Is distributed solar energy a game-changer for emerging economies?

Under the scorching sun in Lahore, Pakistan, the hum of factory machinery persists uninterrupted. Just a year ago, frequent power outages would have stopped production. Today, a collection of solar panels on its roof keeps everything running. This scene is one of thousands happening across buildings in Pakistan, marking a quiet but powerful shift in how emerging economies power their growth.

At Exponential View, we identify distributed solar energy as a key factor for the future, offering cheaper and more accessible electricity. As our research suggests, this grassroots transformation has the potential to redefine economic opportunities and provide energy independence for millions in developing nations, reshaping their futures.

Solar is changing energy from a commodity, like fossil fuels, to a technology, bringing two key benefits. First, as solar technology improves, its cost continues to drop. Between 2010 and 2023, the price of solar energy has fallen by 33.4% every time production has doubled. In contrast, fossil fuel prices are controlled by global markets and politics.

Second, solar panels let people generate power locally, giving them more control over their energy. Unlike fossil fuels, which depend on expensive, unstable grids and resources from other regions, solar power allows individuals to become more energy-independent.

As batteries become cheaper, this independence will grow and energy generation could become increasingly decentralized. Emerging economies are leading this transformation and Pakistan is one of the clearest examples this year.

Pakistan is now the third-largest importer of Chinese solar panels, buying an incredible 13 gigawatts (GW) in just the first half of this year. To compare, the United Kingdom is expected to add only 1.5-2GW of solar capacity this year and the United States added 32GW in 2023. This likely makes Pakistan the sixth-largest installer of solar panels in 2024 but locally, the impact is even bigger.

In six months, Pakistan imported solar capacity equal to 30% of its total power capacity, which was 46GW in 2023.

However, Pakistan’s regulator, NEPRA, only tracks grid-connected or officially registered installations. Geospatial data shows solar panels spreading across factories, homes and even government buildings, pointing to an under-the-radar revolution in energy production.

Two main factors are driving the rapid adoption of solar power: Pakistan’s unreliable, expensive grid and the cheap, plentiful availability of solar energy. Solar energy thrives in unstable environments. In Pakistan, frequent power outages (load shedding) harm both industry and consumers, while electricity prices have risen by 155% since 2021.

Grid electricity in Islamabad costs businesses between PKR 29.11 ($0.10) and PKR 48.00 ($0.17) per kilowatt (kWh), while solar panels provide power for roughly PKR 22-30 ($0.08-$0.11) per kWh. This price gap is even larger due to a 60% drop in Chinese solar panel prices in one year.

Locals are embracing solar power because of its lower cost and reliability and as battery storage becomes cheaper, more decentralized energy systems are expected to emerge. As over 75% of Pakistani businesses consider electricity shortages an obstacle to their operations, this surge benefits consumers and businesses.

In Pakistan, we have evidence of an emerging economy quickly forming an alternative distributed energy system. What does it mean for other emerging economies?

It shows that energy self-sufficiency is becoming possible as energy shifts from a commodity to a technology. This shift is pro-local and pro-entrepreneur: people no longer have to rely on the government for energy – they can secure it themselves. With a small investment in Chinese solar panels (less than half the cost of installed solar), individuals can break free from relying on oil and gas from fossil fuel-producing nations.

Pakistan’s power sector’s carbon dioxide emissions have dropped over the last two years, with reductions in coal, oil and gas generation. This process could spread across emerging markets with excellent solar potential.

There are three key implications of this change for emerging economies:

Pakistan’s solar revolution shows how solar power can help emerging economies overcome infrastructure limits and empower communities to take control of their energy futures. It provides equity in the energy transition while closing the gap in energy transition performance between advanced and developing economies.

Governments can support this transition through policies such as net metering and financial tools to handle upfront costs, paving the way for universal energy access and poverty reduction.