Pakistan’s next major economic pressure could originate from a geopolitical disruption thousands of kilometres away, yet its consequences could quickly reach households, businesses and the country’s external accounts. A prolonged disruption in the Strait of Hormuz could increase Pakistan’s import bill by an estimated $4.5 billion, creating additional pressure on foreign exchange reserves and complicating efforts to maintain economic stability. Such a shock would be particularly significant for a country that continues to depend heavily on imported energy to meet domestic requirements. Higher international fuel prices would not remain limited to the energy sector, as increased costs would spread through transportation, agriculture, manufacturing and logistics, eventually affecting consumer prices and household purchasing power. Pakistan’s repeated exposure to international energy volatility demonstrates the need for an energy strategy that reduces dependence on imported fossil fuels while expanding reliable sources of electricity generated within the country.
In the immediate term, Pakistan can reduce the risks associated with disruptions to conventional energy supplies by diversifying its import routes. The country has already considered rerouting oil shipments through Saudi Arabia’s Red Sea port of Yanbu, allowing supplies to avoid the Strait of Hormuz. Alternative routes can provide an additional layer of protection when geopolitical developments interrupt established shipping channels and can help maintain fuel availability during periods of heightened uncertainty. However, changing the route through which imported energy enters the country does not remove the underlying exposure to international fuel markets. Pakistan would still remain dependent on foreign suppliers, global commodity prices, shipping conditions and foreign exchange availability. Import diversification should therefore be viewed as a short term risk management measure while the country works toward reducing the scale of its imported energy requirement.
The longer term opportunity lies in connecting energy security with Pakistan’s industrial and economic development strategy. The proposed Green Corridor under CPEC 2.0 could provide a platform for integrating renewable energy with industrialisation, agriculture, mining and digital cooperation. Pakistan has considerable solar and wind potential, particularly across Sindh and Balochistan, where large scale renewable projects could support industrial activity while reducing exposure to imported fuel costs. The experience of the first phase of CPEC, however, also demonstrates the risks of expanding electricity generation without sufficiently addressing the broader energy supply chain. Coal’s contribution to Pakistan’s power mix increased from roughly 3 percent to nearly 20 percent over seven years, creating greater exposure to international coal prices, foreign exchange requirements and the possibility of stranded generation assets as global energy markets increasingly move toward cleaner technologies. A future energy strategy should therefore avoid simply replacing one form of external fuel dependence with another.
Renewable energy can also become a foundation for competitive industrial zones if Pakistan addresses the institutional and infrastructure problems that have limited the performance of its Special Economic Zones. Of the nine SEZs designated during the first phase of CPEC, only four, Rashakai in Khyber Pakhtunkhwa, Allama Iqbal Industrial City in Punjab, Dhabeji in Sindh and Bostan in Balochistan, have moved beyond the planning stage, while development remains incomplete. Shortcomings involving utilities, land title security, approval procedures, electricity distribution, investor-developer disputes, logistics and transmission infrastructure continue to affect the ability of these zones to attract and retain investment. The lack of clear sector specific propositions for Chinese investors adds another challenge, particularly when businesses face fragmented approval processes and extended administrative timelines. Renewable electricity alone cannot turn underdeveloped industrial zones into productive manufacturing centres unless these underlying barriers are addressed.
The immediate policy priority should therefore be to make existing SEZs genuinely ready for investment rather than continuing to expand infrastructure without resolving operational weaknesses. One window approval systems, clearly defined electricity distribution responsibilities, enforceable dispute resolution arrangements, transparent land and regulatory procedures and stronger security protocols could significantly improve the investment environment. Reliable logistics and transmission infrastructure would also be necessary to connect industrial activity with markets and energy sources. Once these foundations are established, renewable power could provide SEZs with a competitive advantage by helping manufacturers reduce exposure to international fuel markets and potentially lowering the foreign exchange burden associated with energy consumption. The objective should be to create green industrial hubs where clean energy is integrated into manufacturing strategy rather than treated as a separate infrastructure project.
