The relation between renewable energy systems and financial markets has become more critical than ever, as the global energy landscape undergoes a profound transformation. Today, investment decisions are no longer driven solely by technological feasibility but by robust economic modelling, data transparency, and policy certainty. For countries navigating energy transitions at different stages of development, understanding how markets price risk, opportunity, and sustainability is central to achieving long-term energy security and climate resilience.

In this edition of Scientia, we discover these dynamics with Muhammad Ali Qamar, a doctoral researcher whose work sits at the intersection of energy systems engineering, techno-economic analysis, and data-driven energy policy. With over eight years of experience in assessing the financial and technical viability of clean energy technologies, he brings a nuanced perspective on how analytical tools, market design, and policy frameworks shape investment flows into renewable energy. His research spans bioenergy systems, energy market analysis, and resource assessment, offering valuable insights into how data can reduce investment risk and inform strategic decision-making.

This conversation explores how financial markets influence the pace of renewable energy adoption, the role of techno-economic analysis in bridging the gap between innovation and investment, and the contrasting challenges faced by the Global North and Global South in financing clean energy transitions.

Hifz: Could you share your journey into the energy sector and discuss how your academic and professional experience have shaped your understanding of the role that renewable energy plays globally?

Ali Qamar: For me, it began with the profound realization that energy underlies everything in our lives, from the biochemical energy to the various forms of energy; they interact to make the world around us. During my undergraduate engineering degree, my university introduced a new program in energy systems. That sparked my curiosity, and I started taking elective courses in energy systems, with a growing interest in clean energy. In many ways, renewable energy has grown alongside my generation. 

Over the first two decades, it moved from limited adoption to widespread use. I was very enthusiastic about this trajectory and wanted to pursue it further through a master’s degree in energy systems. Since then, my academic and professional journey has focused on understanding the challenges of clean energy adoption and finding practical ways to address them. I have worked in two very different energy markets in Pakistan and the U.S. I see the nature of the challenges as more similar in terms of market adoption of clean energy.

Hifz: How do you see renewable energy sources reshaping traditional energy markets, and what are the key techno-economic challenges for valuing and integrating intermittent generation, like solar and wind, into those markets?

Ali Qamar: Renewables like wind and solar have demonstrated their massive potential to disrupt both centralized and decentralized power systems. With increasingly favorable techno-economics enabling market adoption worldwide, there is an increasing need to address pertinent challenges associated with them. Their intermittence poses profound challenges, making them unreliable for ramping electricity profiles like in California. California has excess renewable electricity during the day that it needs to curtail. This curtailment often takes the form of the systems operator paying neighboring states to buy excess solar energy to maintain grid stability. 

As the sun goes down, electricity demand goes up, leaving the grid counting on natural gas plants. Energy storage is the most straightforward engineering solution to this problem, but utility-scale batteries are not yet economical at the scale required. Other innovative solutions, like behind-the-meter storage, vehicle-to-grid, green hydrogen production, and pumped hydroelectricity, have their own techno-economic challenges to overcome before becoming viable. 

I believe that transportation electrification, if adopted globally, has the potential to significantly reduce battery costs. This can enable a market-driven uptake of behind-the-meter batteries like solar energy systems. The utilities, grids, aggregators, and policymakers will have to work together to then integrate this resource for grid stabilization.

Hifz: What role do financial instruments such as green bonds, power purchase agreements, or carbon pricing play in accelerating renewable energy deployment, and how important is access to capital and favorable financing structures for scaling projects, especially in emerging markets?

Ali Qamar: Financial tools like green bonds, power purchase agreements, and carbon pricing act as both incentives and pressure points for policymakers to steer markets in certain directions. Their effectiveness, however, varies widely depending on the market. But the effectiveness of bottom-up carrots and sticks is undeniable. While top-down policies can work in some contexts, bottom-up forces are often more powerful. 

For example, Pakistan’s recent solar boom was driven largely by unreliable grid electricity and attractive pricing for solar solutions. This happened without mandates, climate pledges, tax credits, or subsidies. I do not dismiss the use of these instruments, but disagree with a one-size-fits-all implementation that we often see in the emerging markets. Their use must be grounded in the needs of the markets and should be highly sensitive to the interests of all stakeholders. That requires rigorous data collection, careful analysis, and meaningful engagement with market participants to ensure that the policies actually align with real-world conditions. 

