🌅 The rooftop energy revolution no one knew about

Pakistan's silent energy transformation offers a glimpse into the future of economic development, geopolitics and more

For Ksenia Alleyne, a gas trader at commodities house Gunvor, 2022 might have been a bumper year. Through meticulous and aggressive execution of her team’s gas trades, Gunvor’s profit swelled to a record $2.4bn for the year. Ka-ching! In the aftermath of Putin’s invasion of Ukraine, gas prices spiked and Alleyne and her team looked around for commitments the firm had made to sell gas at lower prices, according to Bloomberg reporting.

One of the biggest buyers of long-term gas contracts at lowish prices was Pakistan LNG Ltd, a state-owned buyer of gas. The country desperately needed the fuel to power its industry and domestic consumption. By breaking those contracts and refusing to deliver gas to Pakistani buyers, Alleyne was able to redirect gas to much more profitable spot markets. Pakistan was left in the cold. Power cuts became more widespread, some areas only receiving gas for a couple of hours a day and the economy suffered. Take the textile industry, which accounts for 8.6% of GDP. It contracted some 15% due to energy scarcity. The government was forced to buy natural gas on the much more expensive spot market, resulting in difficult conversations (and worse terms) with the IMF.¹ 

Of course, Pakistan’s energy predicament stems from more than just Gunvor’s response to market changes. Decades of political instability, grift, and worse—mostly self-inflicted—leave it vulnerable to market forces. But cutting off the lifeline that is energy is deeply problematic. Energy is wealth. There are no rich countries that are energy-poor. And if you are a poor, poorly run country, becoming energy-rich—and enjoying the benefits of cheap power—has been a distant dream. Until now.

Power to the people

In January this year, I gave a talk at DLD in Munich where I spoke, inter alia, about the declining cost of energy self-sufficiency. That immense freedom, providing autonomy in one’s energy decisions, is prized by many but enjoyed by very few. Only a handful of nations are in the club: Saudi Arabia, Qatar, Denmark, Brazil, Iceland, Norway, Russia, Columbia, and recently, the United States².

My argument was simply that as energy moves from a dumb commodity, priced at the whim of the regional autocrat, to a technology, it will just get cheaper and cheaper. Learning rates and modularity would push down the prices of solar panels and batteries and expand the market substantially. And as those systems get cheaper, more individual businesses and households will invest in their own energy systems. Consequently, it will be more affordable for nations to become self-sufficient in energy… and with that a dramatic rewriting of global trade and geopolitics beckons.

This shift in the energy system from a Rockefeller-Gulbenkian-Ibn-Saud commodity to a Moore-Gates-Musk technology has more than geopolitical implications. In poorly run countries (of which Pakistan is a great example), organising complex projects like large gas or nuclear power plants is impossible—too much grift and bribery. The grid would not be reliably built in these places, being even more complicated to build out that individual power stations. Yet, I argued that the new technologies of energy—essentially solar and batteries—could work in this context. Why? Local investment: by a householder or a business, with limited need to wait for top-down institutions to provide the public goods needed for big investments. Self-sufficiency could grow from the bottom up. Initially, firms meeting their own power needs, and perhaps spreading across communities through microgrids.

Those ideas were a flicker. I’ve been toying with them for 3-4 years. Now, I am stoked to start finding evidence of them — and in Pakistan, no less. It’s a sweet story contrasting with Pakistan’s dreadful encounter with the commodity markets detailed above. This is particularly poignant due to my heritage: my late father left Pakistan nearly 60 years ago to study in the UK. (He later also worked as the auditor on the Mangla Dam project, a massive hydropower project in the country in the few years before it fully succumbed to the tragi-comedy of Pakistani politics).

A Pakistani paradox

So what is going on? It starts with a paradoxical observation. Soaring power prices drove Pakistan’s grid demand down 10% in just two years. Yet somehow, its economy grew by 2%. 

But remember: Energy is wealth. There are no wealthy energy-poor countries. (And energy is not just wealth… it delivers prosperity, and with it health and social outcomes). 

Unless Pakistani householders and industrialists somehow swapped every bulb for LEDs or transformed from textile manufacturers to clothing designers overnight, a decline in energy consumed should mean a decrease in national income.

But there’s a key caveat: we are just looking at electrical grid demand. That is what has dropped. It seems Pakistanis are finding another way to get electricity.

Evidence mounts to support this case. Pakistan has become the third-largest importer of Chinese solar modules, acquiring a staggering 13GW in the first half of this year alone. To give you some international comparisons, the UK is only on course to add 1.5-2GW of solar capacity this year. In 2023, the US economy added 32GW of solar capacity. 

This likely means Pakistan will be the sixth-largest installer of solar panels this year. But in local terms, it is more significant. The country’s entire electrical generation capacity was only 46GW in 2023. 

In other words, in just six months, Pakistan imported solar capacity equivalent to 30% of its total electricity generation capacity - an absolutely staggering amount. But this is based on Chinese trade data, not actual installations. If this capacity isn’t showing up in grid statistics, where is it going?