The Solar Boom in Developing Nations: Fast, Chaotic, and Unequal

That matters far beyond these countries, because most of the world’s future growth in electricity demand will come from emerging and developing economies, and much of it will be supplied by solar. The challenge is clear: Solar power can be a liberatory force in developing countries, offering a new source of cheap electricity in places long starved of energy, but if governments fail to manage the transition well, the coming buildout could weaken already creaky power systems and worsen economic inequality. 

The scale of the solar boom now underway in parts of the developing world is unprecedented. Sri Lanka reports that rooftop solar capacity grew more than sixfold between 2020 and 2025, while in Lebanon, recorded solar capacity rose more than tenfold over that period. In Yemen, more than half of all people now rely on solar as their main source of electricity for lighting. 

What is remarkable is that much of this data does not appear in government statistics because the new installations are overwhelmingly rooftop arrays and home systems that are behind the meter and not officially registered. Analysts have increasingly turned to customs records and even satellite imagery to reconstruct what is really happening on the ground. In Nigeria, they found an estimated 96 percent of solar capacity is off-grid. In Pakistan, as much as three-quarters of the country’s actual solar deployment may never be officially recorded. 

What we see happening in these places is called “leapfrogging.” People in developing countries are adopting new energy technology without first going through the same stages of fossil-fuel development that wealthier countries went through. Leapfrogging happens when three conditions are met: The new technology is already proven in mature markets. It offers better or comparable functionality to the incumbent technology. And it provides a way around expensive or dysfunctional infrastructure.

Solar is now a mature technology, widely adopted in wealthy countries. It has established supply chains around the world, and as manufacturing has ramped up, primarily in China, the price of solar has collapsed. Chinese manufacturers have built far more factory capacity than the world currently needs, and with trade tariffs now keeping many of their panels out of markets such as the United States and India, much of the surplus has ended up in places like Pakistan and Nigeria instead.

In countries with rickety power grids, solar can offer more reliable electricity, especially when coupled with batteries. The grid in Pakistan is frequently unstable, and in the worst-served districts, households can face 16 to 20 hours of outages in a single day. In Nigeria, around 40 percent of the population has no grid connection or electricity at all, while in Yemen, damage to the power system from the country’s brutal civil war has left close to 90 percent of the population without access to the grid. In these places, solar offers far greater functionality.

Solar also offers a workaround for expensive electricity. In Pakistan, the average electric rate almost tripled over the last decade as subsidies were withdrawn, imported fuel costs surged following Russia’s invasion of Ukraine, and consumers were left paying to maintain underused power plants. In Nigeria, electricity prices for some consumers rose by over 240 percent following rate reform in 2024. Yemen offers what is perhaps the most extreme case of rising grid electricity prices: In July, its government approved increasing rates thirty-six-fold. With every rate hike, solar has become a more attractive alternative.

Climate campaigners have celebrated the solar boom underway in emerging economies, but the rapid growth of solar can create problems if it is poorly managed. Power grids have large fixed costs: Transmission systems must be maintained, and power plants must remain available even when customers buy less electricity. When households and businesses that can afford solar panels stop consuming power from the grid, utilities lose revenue. The result can be a vicious circle: Fixed costs are spread across a smaller number of customers. Rates rise, which in turn makes solar more attractive. That spurs more customers to defect from the grid, and the cycle starts again. This is the famous “utility death spiral.”

Pakistan is already showing signs of spiraling. Grid electricity sales fell 10 percent in 2023, and the country’s energy minister has warned that falling demand could make grid electricity increasingly unaffordable. The distributional consequences are potentially stark. Wealthier households and businesses that can afford the upfront cost of panels and batteries can insulate themselves from rising prices, but poorer households cannot. If rates are raised to recover the grid’s costs, those unable to invest in solar can end up paying more for electricity. And thus, what is a profoundly democratizing technology can ultimately worsen economic inequality when it is adopted into an already dysfunctional electricity system. 

In some cases, solar users may only partly exit the system, which can make the arithmetic for the grid even worse. In Pakistan, many solar owners have sharply reduced their use of the grid during daylight hours but still rely on it after sunset. The grid, therefore, has to remain capable of meeting the evening peak even as it sells far less electricity during the day. Those still on the grid full-time are paying to keep power plants on standby so they are available to generate electricity after the sun goes down. 

None of this is an argument against solar. Quite the opposite. Installing solar in countries with hot climates, growing economies, and unreliable grids generates huge benefits for the economy, education, and health. Solar pumps let farmers irrigate their fields without paying for diesel-operated equipment. Solar lets schools without grid connections run lights, fans, and computers. Swapping diesel generators for solar panels and batteries also means cleaner air. In countries like Nigeria, where millions of homes and businesses rely on diesel for their electricity, the adoption of solar can have a meaningful impact on public health. 

An important task for governments and international agencies is to bring distributed solar into official energy statistics, using import data, registrations, and, where necessary, satellite monitoring. Think tanks such as Ember in the U.K. and Renewables First in Pakistan are already piecing this picture together from customs data. Governments need to use that data for planning. With a clearer picture of what is happening on the ground, officials can begin to integrate fast-growing solar capacity into the power system and do it in a way that strengthens the grid rather than undermines it. That means installing batteries that can store cheap solar during the day for use in the evening. It means building more flexible transmission networks that can move surplus rooftop power to where it is needed instead of wasting it. And it means offering targeted support for low-income households to make solar affordable for more people.

Why isn’t this happening already? One reason is that regulators in developing countries are struggling to keep up with the solar boom. The rules on electric rates and grid connections were written for a system built around large power plants rather than millions of rooftop arrays. Many utilities are also in deep financial trouble — Pakistan’s power sector alone has accumulated billions of dollars of debt. This leaves few financial resources for batteries, smart meters, or network upgrades. 

Governments need to update regulations to make it easier for households and businesses with solar arrays to sell power back to the grid. Wealthy nations and development banks can help countries integrate solar by providing the financing they need to modernize their power systems. However, that support should be tied to regulatory reform and not used to cover utility losses.

Lebanon, whose extraordinary solar boom may have begun to plateau, offers a glimpse of the path forward. With a new government in place and a $250 million World Bank loan to build solar farms, modernize the state utility’s electric billing, and set up a national control center to manage the power network, the country has an opportunity to integrate thousands of decentralized systems into a functioning grid. That will mean registering rooftop systems, paying their owners a fair price for surplus power, and using that solar to cut the utility’s costly fuel imports.

Nigeria, on the other hand, risks following the same path as Pakistan, but with an even weaker distribution sector to manage the consequences. Its 2024 rate increase fell on its top tier of customers, who are promised at least 20 hours of power a day. These are the businesses and better-off households that have the resources to switch to solar. They are also the customers whose monthly payments the struggling distribution companies rely on most. Rising electric rates will likely spur many consumers to take up solar and ditch the grid.

The problem with solar is not the technology itself. The key challenge in many developing countries is that the existing power infrastructure and the institutions running it are struggling to keep pace with the energy transition. The choice for governments is between letting distributed solar spur an unmanaged exit from the grid or intentionally making solar part of a more flexible and reliable network. A well-managed transition can ensure that the solar boom strengthens the electricity system and protects those who cannot afford to leave it behind.