Once cautiously hailed as optimistic & futuristic option, Pakistan’s renewable energy journey seems to be at a dangerous crossroads. Hastily introduced and poorly justified recent amendments to the country’s net-metering policy have rattled the solar industry. This decision has led to the grave concerns among investors, environmentalists, and energy experts. At stake is not only the economic viability of residential and small-scale solar projects, but also Pakistan’s broader commitments to sustainable development and energy security.
Pakistan’s net-metering policy, first introduced in 2015, has played a pivotal role in advancing solar adoption. It allowed consumers to install rooftop solar panels and sell surplus electricity back to the national grid — offering both financial returns and a sense of energy autonomy. The results were transformative. Over a few short years, net-metering turned passive consumers into active energy producers, reshaping how citizens interacted with the national power infrastructure.
But now, with the government’s recent policy shift, the foundations of this transformation are being eroded. The proposed changes reduce the compensation rate for surplus electricity sold back to the grid — from Rs 27 per kWh to a mere Rs 10 — and more critically, eliminate the unit-to-unit offsetting mechanism. Together, these changes amount to an effective 80% cut in the actual financial return for solar adopters. The impact on the solar industry is not just significant — it is existential.
Pakistan’s power grid is plagued by overcapacity in thermal power generation, massive line losses exceeding 20 percent, outdated billing systems, and billions in circular debt. These are systemic issues — solar adopters are mere scapegoats. Targeting them does not address the rot; it merely delays the reckoning.
The government’s justification hinges on a familiar narrative: distribution companies (DISCOs) are losing high-value customers to solar energy, exacerbating their already precarious financial state. In response, the policy aims to disincentivize further solar adoption. But this response is based on a flawed diagnosis. The real disease lies elsewhere — entrenched inefficiencies in the energy sector.
Pakistan’s power grid is plagued by overcapacity in thermal power generation, massive line losses exceeding 20 percent, outdated billing systems, and billions in circular debt. These are systemic issues — solar adopters are mere scapegoats. Targeting them does not address the rot; it merely delays the reckoning.
Debunking the Myths
Several misconceptions underpin the government’s position, and they deserve careful scrutiny.
Myth 1 is that the solar is a luxury for the wealthy. While it is true that new technologies often begin with the affluent, this is a natural cycle of innovation. Early adopters help scale the market, driving down costs and enabling access for the broader population. Penalizing these pioneers disrupts this economic logic and stalls mass adoption.
Myth 2 is that the net-metering users are draining DISCO revenues. The real financial burden on the power sector stems not from net-metering users, but from Independent Power Producers (IPPs) and Captive Power Plants (CPPs), which place nearly 20 times the pressure on the system. Reforming IPP contracts, even marginally, could yield far greater savings than stripping benefits from solar users.
Myth 3 is that slashing solar returns will strengthen DISCO finances. Quite the opposite. As battery costs fall and technology improves, affluent users will turn to off-grid solutions—solar plus battery storage—altogether severing ties with DISCOs. As more high-value customers defect, the financial burden on the grid will intensify, and the remaining consumers—often less affluent—will bear the brunt through rising tariffs.
Myth 4 is that the net-metering is the reason for declining electricity demand. In truth, net-metered solar accounts for only 7.5% to 12% of recent demand reduction. The bigger culprits are macroeconomic woes: spiraling inflation, currency devaluation, and prohibitive energy costs that have forced businesses to scale back operations or shut down entirely.
As of fiscal year 2023–24, Pakistan had installed around 3,000MW of net-metered solar capacity — 2,400MW within DISCO territories and another 600 MW under K-Electric. But, this is just a fraction of the 27,000MW worth of solar panels imported into the country. An estimated 20,000MW of solar operates outside the net-metering regime — suggesting a silent, growing shift toward self-sufficiency.
The state’s crackdown on the net-metered segment, therefore, seems both arbitrary and ineffective. It punishes a small but visible community while ignoring the silent migration toward off-grid alternatives.
The Unseen Consequences
The ripple effects of these policy amendments could be devastating. As compensation shrinks and battery technology advances, more consumers will disconnect from the grid entirely. The current policy all but incentivizes this behavior. The result? A shrinking customer base left to shoulder the fixed costs of a bloated and inefficient grid, with higher tariffs for all who remain.
Applying a blanket policy nationwide ignores stark regional disparities. Areas with low solar penetration and severe load shedding—often rural and underserved—are unfairly penalized alongside urban centers. These communities lose access to the very solution that could alleviate their energy poverty.
Pakistan has pledged to achieve 30% clean energy by 2030. Undermining solar adoption at this critical juncture sends the country veering off course, increasing its dependence on imported fossil fuels, worsening air quality, and weakening its international climate standing.
By discouraging solar, the country risks stifling private investment, slowing job creation in a high-growth sector, increasing foreign exchange outflows, and missing out on critical technological transfer.
The current policy overlooks several often invisible yet vital benefits of distributed solar. Solar energy produced near the point of consumption reduces transmission losses and alleviates stress on the grid during peak demand hours. Distributed solar helps cut fossil fuel use, improve air quality, and preserve foreign exchange reserves by reducing fuel imports.
Lower energy bills boost productivity and enable Pakistani businesses to offer more competitive pricing globally. Unlike IPPs that rely on sovereign guarantees and long-term contracts, net-metering projects are entirely privately funded—without any take-or-pay obligations or capacity payments.
This is not uncharted territory. Global experiences offer a wealth of lessons. California’s NEM 3.0 was introduced with a two-year lead time, allowing stakeholders to prepare. The Netherlands pursued gradual tariff adjustments in consultation with industry. China harmonized solar expansion with grid stability through phased reforms.
Pakistan’s abrupt and opaque policy change stands in stark contrast. It has introduced uncertainty, eroded investor confidence, and created chaos where consistency was most needed.
Toward a smarter, more equitable energy transition
Instead of penalizing solar adopters, Pakistan must focus on holistic reforms. It should invest in smart grids, deploy battery storage at grid stations, and implement demand-response programs that align consumption with solar generation peaks.
Pakistan must introduce dynamic tariffs that reflect actual service costs, modest grid access fees, and compensation structures that acknowledge solar energy’s real value to the grid. Tailor regulations to regional realities—maintain incentives where solar adoption is low and grid strain is high. Pakistan can launch pilot programs, announce changes with long lead times, and institute regular review mechanisms.
Solar energy is not just a matter of kilowatt-hours. It is a pillar of economic empowerment, environmental responsibility, and national resilience. It attracts investment, creates jobs, drives innovation, and reduces our dependence on volatile global energy markets.
The Pakistan Solar Association calls on policymakers to take a step back and reassess. This is not a plea for preferential treatment—it is a demand for fairness, transparency, and strategic thinking.
The government must revisit the proposed amendments and engage meaningfully with all stakeholders—industry, academia, and civil society. It should develop pragmatic, forward-looking policies that address the power sector’s core challenges without derailing renewable energy progress. The government differentiate between high-penetration areas and the broader national landscape and promote a transparent policy-making process grounded in evidence and inclusion.
Pakistan’s solar future still shines bright—but only if we choose dialogue over disruption, progress over regression, and vision over short-term fixes.