Hifz: Given your strong background in data analysis, how can advanced analytics and predictive models improve investment decisions in renewable energy, and what are the main data challenges investors face when evaluating these projects?

Ali Qamar: I touched on this in my previous response, but data analysis plays a critical role in effective investment and policymaking. The biggest data challenges are both quantitative and qualitative. In emerging markets like Pakistan, these challenges are particularly pronounced due to the limited availability of high-quality, reliable government data on energy systems. This has been improving with the institutional reforms in the last decade, so I expect the future analyses to be more robust. 

For investors, the reliability and predictability of the system’s data are key. For example, if I were to invest in a company, I would always prioritize investing in a company that regularly publishes its quarterly financials on time rather than a company that randomly misses a quarter or two or has missing data in its regular reports. Therefore, it is important for the energy systems and the market to have a reliable availability of quality data to enable investors to fully model their investments before committing. This was one of the reasons why the government had to offer guarantees when Pakistan sought independent power producers in the mid-2010s, which has borne bitter fruit to this day. 

Hifz: How do policy frameworks, including subsidies, feed-in tariffs, or carbon pricing, shape financial flows to renewables, and what regulatory priorities would you recommend to balance investor confidence with energy market stability?

Ali Qamar: The mechanisms vary from market to market, and their effectiveness varies accordingly. In Pakistan, the issue is not the mechanism or subsidies; it is the inconsistency. Historically, the existence of incentives or subsidies today has not proven to be a guarantee for tomorrow. This has majorly eroded investor confidence. I would emphasize the need for predictability and reliability of the market as these are the necessary foundations for an investor-friendly environment. Without these, all these tools (no matter how good they are) are like fancy buildings on loose soil. 

The government should focus on improving predictability over high returns. Once the market has established its reliability in the eyes of investors, the immense potential will naturally attract them to the avenues that offer high returns within the market. If this is too difficult for the government alone, opening the sector to greater competition and letting market forces play a stronger role may be a more sustainable path forward.

Hifz: With the rise of ESG (Environmental, Social, and Governance) investing and technological advancements, what major trends do you see shaping renewable energy finance and financial markets over the next decade? 

Ali Qamar: The significance of ESG considerations is growing worldwide, and emerging markets are no longer insulated from this shift. For example, buyers in Western markets are increasingly demanding cleaner production practices from Pakistan’s textile industry. Given the competitive nature of global textiles, the industry has little choice but to adapt. This creates strong demand for verifiable green credentials, driven by both investors and banks. It also presents a major opportunity for the renewable energy sector.

Through energy efficiency measures and rooftop solar, export-oriented industries can meet these requirements without waiting for the national grid to become cleaner (which might take ages, given the economic challenges of Pakistan).

Hifz: How can developing economies attract more institutional and international capital for renewable energy deployment while ensuring local economic benefits and long-term market sustainability?

Ali Qamar: This is literally the billion-dollar question that governments across the developing world are trying to answer. It’s also crucial to understand what NOT to do. Offering guaranteed dollar returns to foreign investors places a heavy burden on already strained public finances and is not a sustainable solution. Regulators should focus less on eliminating risk from investor profits and more on reducing risk within projects themselves. This includes simplifying regulations, improving market predictability, and regularly publishing reliable market data. 

These steps allow investors to assess risk independently and execute projects efficiently, without relying on government guarantees. To ensure local benefits and market sustainability, the focus should be on encouraging investors to capitalize on the local services ecosystem as much as possible. There are various policy tools that the regulators can use to enable this.   

Hifz: Given Pakistan’s rapid growth in solar capacity alongside persistent structural and financial challenges in the power sector, is it possible for Pakistan’s energy sector to achieve a more sustainable and economically viable energy mix? 

Ali Qamar: It is certainly possible, but a lot of challenges stand in the way. One major issue is that the utilities’ best-paying customers have moved to rooftop solar in response to high electricity prices. Instead of viewing residential solar as a threat, regulators should treat it as an asset. This can be done by modernizing the grid and introducing aggregators, virtual power plants, load management programs, and incentives for energy storage. 

Further development of wind energy (both onshore and offshore) should also be explored, as wind complements solar well in certain regions. As storage costs decline, another market-driven expansion could help improve grid reliability and maximize the use of solar power. Until then, load management programs can play an important role in making better use of the clean electricity already available.

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