Pakistan's 22 GW Solar Boom Outpaced Venture Capital. What Does That Tell Us About Climate Finance?

As world leaders gather in Belém this week for COP30, the conversation centres on mobilising $1.3 trillion annually by 2035 for climate action. The Baku-to-Belém Roadmap sets out mechanisms to close the gap from the $300 billion annual target agreed at COP29. These are the numbers that dominate the negotiating rooms, from adaptation to mitigation.  

But while delegates debate funding mechanisms, Pakistan—the world's fifth most populous nation with over 240 million people—is an extraordinary example of a country doing it for itself.  

The Bottom-Up Revolution 

Here's what happened: electricity prices doubled between 2021 and 2024. The grid failed repeatedly. And the people didn't wait for policy or international finance. They acted. 

According to CleanTechnica's Michael Barnard, by the end of 2024, Pakistan had imported a jaw-dropping 22 gigawatts worth of solar panels in a single year.  

Photo Credit, Renewables First

As Barnard notes, "That's more solar than Canada has installed in total. It's more than the UK added in the past five years."  

The economics was glaringly obvious. Solar panels now cost just Rs. 28-32 per watt (approximately $0.20-0.25 per watt), making payback periods as short as 2-4 years according to net metering data. Solar guarantees keeping the lights on. 

As Barnard observes: "The tipping point came when utility-scale and industrial solar started making simple economic sense. With Chinese panel prices crashing through the floor and diesel generator costs spiralling out of control, even small business owners started doing the math. The answer was always the same: buy solar." 

Necessity-driven decarbonisation at scale is working. 

The Energy Trilemma Solved 

Every kilowatt-hour generated from these rooftop systems displaces grid electricity—much of it from imported fossil fuels. Pakistan is reducing CO₂ emissions because solar is cheaper and more reliable than the alternative.  

The benefits span security, affordability and climate at scale. According to the Pakistan Institute of Development Economics (PIDE) Knowledge Brief, net-metered systems alone are avoiding an estimated 475,840 tons of CO₂ annually. 

The Energy Trilemma—the balance between security, affordability and sustainability—has been solved through market forces: 

• Energy security: Decentralised generation immune to grid failures 

• Affordability: Solar payback in 2-4 years; monthly electricity bills approaching zero 

• Sustainability: Displacing fossil fuel imports and reducing emissions 

  
  

Growth Without Venture Capital 

But here's the critical question: does decentralised, policy-absent green transition attract institutional investment? 

The data says no.  

According to a 2023 ScienceDirect research, the top barriers to renewable energy investment in emerging markets are:  

• political instability  

• lack of access to credit  

• high investment risk  

• budget constraints   

  
  

The International Energy Agency's 2024 report on ‘Scaling Up Private Finance’ notes that the cost of capital for renewable projects in countries like Pakistan is 2-3 times higher than in developed economies—driven by perceived macroeconomic instability. 

According to the Institute for Energy Economics and Financial Analysis (IEEFA), Pakistan's flagship 600 MW solar project at Muzaffargarh was deemed "too risky for investment given the country's challenging politico-economic landscape".  

Meanwhile, the IEA's World Energy Investment 2025 report reveals that globally, AI attracted $84 billion in 2024—three times all energy-related venture capital combined. 

Yet Pakistan's grassroots solar boom happened anyway. Without significant VC backing. Without policy certainty.  

Here's what VC missed: cottage industries—small manufacturers, independent installers, local entrepreneurs—set Pakistan's green standard without institutional backing. And a pattern emerges yet again. Every major technology transition in history was driven by decentralised adoption before venture capital recognised the opportunity. By the time institutions arrive, the civilians have already built the market. 

When Governments Respond: Lessons from India and Bangladesh 

Pakistan is not alone in this bottom-up transformation. The Asia-Pacific region offers two instructive examples of how governments have responded to grassroots solar adoption. 

India: After years of underperformance in residential rooftop solar, bottom-up demand finally triggered government action. According to ImpactAlpha and IEEFA reporting, in February 2024, India launched the Pradhan Mantri Surya Ghar Yojana (PM Surya Ghar scheme)—a $9 billion program targeting 10 million households with subsidies for 3 kW systems. IEEFA reports that by May 2025, India had reached over 18 GW of rooftop solar capacity. The government recognised what the market was signalling and built policy infrastructure to accelerate adoption. 

