Clean energy shift meets resistance

Once seen as a beacon of hope for a sustainable future, Pakistan’s renewable energy journey now stands at a perilous crossroads. The recent amendments proposed to the country’s net-metering policy have raised alarm among solar industry, environmentalists, and energy experts. The proposed amendments reduce financial incentives for On-Grid solar installation, particularly affecting residential and small-scale solar projects. While the government cites the need to address revenue disparities, this approach fails to address the power sector’s fundamental challenges.

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. Over a few years, net-metering turned passive consumers into active energy producers, reshaping how citizens interacted with the national power infrastructure.

The proposed changes reduce the compensation rate for surplus electricity sold back to the grid - from Rs27 per kWh to Rs10 - and more critically, eliminate unit-to-unit offsetting mechanism. These changes amount to an effective 80% cut in actual financial return for On-Grid solar projects, severely impacting their viability. While DISCOs face genuine financial challenges as high-value customers adopt solar and pay less, while still requiring grid services, discouraging solar adoption is counter-productive.

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 market, driving down costs and enabling access for broader population. Penalizing these pioneers disrupts this economic logic and stalls mass adoption.

Myth 2 is that the net-metering users are draining DISCOs revenue. The real financial burden on power sector stems not from net-metering users, but from Independent Power Producers and Captive Power Plants, which place nearly 20 times pressure on system.

Myth 3 is that slashing solar returns will strengthen DISCOs finances. As battery costs fall and technology improves, affluent users will turn to off-grid solution - 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 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: inflation, currency devaluation, and prohibitive energy costs that have forced businesses to scale back operations or shut down entirely.

The proposed policy amendments could trigger several unintended consequences. The policy incentivizes high-value customers to seek energy independence via solar-plus-battery systems. This exodus will accelerate DISCOs revenue losses - exacerbating the very problems the policy changes aim to solve. The large gap between low export rate (Rs10) and self-consumption savings (Rs50-60) encourages battery adoption and reduced grid reliance. This will ultimately result in higher electricity prices for remaining customers as fixed costs and capacity charges must be spread across fewer consumed units-ironically worsening the situation for the less affluent consumers the proposed changes purportedly aim to protect.

Applying a blanket policy nationwide ignores stark regional disparities. Areas with low solar adoption and severe load-shedding - often rural and underserved - are unfairly penalized alongside high penetration urban centers.

The proposed policy overlooks several less visible 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, improves 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 large-scale power plants 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.

Instead of discouraging solar adoption, Pakistan must pursue comprehensive strategies that address DISCOs challenges while supporting renewable energy growth. Technical solutions are central to this effort. Deploying utility-scale batteries at neighborhood grid stations can store surplus solar energy and flatten the “duck curve,” while investments in smart grid technologies would enhance efficiency and flexibility. Demand response programs and incentivizing consumption during peak solar production, can further stabilize the system.

Dynamic tariff structures - such as peak-hour pricing reflecting true service costs and super off-peak tariffs encouraging solar use - can better align incentives. Reasonable fixed grid access fees for solar users would help fund infrastructure without undermining adoption. Solar energy’s true value to the grid, including transmission savings, emission reductions, and peak demand management, must also be fairly compensated.

Policies must be regionally differentiated. Regulations should be based on actual grid capacity and solar penetration levels, not arbitrary national standards. Incentives should be maintained in areas with low solar adoption and high load-shedding, helping balance development across regions.

Clear, phased transition timelines would provide stability, while regular policy reviews would ensure adaptability to technical and market realities. Pakistan Solar Proponents of clean energy have been at the forefront to emphasize that these broader advantages far outweigh perceived challenges tied to supporting net-metering policies. The opportunity remains within reach, but only if all stakeholders act together with vision and resolve.