuels that had drained foreign exchange, stoked inflation and left the economy exposed to energy shocks.

According to estimates, Pakistan was the eighth most affected country by climate disasters between 2000 and 2019. By 2050, climate change impacts, environmental degradation, and air pollution will incur annual losses of up to USD 3.8 billion. Importantly, as climate change intensifies and the days when the mercury exceeds 50°C, which Pakistanis are used to, become even more frequent, the energy demand will continue to increase.

Pakistan’s solar boom, along with the 40 GW of estimated solar power potential and ever-declining equipment costs, means the country has found the most viable and secure way to transform its energy system. Importantly, Pakistan’s efforts would continue to bear fruit, further protecting the country’s economy as the next fossil fuel crisis unfolds. Because, judging by history, this won’t be the last period of turmoil.