Bangladesh: Facing similar grid challenges, Bangladesh experienced organic growth in industrial and commercial rooftop solar. According to The Business Standard, the government responded in March 2025 by amending its net metering policy—removing the 70% cap and allowing users to export 100% of excess power to the grid. The same source reports that textile factories alone have rooftop space capable of generating 400 MW. The policy response followed market demand, not the other way around. 

Both examples show governments learning from grassroots adoption and creating enabling frameworks after the market proves the model. 

Pakistan's Policy Evolution 

Pakistan is beginning its own policy evolution. According to the Green Climate Fund and World Economic Forum reporting, the Green Climate Fund backs a Pakistan Distributed Solar Project financing 43 MW of installations through the State Bank of Pakistan's renewable energy scheme.

In October 2024, the GCF also committed $15 million as an anchor investor to the $40 million Climaventures Fund targeting climate ventures in Pakistan. Multiple Pakistan solar finance sources report that JS Bank offers concessional loans at 6% interest for solar systems. As Barnard notes, the government "removed tariffs, approved net metering, and got out of the way." 

But the question remains:  

Is this enough to attract the scale of PE and VC investment needed to industrialise the green transition?  

The $40 million Climaventures Fund, while significant, is tiny compared to the scale of Pakistan's multi-billion dollar solar hardware imports. Traditional venture capitalists seek political stability, strong regulatory frameworks and clear long-term policy vision. Pakistan, despite its market-proven solar success, struggles on these metrics. 

The Uneven Geography of Green Finance 

This exposes the fundamental challenge: green energy transition PE and VC investment is profoundly uneven worldwide. According to CEPR research on emerging-market green finance, emerging markets receive only a fraction of global climate finance, despite being the fastest-growing emitters and having the greatest need. The barriers are well-documented by the IEA, World Economic Forum, and academic research: 

• Cost of capital disparities: According to the IEA, 2-3x higher in emerging markets 

• Perceived political risk: Even successful market-driven transitions are deemed "too risky" 

• Currency risk: International investors face foreign exchange exposure 

• Shallow capital markets: Domestic financing infrastructure remains underdeveloped 

• VC model mismatch: According to ScienceDirect research on venture capital and clean energy (2023), climate hardware is capital-intensive with longer return horizons than VC traditionally accepts 

A Green Executive’s View from the Fundraising Trenches 

Working with cleantech companies, navigating venture capital — doors are open in Europe. Green infrastructure funds, climate-focused VCs, corporate venture arms—the ecosystem is mature and capital is flowing. When a European solar developer or battery startup has proven technology and a credible business model, the conversations happen. The due diligence is rigorous, but the pathway exists. 

Emerging markets? It’s a different story. 

The same business model that attracts €10 million in Series A funding in Amsterdam gets a polite "too risky" in Karachi or Dhaka. And let's be clear: the risk assessment isn't irrational. Political instability is real. Currency volatility can wipe out returns overnight. Legal frameworks are weaker. Exit markets are shallow. Contract enforcement is uncertain. The rational response, from a fiduciary duty perspective, is: don't invest. 

Here's a thought... The UK's approach to wind energy offers an instructive parallel. In the early 2000s, offshore wind was deemed too expensive, too risky, too unproven. The private sector wouldn't finance it at scale. So the UK government created the Contract for Difference (CfD) mechanism—a long-term revenue guarantee that de-risked investment by ensuring predictable returns regardless of fluctuations in wholesale electricity prices. It worked. Capital flooded in. Offshore wind is now one of the UK's cheapest energy sources, and the CfD strike prices have fallen by over 70% as the technology has matured and competition has increased. 

Governments shouldn't subsidise forever. Strategic de-risking mechanisms can unlock private capital in markets that would otherwise appear too risky. Pakistan's 22-gigawatt surge happened despite the absence of such mechanisms—imagine what could happen with them in place. 

The irony is acute: the places where clean energy solves the most urgent problems—unreliable grids, energy poverty, fossil fuel import dependence—are precisely the places where institutional capital fears to tread. Yet here's what Pakistan demonstrates: you have to speculate to accumulate.

The grassroots market moved first, proved the model at scale, and now policy is catching up. The $40 million Climaventures Fund is a start, but small compared to the billions in hardware already deployed by businesses and households. 

