Half the energy, all the cost: Pakistan’s fossil fuel habit is costing us Rs 4.4 Trillion

In FY24, the country spent Rs 4.4 trillion on fossil fuel imports – equivalent to 10.6 per cent of GDP and roughly one-third of the total import bill of $53.2 billion. More than 40 per cent of Pakistan’s fossil fuel demand is met through imported crude oil, LNG, coal and petroleum products.

But the financial burden tells only half the story.

According to a new assessment by Renewables First, Pakistan derives just 21.4MTOE [Million Tonnes of Oil Equivalent] of useful energy from 56.5MTOE of primary fossil fuel supply. In simple terms, around 59 per cent of fossil energy is lost before it delivers usable output. These losses occur during extraction, transportation, power generation and end use.

Oil is the least efficient of the major fuels, with an overall efficiency of about 32 per cent. Internal combustion engines convert only 20-40 per cent of fuel into motion; the rest is lost as heat. By contrast, electric motors convert more than 80-90 per cent of delivered electricity into useful work.

The macroeconomic implications are stark. During the 2022–23 global energy crisis, Pakistan’s annual energy imports averaged about $20 billion – more than half the country’s trade deficit. At the same time, the rupee depreciated from 158 to 248 against the US dollar between 2020 and 2023. The rupee-denominated cost per unit of energy rose by roughly 215 per cent over that period, fuelling inflation across the economy.

Such exposure creates a vicious cycle: higher global prices weaken foreign exchange reserves, currency depreciation raises domestic costs further, and inflation suppresses growth.

In contrast, solar photovoltaic imports represent capital investment rather than recurring fuel expenditure. Between FY17 and FY25, Pakistan imported around 48GW of solar panels. Fully deployed, this capacity could generate roughly 1,650TWh of electricity over 25-30 years; equivalent to about 15 years of current annual grid supply.

Producing the same amount of electricity from fossil fuels would require an estimated 330-400MTOE of primary fuel input. At FY24 prices, that would mean $100-120 billion in fuel imports.

Solar’s cost advantage is equally striking. While fossil fuel-based electricity generation averaged Rs 29-32 per kilowatt-hour in FY24 and FY25, solar power costs are estimated at roughly Rs 3.5-5 per unit once installed.

Beyond cost, solar paired with electrified end uses dramatically reduces physical waste. Electrifying transport alone could cut oil demand by more than half over time, given the superior efficiency of electric motors.

The emerging shift is not merely about clean energy. It is about economic resilience. Spending scarce foreign exchange on fuels that lose more than half their energy value before useful output is increasingly hard to justify.

The choice before policymakers is not whether electrification will happen – consumer economics is already pushing it forward. The real question is whether Pakistan will manage the transition strategically, reducing fiscal stress and import dependence, or allow it to unfold in a fragmented and reactive manner.

Either way, the era of hydrocarbons dominating Pakistan’s energy logic appears to be under growing strain.