There is a lot of solar panels in Pakistan at the moment. According to a Bloomberg NEF report, 13 GW of solar panels were imported from China in the first half of 2024. According to one project developer, importing such a large number of solar panels resulted in solar panels being “seen on the roads.” In 2023, Pakistan will have a demand for solar panels of about 3.5 GW, and in early 2024, Pakistan will be the target for Chinese solar exports. became the third largest market.
Muhammad Mujahid, executive director of Innovo Corp, said that in 2022, Pakistan’s central bank faced a shortage of dollars, leading to a trade deficit and an informal ban on imports. Only essential goods such as medicine and food could be imported, which meant that distributors were unable to bring in solar panels for nearly nine months.
Despite these restrictions, some solar panels were imported. Generally, a letter of credit (LC) is required from the importer’s bank to import goods. However during the foreign exchange crisis in 2022, issuance of LCs was limited. This situation provided an opportunity for the big players in the market to take advantage.
Hussain Khan of Wateen Energy Solutions said that the direct cost of importing the panels was $0.15 per watt while they were being sold at $0.30 per watt in the local market, a 100 percent profit in the trading business. Seeing the profit rate, everyone started ordering solar panels. Companies that were also exporting rice ventured into this business. For example, they exported rice and now they could bring their dollars back from other countries and suddenly the distribution of solar panels increased significantly.
Mohammad Mujahid said that selling solar panels was not a problem and no experience was necessary, meaning that it was not difficult for you to amortize solar panels from grade A manufacturing companies and sell them in the local market. .
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What are the main factors driving the increase in solar panel imports in Pakistan?
### Interview with Muhammad Mujahid and Hussain Khan on the Solar Panel Boom in Pakistan
**Editor:** Today, we have Muhammad Mujahid, Executive Director of Innovo Corp, and Hussain Khan from Wateen Energy Solutions, discussing the recent surge in solar panel imports and installations in Pakistan. Thank you both for joining us!
**Muhammad Mujahid:** Thank you for having us.
**Hussain Khan:** It’s a pleasure to be here.
**Editor:** Let’s start with you, Muhammad. The recent Bloomberg NEF report highlighted a staggering 13 GW of solar panels imported from China in the first half of 2024. What factors have contributed to this rapid increase in imports?
**Muhammad Mujahid:** The demand for solar energy has been growing significantly, especially given the financial constraints airlines faced in 2022. The central bank’s dollar shortage led to a temporary block on imports, limiting access to solar panels for nearly nine months. However, once those restrictions eased, market players quickly filled the gap, resulting in the influx of solar panels we’re seeing today.
**Editor:** Hussain, you mentioned earlier that the profit margins in the solar panel trade were extremely high—up to 100%. Can you elaborate on that?
**Hussain Khan:** Absolutely. The direct cost of importing panels was around $0.15 per watt, but they were being sold for $0.30 in the local market. This created a lucrative scenario prompting various businesses, even those from different sectors, to pivot to solar panel distribution to capitalize on the profits.
**Editor:** It’s fascinating to see such diversification. But with this oversupply of solar panels, how is the market reacting now that profit margins are declining?
**Muhammad Mujahid:** The surprising aspect is the speed at which companies are withdrawing from the market. We anticipated a longer duration before there would be a pullback, given the initial windfall. However, as panel prices have dropped, some have started selling at a loss, which has reduced overall enthusiasm in the investment landscape.
**Editor:** Hussain, in terms of future investments, do you see continued interest in solar energy despite the current market volatility?
**Hussain Khan:** Definitely. Investment is pouring in from both commercial and industrial sectors, and many companies view solar systems as a straightforward investment. Typically, they yield returns within 18 to 24 months. Furthermore, even with the decreasing profitability of net metering, the rising costs of electricity make solar energy a sustainable solution for many.
**Editor:** That leads us to electricity prices in Pakistan. What are the key factors influencing the current pricing structure?
**Muhammad Mujahid:** There are multiple elements at play: currency devaluation, high demand, and inefficiencies in the transmission and distribution processes, among others. These factors have resulted in significant fluctuations in electricity pricing, driving more people to consider solar energy as a stable investment.
**Editor:** An interesting perspective! Haniya Asad from IEEFA also mentioned sustainability as a consideration in moving forward. How do you both see the future of solar energy in Pakistan in this context?
**Hussain Khan:** Given the current state of affairs and the growing recognition of renewable energy’s importance for sustainability and energy security, I’m optimistic. Companies are learning to adapt quickly to market changes, and this resilience will pave the way for a stronger solar market.
**Muhammad Mujahid:** Indeed. We must leverage this moment to foster a more sustainable energy future, ensuring that solar energy is accessible and beneficial for all.
**Editor:** Thank you both for your insights! It’s clear that while there may be challenges in the solar market, the future remains influential and vital for Pakistan’s energy landscape.