About an hour's drive east of Karachi, Pakistan's coastal mega-city of more than 20 million people, a coal-fired power station hailed as a flagship project in China's $1.5 trillion Belt and Road Initiative is being engulfed by a sea of solar.
Glinting arrays crown steel plants and manufacturing sites across a vast industrial zone of about 400 companies flanking the Arabian Sea at Port Qasim, part of a rapid — and largely unplanned — advance of renewable energy that's added new risks to the nation's already precarious energy economics.
“There are solar panels almost everywhere one sees,” says Zaheer Allana, owner of a packaging factory, where the rooftop is crowded with photovoltaic modules that generate about a fifth of the facility's electricity needs. “We have utilized almost all available space,” he explains, as workers load burlap sacks onto delivery trucks. “If we had space, we would take it to 100%.”
Allana's site, which churns out products like paper boxes and cups, added solar in 2022 to help limit its exposure to surging prices from Pakistan's fossil-fuel dominated grid. The panels deliver power at less than one-third of the price, he said. “If we save through electricity, it is significant for us,” said Allana. “It all trickles down to the bottom line.”
Factories to farms and homes in the nation of more than 255 million people — about a fifth of whom live in poverty — are being transformed by a bottom-up, consumer-led torrent of solar installations. The technology accounted for about 20% of Pakistan's electricity generation in 2025, up from roughly 3% at the start of the decade, according to Ember, an energy think tank.
High power costs, an unreliable grid and the availability of cheap panels — popularized through DIY installation tutorials on TikTok — made the nation China's third-largest solar export market last year, and the equipment has become so ubiquitous that it's now even being used as wedding dowry.
The scale of that clean energy influx has brought huge benefits for consumers. Solar has provided not only a cheaper source of power, it's also added electricity access in some underserved regions. For industrial customers, it has softened the impact of power tariffs that are among Asia's most expensive.
Yet dwindling demand for grid-supplied electricity has worrying consequences for both Pakistan and China. Declining margins for state-owned power utilities are straining the existing energy system, and complicating the task of repaying the Chinese companies that operate the nation's largest coal-fired power plants.
While some of Pakistan's challenges are unique, its experience highlights the risks of underestimating the potential speed and impact of the green transition. Already, there are signs China will see stresses in other regions between that renewables boom and its legacy energy strategy, with implications for both state-owned power firms and the nation's 1.3 trillion yuan ($190 billion) clean technology export sector.
Senior Chinese officials are aware of the tensions playing out, according to people familiar with discussions on the issue. They are also wary that any resolution with Pakistan could set a precedent for the country's approach to similar dilemmas elsewhere in the future, said the people, who requested anonymity to recount private details.
“It's Chinese renewable energy technologies on one hand, and Chinese fossil fuel power plants on the other,” said Haneea Isaad, a Pakistan-based energy finance specialist at the Institute for Energy Economics and Financial Analysis, a think tank. “They are at odds with each other."
A follow-up wave of green imports is adding to the pressure on traditional electricity generators and distributors, as households and businesses shaken by the Iran War's disruption to energy supply install Chinese-produced batteries, further increasing their self-sufficiency.
Battery imports from China jumped almost 150% in the first half to a value of about $392 million, customs data show.
“Every consumer who is opting out of the grid and going to solar is causing the burden to increase,” said Muhammad Mujahid, executive director of Lahore-based Innovo Corp., a clean technology importer that has supplied batteries, inverters and solar panels. “This is like a death spiral for all the utilities.”
In discussions on Pakistan, China's officials have been unwilling so far to make major concessions on outstanding debts that would trigger losses for Chinese state-owned companies and banks, according to the people familiar with the deliberations. Even so, diplomats aim to maintain strong ties to Islamabad, a trusted ally, and are continuing to consider potential solutions, the people said.
The Chinese Foreign Ministry in a statement to Bloomberg News said energy cooperation between the two countries has “strongly guaranteed Pakistan's domestic energy supply, effectively lowered local electricity prices, and given a strong boost to economic and social development.”
A spokesperson for Pakistan's Prime Minister did not respond to requests for comment.
