The recent surge in solar adoption, driven by the declining cost of solar panels and rising tariffs, is nowadays central to policy discussions. Net metering, once a driver of expansion in the past, now requires re-examination to ensure fair cost sharing, grid balance and fiscal sustainability for DISCOs. The challenge has shifted from expansion to integration: how can Pakistan effectively harness solar energy without straining DISCOs' finances or imposing additional costs on non-solar users?
SOLAR INDUSTRY
The recent surge in solar adoption, driven by the declining cost of solar panels and rising tariffs, is nowadays central to policy discussions. Net metering, once a driver of expansion in the past, now requires re-examination to ensure fair cost sharing, grid balance and fiscal sustainability for DISCOs. The challenge has shifted from expansion to integration: how can Pakistan effectively harness solar energy without straining DISCOs' finances or imposing additional costs on non-solar users?
The answer lies in an integrated policy strategy that safeguards affordability, ensures a resilient power system and fosters an inclusive energy transition. Failure to act strategically risks accelerating grid defection and worsening Pakistan’s circular debt crisis. A well-structured, evidence-based reform is imperative, recognising solar’s role in energy security while addressing inefficiencies and paving the way for a sustainable energy future.
Net metering, once vital for solar expansion, now requires rethinking to balance grid stability, equity and the power sector’s financial sustainability. Although the path ahead is not simple, if navigated wisely, it holds the potential to stabilise the power grid, secure fair energy economics and expand access to affordable electricity.
The success of net metering encouraged private investment, reduced the reliance on fuel imports, and fostered a local solar industry. These gains are significant. Yet, the shifting energy dynamics, influenced by declining solar costs, a 155 per cent tariff hike over three years, and worsening grid reliability, has driven an unprecedented solar rush. With imports for 22GW in 18 months, Pakistan is presently the world's sixth-largest solar market and third-largest buyer of Chinese-produced panels.
While easing consumer costs, this transition adds pressure on DISCOs as grid defection accelerates and high-paying users exit, leaving others to bear rising tariffs. This raises concerns over revenue sustainability, further straining Pakistan’s Rs2.6 trillion circular debt. With fixed capacity payments to IPPs, reduced demand exacerbates financial strain, prompting further tariff hikes. A robust policy is needed to prevent further imbalance. Apart from regulating solar expansion, diversifying demand towards industry can maximise grid use, alleviate capacity payment pressures, and promote long-term sector viability.
Concerns surrounding net metering revisions require careful consideration. However, the most recent proposed policy, lowering buyback rates to Rs10 per unit and limiting sanctioned load to 100 per cent from 150 per cent, has generated debate, revealing underlying structural inefficiencies. Attributing the crisis solely to solar net-metering users oversimplifies the issue. Distributed generation has reduced the need for grid expansion, and while early adoption primarily benefited higher-income urban groups, declining costs and continued growth have expanded access more broadly.
Nevertheless, the financial impact on DISCO revenues and potential cost-shifting to non-solar consumers remains a valid concern. Grid electricity sales dropped 10 per cent in FY23 as self-generation rose, while distribution losses (22,286 GWh in FY23) significantly exceeded net metering exports (482 GWh), indicating broader systemic inefficiencies requiring attention. Unregulated solar adoption, without properly structured tariffs, may lead to an inequitable allocation of capacity costs, increasing financial strain on consumers who rely solely on the grid.
Beyond economic concerns, integrating distributed solar poses technical challenges. The distribution network's hosting capacity remains a key bottleneck. Pakistan's ageing grid, designed for one-way flow, struggles with bidirectional power flows, leading to power quality issues such as overvoltage, reverse power flows, harmonics, and inadequate reactive power.
The transition to net billing, featuring reduced buyback rates and capacity limits, was anticipated in response to declining solar costs and grid constraints. However, any revisions should be guided by data-driven evidence-based research analysis and inclusive stakeholder engagement
The utilisation of ‘sanctioned load’ provisions to install oversized solar systems, effectively using the grid as free storage, has added to the operational strain on DISCOs. With net metering adoption surging -- reaching 283,000 consumers and an installed capacity of 4,124MW by December 2024 -- addressing these technical and regulatory challenges has become increasingly important.
DISCOs must conduct Hosting Capacity Analyses (HCAs) to assess solar integration limits for effective planning and operation. Lowering the sanctioned load cap to 100 per cent may curb excess injection, but without grid upgrades and proper capacity planning, this alone will not ensure long-term stability.
The transition to net billing, featuring reduced buyback rates and capacity limits, was anticipated in response to declining solar costs and grid constraints. However, any revisions should be guided by data-driven evidence-based research analysis and inclusive stakeholder engagement to ensure an equitable and sustainable energy transition. Reducing buyback rates may risk accelerating grid defection, particularly as battery prices fall. At the same time, a slowdown in solar demand could further lower panel prices, making adoption more accessible. With growing energy independence, distributed systems like microgrids can gain ground, offering a resilient complement to the grid.
A sudden policy shift without transitional safeguards or hybrid tariff mechanisms may slow investment and disrupt energy diversification. Therefore, thoughtful reforms are needed to sustain distributed generation. A phased TOU net metering approach, tailored to Pakistan’s dynamics, can help manage the ‘duck curve’ effect (lower daytime demand due to solar generation, followed by a sharp evening surge) by adjusting tariffs based on peak and off-peak usage. Integrating AMI can enhance grid stability, encourage self-consumption, and promote battery storage. However, a structured transition, public awareness, and safeguards against excessive peak-hour pricing are essential for equitable implementation.
Amid these policy considerations, access to electricity remains a critical challenge in Pakistan, with nearly 15.3 per cent of households still lacking a connection. Reliability issues drive many toward alternative energy sources even for those connected to the grid. According to the 7th Population Census of Pakistan 2023, approximately 41 million households (84.7 per cent of total households) have access to grid electricity. However, four million households (7.4 per cent) reported access to solar energy, as highlighted by Gallup Pakistan.
Rural areas in Balochistan (31.4 per cent), Sindh (20.7 per cent), and KP (13.2 per cent) have the highest adoption, primarily for basic energy access rather than financial incentives. These off-grid users depend entirely on self-consumption, making net metering reforms largely irrelevant to them. In contrast, urban solar adoption remains low -- 5.7 per cent in Balochistan, 3.2 per cent in Sindh and 2.4 per cent in KP.
The real challenge lies in energy inequity -- while urban consumers have more opportunities to benefit from incentives, rural households use solar primarily to meet basic energy needs. Policies must prioritise decentralised solutions like community microgrids to ensure equitable energy access, address energy poverty, and strengthen long-term energy security.
To ensure a sustainable and equitable energy future, the policy framework must prioritise restructuring, implementing TOU tariffs that balance solar incentives with grid stability and DISCO financial viability; strategic grid modernisation, prioritising infrastructure upgrades, smart grid deployment and enhanced grid monitoring; battery storage incentives, promoting BESS adoption through incentives and policy support; regulatory clarity and consistency, providing predictable policy signals to encourage renewable energy investment; integrated solar solutions must extend beyond rooftop PV to include solar water heaters and cookers, especially amid Pakistan’s gas shortages.
With the potential for surplus electricity generation, incentivising a shift toward electric cooking where viable can further enhance energy security and resilience; alignment with EV growth, integrating net metering policies with electric vehicle (EV) charging infrastructure development to reduce reliance on fossil fuels and mitigate grid stress; and promotion of decentralised solutions, emphasising community-owned solar mini/microgrids to bridge energy access gaps and promote energy equity, particularly in underserved regions.
The writer is an academic and researcher based in Jamshoro.
