The hedge that paid off: How Pakistan’s solar boom is shielding it from the Hormuz crisis

Alice Harrison
2 days ago
5 min read

Pakistan has avoided more than USD 12 billion in oil and gas imports to date, and could save a further USD 6.3 billion by the end of the year.

Pakistan has spent the last few years quietly building resilience to the very scenario the energy sector most feared: the shutting of the Strait of Hormuz. This will significantly soften the blow from the current energy crisis, which will hit Asia hardest.

The financial impact of Pakistan’s solar transition is stark. By February 2026, the country had avoided more than USD 12 billion in oil and gas imports that would otherwise have been needed to meet domestic energy demand. At the prices the market expects for this year, Pakistan could save a further USD 6.3 billion by the end of the year.

The geopolitical context makes these savings even more significant. Pakistan imports a large share of both LNG and oil through the Strait of Hormuz, one of the world’s most critical and contested energy chokepoints. In 2024, and despite reducing its reliance, Pakistan still ranked third globally in LNG dependence on Hormuz-transiting cargoes as a share of total consumption, and fifth for oil. Any sustained disruption to the strait would send immediate shockwaves through Pakistan’s energy system.

Solar has quietly changed that calculus. As rooftop panels spread across homes, farms, and factories, demand for LNG has fallen. The clearest signal sits in Pakistan’s long-term LNG contracts, where some shipments have been diverted to international markets, and the government has been actively renegotiating terms as solar-driven displacement reduces the need for imported volumes. Without the growth of distributed solar, Pakistan would be far more exposed to the supply disruptions and price shocks now rippling out of the Middle East.

“Pakistan’s solar revolution wasn’t planned in Islamabad – it was built on rooftops. 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,” said Rabia Babar, Energy Data Manager at Renewables First.

*Pakistan saved USD 12 billion through reduced LNG imports between 2021 and the end of February 2026, with a further USD 6.3 billion in potential savings by the end of 2026 if prices remain elevated.*

The Strait of Hormuz remains one of the world’s most dangerous energy chokepoints, but Pakistan has been quietly reducing its exposure for years. 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,” said Lauri Myllyvirta, Co-Founder at the Centre for Research on Energy and Clean Air.

Oil rationing introduced

As Pakistan restricts travel to conserve oil, workers and students are being encouraged to stay at home and work online. This working from home option is viable and affordable precisely because Pakistan's rapid deployment of rooftop solar has reduced reliance on grid electricity and, by extension, imported gas. The fact that load shedding and other measures to restrict power supply during peak demand periods are not currently being considered shows how solar is both saving money and providing additional power.

Regional comparison

This is a markedly different story from Pakistan’s regional peers. China, India, South Korea and most other Asian economies have increased their LNG imports, while Pakistan’s energy curve has bent the other way. This is not a country using less energy, it is the signature of one where a large and growing share of demand is being met outside the formal system, and therefore outside official statistics.

Pakistan’s solar story was built not by design, but by market forces and consumers – with one critical exception. While western economies erected tariff walls against Chinese solar imports, Pakistan took the opposite path, maintaining a zero-rated tax regime on solar PV imports that held from 2013 until mid-2025. The government didn't plan the revolution, but it left the door wide open. Going from under 1 GW of solar PV imports in 2018 to over 51 GW by early 2026 represents one of the fastest consumer-led energy transitions on record, and one that drove a 40% drop in oil and gas imports between 2022 and 2024.

This grassroots solar surge has gathered pace since the energy crisis of 2022 and has quietly delivered what years of state energy policy had not thus far: falling fuel import dependence, stronger energy security, and a measure of relief from spiralling electricity costs for millions of households. The other market driver was the precipitous fall in costs of solar manufacturing in China, which is the invisible enabler behind Pakistan's transition.

*Pakistan's fossil fuel imports dropped by 40% between 2022 and 2024.*

Between 2020 and 2024, the cost of solar PV modules fell drastically, driven by a wave of Chinese industrial policy, overcapacity, and relentless economies of scale. By 2024, Chinese panels were landing in Pakistani ports at prices that made rooftop solar cheaper per unit of energy than grid electricity. Across the world, it is now renewables, not oil and gas, that offer the lowest-cost path to energy access for low-and middle-income households.

Pakistanis are not consuming less. They are consuming more, but differently. In doing so, they unwound one of the country’s most stubborn macroeconomic vulnerabilities: dependence on an import bill for fossil fuels that had drained foreign exchange, stoked inflation, and left the economy exposed to energy shocks.

Although Pakistan still appears prominently in both the volume and dependency rankings for Hormuz-transiting energy, the trajectory is downward. Every gigawatt of distributed solar deployed is, in effect, a hedge against the brewing energy crisis. Pakistan’s USD 12 billion in avoided imports since 2018 represents not just fiscal relief, but a structural reduction in geopolitical risk exposure that no LNG contract or hedging strategy could have delivered at equivalent scale or speed.

This trajectory is not the same in the wider Asian region, which is disproportionately exposed. It accounts for the majority of Hormuz-dependent oil and LNG flows, and any sustained disruption would continue to hit Asian economies hardest.

Notes and methodology

Solar PV import data sourced from Ember. Seaborne oil and gas import volumes sourced from Kpler. Installed capacity estimated from solar panel import data lagged by six months, calibrated against Transition Zero and PRIED estimates of approximately 33 GW of installed capacity in Pakistan as of March 2025. Oil and LNG import prices sourced from the CREA Fossil Fuel Tracker. Avoided import calculations based on CREA modelling of displaced fossil fuel volumes: utility-scale and urban solar assumed to displace LNG; rural off-grid solar assumed to displace diesel. Fiscal year references follow Pakistan's July–June calendar. GW figures refer to cumulative solar PV module capacity imported. All USD figures are nominal.

All graphs are available for download here and logos here and here.