Over the course of the last two decades, China's banks and power companies undertook almost $60 billion of coal-fired power plant construction overseas, according to calculations by Global Energy Monitor, a nonprofit. The buildout, from Vietnam to South Africa, was a bet that developing economies would remain reliant on fossil fuels for decades to come.
Yet China's rise as the world's leading manufacturer and supplier of clean energy technology has shifted that equation. President Xi Jinping pledged in 2021 that China would no longer develop new coal power projects overseas, and Chinese firms have largely complied. Increasingly, the nation's green exporters are competing in the same markets previously targeted by its coal power sector.
Since 2013, the value of China's fossil fuel-related investments and construction contracts under the Belt and Road Initiative was about $350 billion, compared to $166 billion for renewables, including hydropower, according to research by the University of Queensland and the China-based Green Finance & Development Center. Now, that balance is changing — green energy accounted for a record 56% of the total in the first half of this year.
As solar imports increased most sharply in Pakistan between 2022 and last year, generation at Chinese power plants running on imported coal contracted along with a wider downturn for grid-supplied electricity. Consumption across the country's electricity distribution companies was almost 12% lower in the 12 months to July 2025 compared to the same period three years earlier, the most recent regulator data shows.
“No-one knew that this dramatic and highly disruptive transition would happen so quickly,” said Innovo's Mujahid, whose firm is importing containers full of batteries every month. “I think the policymakers have been caught off guard.”
Solar does have limitations and isn't fully replacing grid-supplied power for businesses like Allana's manufacturing site. Coal has also had a comeback in recent months, as the closure of the Strait of Hormuz has choked off almost all liquefied natural gas cargoes from Qatar, Pakistan's key supplier.
The revival of power plants burning imported coal is expected to be temporary, with batteries and natural gas better suited to a role complementing a rising share of intermittent solar and wind.
At Port Qasim's main coal plant, frustration has been mounting as falling demand for grid-supplied electricity has further reduced the ability of utilities to settle a backlog in payments to the power stations that supply them.
Over the past several years, Wang Dongfang, chief executive officer of Port Qasim Electric Power Co., or PQEPC, the site's operator, has written a series of letters to key Pakistan officials calling for the delivery of overdue payments – which totaled almost $300 million in June, according to an official familiar with the matter.
Filings from the project's launch show PQEPC was 51% owned by a subsidiary of state-owned Power Construction Corp. of China, better known as PowerChina, with Al Mirqab Capital SPC — a private investment firm for former Qatari Prime Minister Sheikh Hamad bin Jassim bin Jaber Al Thani — holding the remainder.
Al Mirqab Capital and PQEPC didn't respond to requests for comment.
Port Qasim is one of seven coal-fired plants China has delivered in Pakistan since 2017, at a cost of about $9.6 billion — built by state-owned enterprises, financed by government banks, and underwritten by China Export and Credit Insurance Corp., known as Sinosure.
China's aim was not only to build, but to own and operate coal-powered electricity generation globally, and Pakistan – blighted by hours-long blackouts during parts of the last decade – was in need. From virtually no installed coal-fired capacity in 2016, the buildout saw the fuel's share rise to 10% by 2020, according to data compiled by BloombergNEF.
When China was focused on the export of coal power, “Pakistan was the darling of that,” said Kevin Gallagher, a professor of global development policy at Boston University and a co-author of China and the Global Economic Order. “Now they're the darling of green, but the two don't square.”
As solar has surged in Pakistan, overdue payments owed to Chinese electricity plants built as part of Belt and Road cooperation have swelled. As of August, the total was more than $1.5 billion, according to an official familiar with the details and who was not authorized to talk to the media.
Separately, outstanding project debt tied to China-financed coal power assets totaled $3.1 billion last year and creates additional foreign-exchange obligations as the loans are predominantly denominated in US dollars, according to new research from Boston University and the Pakistan-based Sustainable Development Policy Institute.
