Developing Pakistan's hydrogen strategy: overview of techno-economics and strategic pathway

As countries accelerate their transition to climate neutrality, renewable hydrogen (RES hydrogen) is gaining momentum as a key solution for industrial decarbonization. With abundant renewable energy resources, particularly in the Sindh and Balochistan provinces, Pakistan has potential to develop a renewable hydrogen sector and is preparing a national hydrogen strategy to support energy diversification and its long-term climate goals. The challenge is to translate this technical potential into a viable market through supportive policies, sound business models, and effective institutions. This blogpost presents key findings of the working paper titled ‘Techno-economic assessment of RES hydrogen in Pakistan’ and discusses how hydrogen can enable the country’s energy transition.

Pakistan's energy transition requires a strategic hydrogen framework 

Pakistan currently faces interconnected energy, economic and environment challenges. The country's energy system remains heavily dependent on imported fossil fuels including natural gas, oil and coal making it vulnerable to price volatility and geopolitical uncertainties. It is projected that by 2032, the country’s natural gas imports could reach more 29 billion cubic meters (bcm) while local production might remain at only 22 bcm if no further reserves are tapped. In the renewable energy landscape, solar photovoltaics (PV) and wind power accounted for less than 5 percent of Pakistan's grid-scale electricity generation in 2024. This is in stark contrast to the country's ambitious policy goal of achieving a 30 percent share of renewable electricity by 2030. Against this backdrop, hydrogen presents both an opportunity and a challenge. If the strategy is not grounded in realistic economic and institutional reforms, it risks becoming disconnected from the broader energy policy rather than accelerating the development of a domestic hydrogen market. Some key points of consideration are:

• Ambitious hydrogen targets without viable financing mechanisms may create unrealistic expectations and undermine policy credibility.
• Overemphasizing hydrogen exports without incentivization and de-risking mechanisms may hinder the development of the hydrogen market. 
• If domestic demand, infrastructure, and regulatory frameworks are underdeveloped, hydrogen projects may struggle to achieve commercial viability.

Pakistan's export ambitions regarding hydrogen are likely to remain constrained in the near term

The economic assessment based on the PTX Business Opportunity Analyzer (BOA) suggests that Pakistan currently has no cost competitiveness over regional competitors when exporting PtX products to key import markets such as China, Germany or Japan. This is primarily driven by factors such as cost of financing which raises the levelized cost of production, and longer geographic distance to these markets compared to competitors such as the Middle East and North Africa. Pure hydrogen transport remains costly worldwide, regardless of exporting country. In terms of transporting pure hydrogen from Pakistan to Europe or the Association of Southeast Asian Nations (ASEAN) can add almost 60 percent to production costs alone, making it significantly less competitive than exports from geographically closer regions.

Ammonia and methanol are therefore emerging as more practical export vectors, as shipping costs are lower for long-distance trade. However, where end users ultimately require hydrogen, reconversion from ammonia introduces additional costs and efficiency losses, reducing overall economic viability. For Pakistan specifically, while export opportunities for ammonia and methanol may be promising in the medium term compared to pure hydrogen, the high cost of financing continues to limit its position in the global market.