Solar panels have been seen as a ticket to lower electricity bills, allowing homeowners to generate their own power and sell excess energy back to the grid.
SOLAR SITUATION
Solar panels have been seen as a ticket to lower electricity bills, allowing homeowners to generate their own power and sell excess energy back to the grid.
But behind the scenes, an unsustainable financial model quietly shifted costs onto millions of non-solar users. The recent confusion from the regulators and government quarters has left the utility companies as well as the customers scratching their heads.
The government recently decided to reduce the net metering buyback rate from Rs27 to Rs10 per unit, which has sparked intense debate. This step was, however, halted before implementation. The debate is that some view it as a setback for solar adoption, while others see it as a necessary correction to an inequitable system. As in most energy policy shifts, the reality lies somewhere in between.
The previous Rs27 per unit buyback rate was instrumental in promoting solar adoption, leading to a surge in rooftop solar capacity of up to 4,124MW in 2024 and pushing the net metering consumer base to 283,000. However, this incentive came at a cost wherein non-solar consumers, primarily lower-income households and small businesses, saw their electricity bills rise to compensate for the losses incurred by distribution companies. According to government estimates, this cost-shifting amounted to Rs159 billion, placing additional financial strain on a power sector already burdened with circular debt exceeding Rs2.3 trillion.
Pakistan’s electricity grid was designed for centralised power generation, not for handling thousands of small solar producers feeding power back into the system at unpredictable times. As a result, distribution companies faced growing revenue losses, exacerbating an already fragile financial position. The situation was unsustainable. With projections suggesting that unchecked net metering expansion could push system costs to Rs503 billion over the next decade, intervention was inevitable.
The revised Rs10 per unit tariff is an attempt to align the buyback rate with the actual avoided cost of power generation. This move seeks to prevent a further financial burden on non-solar users, many of whom lack the resources to install solar panels. The policy also helps stabilise the grid, which has struggled to manage the unpredictable nature of distributed solar energy.
While adjusting net metering rates was necessary, it is only one piece of the puzzle. For Pakistan’s energy transition to succeed, additional reforms are required. The transmission network must be upgraded to manage bidirectional energy flows efficiently. Smart inverters, advanced forecasting tools, and grid-edge technologies can help improve stability as renewable energy penetration grows.
As per media reports, dealers in solar system installation have stated that battery storage prices have dropped by 80 per cent since 2010, making hybrid solar-storage systems increasingly viable. Pakistan should introduce green financing initiatives to incentivise commercial and industrial solar users to adopt storage solutions, reducing peak demand pressure on the grid.
Beyond debating solar buyback rates, the focus should shift to comprehensive solutions, including modernising the grid, incentivising energy storage and expanding utility-scale renewables. If Pakistan gets this right, it could emerge as a regional leader in pragmatic renewable energy integration
While rooftop solar plays a role, large-scale solar and wind projects provide a more efficient pathway for decarbonisation. A 100MW solar farm is easier to integrate into the grid than 20,000 dispersed 5kW systems. It is pertinent to note that a couple of solar and hybrid projects by KE such as the 150MW solar projects in Winder and Bela in Balochistan and 220MW hybrid project in Dhabeji, Sindh are awaiting a decision from NEPRA meanwhile hearings of the 120 MW and 150 MW solar projects of Deh Halkani and Deh Metha Ghar have also been recently conducted. It is also pertinent to note that KE attracted the lowest tariff bids in the country for its RE projects.
This type of accelerated investment in utility-scale renewables is much awaited, following the Alternative and Renewable Energy Policy (2019), which is a significant and officially implemented framework in Pakistan's energy sector. It was introduced to replace the earlier 2006 policy and aims to substantially increase the share of renewable energy in the country's electricity mix. It encourages investment from both local and foreign private sectors in renewable energy projects, providing a conducive environment for such investments. By diversifying the energy mix, the policy aims to reduce reliance on imported fossil fuels, thereby enhancing energy security and promoting environmental sustainability. The policy introduces a transparent and competitive bidding process for renewable energy projects to ensure cost-effectiveness and efficiency.
Pakistan is not alone in recalibrating its net metering policy. California’s Net Energy Metering 3.0 reduced buyback rates to reflect the declining cost of solar energy and prevent unfair cost shifts to non-solar consumers. Germany’s Solar Peak Law introduced regulations to prevent blackouts caused by grid overloads, requiring storage adoption and smarter energy management. Australia’s net metering reforms allowed distribution companies to charge for grid access based on real-time demand, creating a fairer system for all consumers.
These examples highlight the importance of dynamic energy policies that evolve with market realities. Pakistan must take a similarly strategic approach, ensuring that renewable energy growth does not come at the expense of grid stability and financial sustainability.
Pakistan’s energy transition requires balancing multiple priorities, including encouraging renewable adoption, protecting vulnerable consumers, and ensuring the financial viability of distribution companies. The net metering revision is not a rollback of solar progress but a recalibration to create a more sustainable, equitable energy system. The coming months will be crucial in determining the policy’s success.
Beyond debating solar buyback rates, the focus should shift to comprehensive solutions, including modernising the grid, incentivising energy storage and expanding utility-scale renewables. If Pakistan gets this right, it could emerge as a regional leader in pragmatic renewable energy integration, ensuring a future where energy is affordable, dependable and fair for all.
The writer is a freelance contributor