Some of Pakistan's current challenges are specific to the nation's power sector, which has long struggled with circular debt – the chain of arrears that cascade from consumers to distributors, power generators and fuel suppliers – and seen electricity tariff increases imposed under the conditions of International Monetary Fund loan programs.
Even so, other nations with Chinese-backed coal-fired power stations could face similar energy transition tensions as they rapidly add imports of renewables under their attempts to improve self-sufficiency and lower greenhouse gas emissions.
A rush of rooftop installations in the Philippines saw China's solar exports to the nation jump more than 165% in the first half from the same period in 2025, while Indonesia, Cambodia and Vietnam are showing similar dynamics.
Over time, solar and batteries “are likely to dominate new capacity additions, gradually reducing the market share and operating hours of fossil fuel plants” in the Philippines, said Alnie Demoral, a Manila-based energy analyst at Ember.
In South Africa, where the China Development Bank previously financed coal projects, state-owned utility Eskom Holdings SOC Ltd. is now managing generation that exceeds demand and has more than 3 gigawatts of capacity in so-called cold reserve, according to an August statement. That excess is, in part, the result of a similar rooftop solar boom, according to Eskom.
Even as Chinese officials urge firms to use the nation's competitive advantage in green power to boost overseas trade and to help cut emissions, “some of their previous investments are standing in the way,” said Gallagher.
In an attempt to limit pressure on utilities, officials in Pakistan last year imposed a tax on solar panel purchases and have cut the rates available for selling surplus power back to the grid. Pakistan's Minister for Energy (Power Division) Awais Leghari has advocated greater use of domestic coal resources, while the IMF has encouraged officials to enact reforms aimed at keeping consumers on the grid.
Leghari is leading a national energy task force, and attempting to “find an economically and financially viable way” forward, he said in an interview. In recent years, Islamabad has made multiple attempts to renegotiate outstanding power sector loans with Beijing.
“We are not expecting any haircuts in those terms and conditions,” said Leghari. “We are just expecting to, or have asked for, the debt to be extended over a longer period of time.”
For China, the extent of its role in Pakistan's energy sector means any long-term resolution would need support from a wide sweep of Beijing's ministries and agencies. State-owned enterprises with stakes in the overseas power stations have outstanding loans with state-run banks, while Sinosure — which underwrote lenders — has potential exposure if payment defaults prompt project owners to make insurance claims.
Despite the complexities, there are indications Chinese bureaucrats are increasingly focused on finding solutions, according to Boston University's Gallagher, who held discussions with ministry officials in China earlier this year.
“There's a real recognition of the need to make sure that they get the contract terms right,” given the obstacles Pakistan has faced in paying the Chinese power plants, he said. “There's a new momentum for potential refinancing.”
In recent months, the Pakistan-China Institute, an Islamabad-based think tank, has hosted parties from all sides to discuss possible paths forward, including repurposing under-utilized power plants, said Mustafa Hyder Sayed, the institute's executive director. Power stations running on imported coal, like Port Qasim, have seen particularly low utilization rates because of their higher generation costs and exposure to volatile global fuel prices.
Chinese officials have considered whether some fossil-fuel-based projects overseas could be transformed into renewables operations, and see that as an option that would emphasize Xi's role in encouraging global growth in clean energy, according to the people familiar with government deliberations. Domestically, China has called for old coal facilities to be reused to house battery storage, or host equipment that provides grid stability.
Another alternative would simply be to retire some of the China-built coal plants early, though discussions on the prospect have made little progress. The concept — under which a still-functioning power station would be shuttered ahead of schedule and operators compensated for lost revenue — suffered a setback last year, when a test case project in Indonesia was scrapped.
As officials debate potential solutions, business owners back in Port Qasim continue to add to the country's solar expansion to avoid the high costs of grid power, said Mian Muhammad Ahmed, chief executive of Al-Momin Packaging Industries (Pvt.) Ltd. Ahmed's firm uses solar for as much as 40% of its electricity needs.
Expensive electricity from coal-fired generation will become “just as obsolete” as landline phone connections in Pakistan, which are now outnumbered more than 75 to 1 by cellphones, according to Ahmed. “I don't see any future for coal power plants,” he said.
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