LAHORE: Pakistan’s rapid shift towards solar power is undermining the economics of coal-fired electricity generation, even as the government continues to back coal as a pillar of energy security, according to a new global report.
The report, Boom and Bust 2026, released by Global Energy Monitor, says Pakistan is witnessing a “bottom-up” solar revolution, with an estimated 25 percent of the country’s electricity consumption in 2025 coming from solar energy, most of it generated through off-grid installations.
Despite the rapid spread of solar energy, the report notes that Pakistan has not committed to phasing out coal-fired power plants. None of the country’s operational coal plants have planned retirement dates, while coal retirement is absent from Pakistan’s climate commitments under its Nationally Determined Contributions (NDCs).
The report warned that continued reliance on coal could deepen financial stress in the power sector as cheaper renewable energy gains ground.
“The challenge has shifted from ‘keeping the lights on’ to ‘paying for what isn’t used’,” says Lucy Hummer, senior researcher at GEM’s Global Coal Plant Tracker. She says Pakistan is now on the “front lines” of a global struggle to exit uneconomical coal agreements that power systems had already begun to outgrow.
The report highlights concerns over efforts by coal-based independent power producers (IPPs) to secure extended long-term guarantees that could lock coal into Pakistan’s energy mix for another decade, potentially crowding out lower-cost renewable alternatives.
Shaheera Tahir, head of the Energy Transition Department at Policy Research Institute for Equitable Development, says the ongoing regional tensions and war involving Iran has created a policy dilemma for Pakistan.
According to her, policymakers are increasingly inclined to convert imported-fuel coal plants to indigenous coal in an attempt to reduce exposure to external supply disruptions. However, she says ordinary Pakistanis are continuing to adopt distributed solar power despite new barriers, including a 10pc tax on solar panels and measures discouraging grid-connected solarisation.
Zahra Naeem, communications specialist at PRIED, warns that a renewed push towards local coal could trap Pakistan in another cycle of fossil-fuel overcapacity at a time when consumers are already moving towards distributed solar systems to escape, what she described as an expensive and unreliable national grid.
Globally, the report finds, the coal power capacity continued to expand in 2025 even as actual coal-fired electricity generation declined. Worldwide coal capacity increased by 3.5pc, while coal generation fell by 0.6pc, reflecting what the report describes as a growing disconnect between new coal plants and actual electricity demand.
China and India remain the largest drivers of new coal development, although both countries also saw falling coal generation as renewable energy increasingly met incremental electricity demand.
The report further notes that the number of countries proposing or building new coal plants fell from 38 in 2024 to 32 in 2025, indicating that coal expansion was becoming increasingly concentrated in a small number of countries.
Published in Dawn, May 25th, 2026
