As the satellites got closer, the panels could be seen glinting from space. BloombergNEF solar analyst Jenny Chase and her team discovered this year that the roofs of homes and factories across Pakistan are covered in solar panels after matching images taken miles above the Earth with Chinese customs records. The Pakistanis took their government by surprise and installed massive amounts of solar power.
In the process, Pakistan has gone from an inconsistent solar market to the sixth largest in the world. The country of 242 million has an electric grid with a peak capacity of 46 gigawatts — less than 4 percent of America’s electricity supply in a country with more than two-thirds of the people. Over the past three years, Pakistanis have imported more than 25 gigawatts of solar panels from China. This unorganized bottom-up boom increased Pakistan’s energy supply by 50 percent.
The solar surge is driven by high local electricity costs. At 16.6 cents per kilowatt hour, Pakistan’s business electricity rate is 37 percent higher than neighboring India and more than double the average rate in Asia. Agreements made in the 1990s kept the country’s crisis trapped in expensive contracts with independent power producers, and power plants burn a lot of liquefied natural gas, which has become more expensive after Russia’s invasion of Ukraine in 2022. That same year, Pakistan tapped into the country’s foreign exchange dollar reserves fell, which made everything more expensive.
All this has opened an opportunity for businesses and better-off Pakistanis to start importing solar panels from China that can pay for themselves in as little as two years and free their users from an expensive and unreliable grid. The middle class began to do the same. The state has come under pressure to raise conventional grid rates to meet its contracts with power producers — something an ever-shrinking and poorer customer base struggles to afford even more. Consumers who have switched to solar panels, like the owner of a soccer ball factory in Sialkot, told the Financial Times: “Allah has given us this gift to get us out of this mess.”
But there’s a bigger story that goes beyond one nation’s problems with its power grid. What’s happening in Pakistan is the latest sign that energy authorities are underestimating how much clean energy the world needs — and that energy models may suffer from the same biases as their creators. These number crunching failures aren’t just abstract. Failure to understand how much energy is needed and what people in places like Pakistan might be willing to do to get it leaves the world unprepared to build, finance and plan for a cleaner future.
Why our energy demand projections are always wrong
History shows that cheap energy creates its own demand. As steam engines became more efficient in Britain in the 19th century, coal consumption increased. When oil became cheap and plentiful after World War II, people did not enjoy the savings. They built more cars. As recently as 2000, when it estimated industrializing China’s electricity demand for 2005, the Energy Information Administration’s projections were 25 percent lower.
Modelers try to project how much energy will be needed years into the future. However, these projects often fail to distinguish between how much energy is needed and how much is available he wanted.
This is partly due to the peculiar outperformance of solar power, whose growth has been drastically underestimated every year since 2006 by the International Energy Agency (IEA), the intergovernmental organization that oversees the global energy sector – as well as countries’ own renewable energy targets. The IEA’s Net Zero by 2050 report, a plan to eliminate net greenhouse gas emissions by the middle of the 21st century, was seen as ambitious in 2021. It called for the world to add 630 gigawatts of solar power annually by 2021. 2030. That actually turns out to be a very easy target: The world is already on track to add nearly 600 gigawatts by 2024 — 334 gigawatts in China, 53 gigawatts in the US and, surprisingly, at least 16 gigawatts in Pakistan.
The pattern is that Western energy forecasters are constantly surprised by how much energy people in developing countries consume. As countries like Pakistan grow richer, their people will demand the same energy-dependent conveniences that people in rich countries already do—and our energy forecasts must reflect that reality, or we’ll keep getting it wrong.
A recent projection illustrates the problem. In collaboration with Pakistan’s energy authorities, the Danish Energy Agency explored in 2023 how Pakistan’s electricity sector could evolve to align with the IEA’s net-zero path to 2050. It expected Pakistan’s electricity generation to reach about 350,000 gigawatt-hours in 2045 (unit of energy consumption in time), which will double its capacity in 2022 to 173,000 gigawatt hours. But that would still allow hundreds of millions of people living in a future Pakistan to get by on far less energy than Texas generates today, with a fraction of Pakistan’s population.
However, this estimate does not take into account Pakistan’s middle class, which numbers nearly 100 million and millions more are on the verge of leaving poverty and entering its ranks. As people get richer, they demand – and use – more electricity. Today, only 11 percent of Pakistani households have air conditioning. At least 568 people died in six days this June, when temperatures in southern parts of the country reached 120 degrees Fahrenheit. In the 3 degree Celsius scenario we are on track to reach by 2100, major cities in South Asia will face multiple heat waves each year lasting an average of 23 days – almost twice as long as today. Even if air conditioners become more and more efficient, in a scenario where electricity generation only doubles by 2045, much of the population would lack protection from the deadly temperatures of the 1940s.
Either Pakistan’s growing middle class will continue to endure heat waves like this year’s without using technology to ease their suffering — or they will end up using far more energy than prominent energy use forecasts predict. That would set a precedent: global demand for energy to power air conditioning and other cooling measures has risen from 300 terawatt hours in the 1990s to 800 terawatt hours in 2023, which is one reason why global carbon emissions still haven’t peaked. A recent study in Pakistan found that warmer temperatures will help increase electricity demand twice as fast (6 to 8 percent per year) than current estimates suggest. The IEA itself has one more time revised up its forecast for electricity demand growth by 6 percent, adding that the key uncertainty is demand for air conditioning.
Models of energy and climate systems are full of assumptions that often don’t penetrate those who read the findings in the headline: some scholars call it “status quo bias.” When the energy agency in Paris or Copenhagen assumes that the world can reach zero, when millions of Pakistanis have enough energy to run ceiling fans, they postulate certain limits on how much energy could be installed in Pakistan and how many Europeans could reduce emissions and leave Pakistan room for growth. While seemingly apolitical integrated assessment models that assess the economic outcomes of climate change tell policymakers which temperature targets are possible or desirable, they also reveal policy assumptions that are often wrong.
When accepting the Nobel Prize in 2018, William Nordhaus, the godfather of integrated assessment models, declared that “the cost-benefit optimum (for warming) will rise to 3°C in 2100. In other words, the most cost-effective outcome of climate change—in terms of how much we spend to stop it and how much damage it causes—is a global average temperature increase of 3 degrees Celsius, double the warming target set in 2015. The Paris Climate Agreement ( a goal that the world is well on its way to disappearing). But whose costs and whose optimum? Models like Nordhaus’s assume that economic development can protect people from climate change caused by the same economic activity. This line of thinking assumes that there is a limit to how much the rich countries of the world can slow (or green) their energy use to stop climate change – and therefore there is a limit to how much new energy can be allocated to poorer countries with their fast-growing economies.
The growing global middle class is not waiting for permission to buy air conditioners. The challenge now is to ensure that the energy that powers them is clean – and that means having more than enough solar panels for both Lahore and Copenhagen.
