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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How do the fluctuating profit margins in the solar panel market affect new investment strategies in the industry?
### Interview with Muhammad Mujahid and Hussain Khan on Solar Panel Trends in Pakistan
**Host:** Welcome to our special segment on renewable energy. Today, we’re joined by Muhammad Mujahid, executive director of Innovo Corp, and Hussain Khan from Wateen Energy Solutions. Thank you both for being with us.
**Muhammad Mujahid:** Thank you for having us.
**Hussain Khan:** Glad to be here.
**Host:** Let’s dive right in. There’s been a significant influx of solar panels in Pakistan recently. Muhammad, can you explain how we got to this point?
**Muhammad Mujahid:** Certainly. The demand for solar panels in Pakistan has surged, with about 3.5 GW needed in 2023. Many panels, particularly from China, were imported—13 GW just in the first half of 2024! Due to challenges like the dollar shortage and trade deficits in 2022, we faced some restrictions, but it also led to a fascinating market shift, where big players took advantage of the situation.
**Host:** That sounds like a major turning point. Hussain, how did these market dynamics affect pricing?
**Hussain Khan:** The cost structure shifted dramatically. When we were importing panels, the direct cost was about $0.15 per watt. However, they were being sold at $0.30 per watt locally, which meant substantial profit margins. This attracted many businesses, even those outside the energy sector, to start trading solar panels.
**Host:** That’s interesting. Muhammad, you mentioned earlier that the market is becoming saturated and profits are declining. Can you elaborate on that?
**Muhammad Mujahid:** Yes, indeed. With the influx of so many panels, it has led to decreasing profit margins, and in some cases, panels are even being sold at a loss. I didn’t anticipate such a quick market exit for some players; I thought it would take longer since many capitalists were making extraordinary profits.
**Host:** It sounds like a classic boom-and-bust cycle. Hussain, what’s driving investment in solar energy now, especially in terms of sectors involved?
**Hussain Khan:** The investment is mainly coming from the commercial and industrial sectors. Companies see solar as a straightforward investment with an ROI typically within 18 months to two years, even with rising electricity prices. As prices for conventional electricity continue to climb, more entities want to switch to solar.
**Host:** That makes sense. Muhammad, looking ahead to 2024, what do you foresee for the solar market in Pakistan?
**Muhammad Mujahid:** The growth potential is still significant, despite the current challenges. While the market has seen some fluctuation, the interest in solar energy remains high due to financial viability, particularly as electricity prices escalate, which is being influenced by several systemic issues within our energy sector.
**Host:** Hussain, with the expected changes in profitability, how do you think this will impact new entrants into the solar market?
**Hussain Khan:** I believe we will see a more cautious approach from new entrants. Those who want to invest will likely need to have a solid business strategy because margins will continue to tighten. However, with increasing energy demands and continual growth in the commercial sector, there will still be ample opportunities for growth in the future.
**Host:** Thank you both for sharing your insights on the current state and future outlook of solar energy in Pakistan. It’s an exciting time for the industry!
**Muhammad Mujahid:** Thank you.
**Hussain Khan:** Thanks for having us.