Energy resilience must also extend beyond large industrial developments because households and small businesses remain directly exposed to electricity prices and grid constraints. Pakistan’s rapid adoption of rooftop solar has shown the strength of consumer demand for alternatives to expensive and increasingly volatile grid electricity. For many consumers, distributed generation provides a way to reduce electricity purchases from the grid, lower monthly energy costs and gain greater control over household power consumption. Rooftop solar can also contribute to reducing pressure on the grid during periods of strong daytime generation, although its effectiveness as a broader energy security solution depends on how generation, storage and grid regulation evolve.
The next stage of distributed energy development is likely to involve combining rooftop solar with battery storage. Solar and battery systems can enable households and small businesses to use more of the electricity they generate during the day and shift that energy into evening hours when demand typically rises. This can reduce dependence on grid electricity during expensive peak periods and provide greater resilience when grid supply becomes constrained. Battery storage also creates an opportunity to consider technologies beyond lithium based systems. Sodium ion batteries could eventually become relevant for stationary energy applications because of their potential cost and thermal characteristics, particularly in markets that face very high summer temperatures. Their wider adoption would depend on technological maturity, economics, manufacturing capacity and the development of appropriate local supply chains.
Pakistan’s domestic mineral resources could form one part of such a future industrial ecosystem. The country has significant rock salt resources, including high purity salt associated with the Khewra region, which could potentially provide a domestic input for sodium based chemical production. However, the availability of salt alone would not be enough to establish a complete sodium ion battery industry. A functioning battery manufacturing chain would require specialised chemical processing, cathode and anode materials, cell production, battery management electronics, testing facilities, quality control systems and skilled technical workers. A realistic industrial strategy would therefore begin with selected stages of the supply chain rather than attempting to move directly from raw salt production to finished batteries.
Local battery assembly could provide an initial step toward developing these capabilities. Pakistan could gradually establish domestic capacity for battery pack assembly, testing, safety standards, recycling and selected component manufacturing before moving into more sophisticated stages of chemical processing and cell production. Developing these capabilities alongside the expanding domestic market for solar energy could create a stronger business case for local manufacturing. The same industrial policy could be applied to solar equipment, power electronics, energy management systems and other clean technology products. Linking growing domestic demand with local production would allow Pakistan to retain more economic value within the country while gradually reducing dependence on imported clean energy equipment.
Such an approach could also open opportunities for exports if local manufacturers develop competitive products and meet international technical standards. The transition to cleaner energy would then become more than a response to climate concerns or imported fuel prices. It could support the development of new manufacturing industries, technical skills, supply chains and investment opportunities. For Pakistan, this distinction is important because an energy transition that relies entirely on imported solar panels, batteries and other equipment could reduce fossil fuel dependence while creating another form of external dependence. Building domestic capabilities would make the transition more closely connected with industrial development and economic resilience.
Pakistan’s energy strategy therefore needs to operate across several time horizons. In the short term, alternative fuel routes can provide protection against disruptions to established shipping corridors. At the industrial level, the country can use renewable resources to support more competitive SEZs, provided that governance, utilities, land, transmission and investor facilitation issues are resolved. For households and small businesses, rooftop solar combined with storage can provide greater control over electricity consumption and reduce exposure to grid volatility. Over the longer term, investment in battery technology, solar equipment and related clean energy manufacturing can establish domestic supply chains capable of supporting both local demand and potential exports.
The central challenge is to ensure that energy policy is treated as part of Pakistan’s economic security strategy rather than solely as a power generation issue. Dependence on imported fuels leaves the country exposed to international commodity prices, shipping disruptions, geopolitical tensions and foreign exchange constraints. A broader mix of domestic renewable generation, distributed energy, battery storage, efficient industrial infrastructure and local clean technology manufacturing can gradually reduce those vulnerabilities. If Pakistan can connect its renewable energy resources with industrial policy and stronger institutions, the transition could strengthen not only the electricity system but also the country’s external position, manufacturing capacity and long term economic resilience.
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