The capital that moves early in these markets—with the right de-risking support—won't just generate returns; it will also drive growth. It will shape the architecture of the global energy transition. COP30's challenge is to build the financial infrastructure that makes what currently seems too risky rational. 

The Question for COP30 

The critical question for COP30 is this: if grassroots, market-driven green transitions are succeeding despite the absence of significant institutional capital, what structural barriers in global finance prevent capital from following suit? 

To unlock the full potential of these transitions, climate finance must move beyond risk-averse metrics and recognise that necessity-driven markets in emerging economies are already delivering results. The responsibility now is to understand why the blocks exist—political risk premiums, currency exposure, shallow capital markets, policy uncertainty—and systematically address each one. 

Only then can we mobilise the capital needed to turn grassroots revolutions into permanent energy transformations at the scale the climate crisis demands. 

Sources & References: 

1. COP30 Baku-to-Belém Roadmap: Target of $1.3 trillion annually by 2035 (Carbon Brief: "COP30: What does the 'Baku to Belém roadmap' mean for climate finance?", UN News: "COP30 kicks off with urgent call to deliver on climate promises", 2025) 

2. Adaptation Finance Gap: $284-339 billion per year for developing countries (UNEP Adaptation Gap Report 2025, cited in IISD: "What's at Stake for Climate Change Adaptation at COP 30?") 

3. Pakistan's 22 GW Solar Import: Michael Barnard, CleanTechnica: "Pakistan's 22 GW Solar Shock: How a Fragile State Went Full Clean Energy", April 4, 2025 (https://cleantechnica.com/2025/04/04/pakistans-22-gw-solar-shock-how-a-fragile-state-went-full-clean-energy/) 

4. Solar Panel Costs: Rs. 28-32 per watt / $0.20-0.25 per watt (SolarApp.pk, PakistanSolarMarket.com, W11stop.com, 2025) 

5. CO₂ Avoidance: 475,840 tons annually from net metering (PIDE Knowledge Brief: "Unlocking Climate Finance: Potential Carbon Credits from Renewable Energy", cited in ProPakistani, February 2025) 

6. AI vs Energy VC: AI $84 billion in 2024, 3x energy VC funding (IEA: "World Energy Investment 2025 – Executive Summary") 

7. Investment Barriers: Political instability (4.51%), credit access (4.52%), investment risk (4.42%), budget constraints (4.68%) (ScienceDirect: "Analysis of obstacles to adoption of solar energy in emerging economies using spherical fuzzy AHP decision support system: A case of Pakistan", July 2023) 

8. Cost of Capital Disparity: 2-3x higher in emerging markets vs developed economies (IEA: "Scaling Up Private Finance for Clean Energy in Emerging and Developing Economies – Key Findings", 2024) 

9. Muzaffargarh Project Risk: Deemed too risky by GIZ (IEEFA: "Choosing the right incentive for Pakistan's renewable energy industry", statement by Gerd Schober, Team Leader REEE II project at GIZ) 

10. India PM Surya Ghar: $9 billion program, 10 million households, 18 GW by May 2025 (IEEFA: "Advancing residential rooftop solar adoption in India under PM Surya Ghar Yojana", ImpactAlpha: "India's residential rooftops sprout solar panels with generous government subsidies", August 2024) 

11. Bangladesh Net Metering Reform: Amended from 70% to 100% grid export, March 2025 (The Business Standard: "Govt to relax net metering policy to boost rooftop solar", March 2025) 

12. Bangladesh Rooftop Potential: 400 MW from textile factories alone (The Business Standard: "Govt to relax net metering policy to boost rooftop solar", March 2025) 

13. GCF Pakistan Projects: 43 MW Pakistan Distributed Solar Project through JS Bank (Green Climate Fund: "SAP024: Pakistan Distributed Solar Project", May 2022; World Economic Forum: "Pakistan's energy transition via solar power and batteries", 2025); $40 million Climaventures Fund with $15 million GCF commitment (Green Climate Fund: "SAP047: Climaventures", October 2024) 

14. Emerging Market Finance Barriers: (CEPR: "The lack of portfolio investment finance in green companies in emerging markets"; World Economic Forum: "How private capital can close the great financing gap", 2024) 

15. VC and Clean Energy Challenges: (ScienceDirect: "The role of venture capital and governments in clean energy: Lessons from the first cleantech bubble", July 2023)