Pakistan is generating more clean energy than ever, but we still burn imported coal, RLNG and residual furnace oil to keep the lights on. This is expensive and keeps us dependent on others for our energy security.
Our solar boom has been extraordinary by almost any measure. The problem is that the transmission grid, designed decades ago for a centralised fossil-fuel system, was never built to absorb what we are now producing through renewables. Clean energy potential goes underutilised while the structural mismatch drives up electricity tariffs, deepens circular debt, and steadily erodes our long-term economic competitiveness.
The Utilities for Net Zero Alliance has put the failure in numbers that are difficult to argue with – for every $1 spent on renewable generation globally, only $0.70 to $0.80 is spent on the grid. To meet 2030 net-zero targets, that ratio must flip: we must spend $1.24 on grids and storage for every $1.00 on renewable energy generated. In our case too, we are not simply underfunding critical infrastructure, but we are sequencing the transition in reverse, and the bill falls disproportionately on populations that can least afford to pay it.
I recently participated at a consultative discussion convened by international energy transition think tanks, including Pakistan’s Sustainable Development Policy Institute, where I outlined the case for transitional financing of grid modernisation. The government has made real commitments: the recent federal budget allocated Rs10.2 billion for static synchronous compensator systems to stabilise voltage and improve power reliability for renewable integration, as well as Rs3 billion for battery energy storage systems, and over Rs158 billion through Wapda and the national grid company’s own financing. But public capital alone will not close a gap of this magnitude, which will grow as the population projected for 2050 rises towards 390 million.
The standard framing treats grid modernisation as a domestic infrastructure challenge – a capital expenditure decision to be weighed against competing budget priorities. That framing is wrong. Grid modernisation in countries like Pakistan, South Africa, India, Brazil, and Indonesia is not an infrastructure request but a climate debt repayment obligation owed by the Global North.
These highly populated developing economies built their industrial base within a global trade and development system the Global North designed, one that made fossil fuel dependency the default path to growth. The carbon bill from that system has been borne disproportionately by countries like Pakistan, through climate vulnerability, import dependency, and fiscal pressure to transition before the infrastructure exists to do so affordably.
At COP29 in Azerbaijan, developed countries committed $300 billion per year by 2035, falling well short of the $1.3 trillion developing countries actually need. At COP30 in Brazil, nations endorsed the Green Grids Initiative’s Climate Finance Principles and formally recognised grids as a core climate investment. That declaration matters, but endorsing principles and reclassifying lending criteria are two entirely different things.
In parallel, several financing models are worth considering, but the use cases most likely to gain traction in Pakistan include a couple of relevant examples. For instance, India’s Power Grid Corporation carries a domestic AAA credit rating and has issued 83 successive bond series, raising billions annually at fine pricing. The architecture rests on one durable insight, which is that a regulated tariff structure creates predictable cash flows, and those cash flows underpin a rolling capital market programme that does not depend on project-by-project government approval. As its financing entity, the Power Finance Corporation acts as a single green finance entity that can now borrow in hard currencies including yen and euros.
In Brazil, the regulator, ANEEL, runs competitive public transmission auctions. Private concession winners finance construction through commercial debt, multilateral lending, and local capital market bonds, while the state-owned development bank, BNDES, provides catalytic support that deliberately shrinks as private markets deepen. Brazil’s green bond market exceeded BRL60 billion in 2024 alone, with the energy sector taking nearly half.
In May this year, Pakistan issued its inaugural sustainable Panda Bond – RMB1.75 billion, approximately $250 million – at a coupon of just 2.5 per cent. Supported by ADB and AIIB credit enhancements, this gives us access to China’s capital markets at rates conventional sovereign borrowing simply cannot reach. Under the approved RMB7.2 billion programme, future tranches can be directed explicitly toward clean energy-related transmission expansion, battery storage and grid stabilisation.
Combined with our Green Sukuk programme – which taps Islamic finance markets and domestic institutional investors who currently have no long-tenor green instrument to buy –Pakistan now has two distinct capital market channels for grid finance. The task is to connect both to a structured project pipeline, not treat each issuance as a standalone event.
Backbone transmission finance will not solve every dimension of this challenge. Conventional grid extension will not connect the sparsely populated rural clusters of Balochistan, Gilgit-Baltistan, and interior Sindh in any realistic timeframe. One solution to consider is aggregated mini-grid project bonds. These pool clusters of up to 5MW projects into a single rated instrument, so investments unfinanceable individually become viable at scale.
The federal government can consider viability gap funding as first loss while district authorities commit to a floor power offtake that anchors the structure. Multilateral banks can provide partial credit guarantees that cover demand risk. IFC’s Scaling Mini-Grid initiative in the Democratic Republic of Congo has shown that a targeted blended-finance guarantee on demand risk can mobilise $400 million in private capital. Pakistan’s Special Economic Zones in Balochistan and KP are natural offtake anchors for exactly this structure.
Getting stakeholders aligned is essential. It should begin with multilateral development banks who need to consider reclassifying grid modernisation within their climate finance windows. Treating transmission as general infrastructure which is ineligible for concessional terms is a definitional error with trillion-dollar consequences. The Green Grids framework, endorsed at COP30, provides the basis and hence multilaterals must operationalise it in lending criteria.
When structuring, it is important to ensure that grid asset life is clear upfront – infrastructure that lasts 25 to 40 years cannot be financed by guarantees that expire in 7-10 years. Short guarantees force refinancing risk into project structures not designed to carry it, pricing out precisely the patient capital these investments require. South Africa’s Just Energy Transition Partnership secured $8.5 billion for coal retirement.
A grid-focused new energy transition framework for Pakistan – anchored by our Panda Bond track record, our budget commitments and a credible project pipeline – is a case we should be making in every relevant forum. Catalytic public capital, used strategically at the start, shall build confidence in markets that sustain themselves.
Pakistan’s pipeline of transmission, storage and special export zones’ interconnection projects is auction-ready today. We need to focus on the regulatory scaffolding and a blended finance overlay backed by a credible tariff framework.
The writer is an adviser to the federal minister for finance and revenue. He is a seasoned banker with over 30 years of expertise. He can be reached at: 1adnanpasha@gmail.com The views expressed are the writer’s own.
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