Net metering reforms: Course correction

The solar gold rush in Pakistan was always going to invite a policy response. The numbers alone warranted it. In the last 12 to 18 months, net-metered rooftop solar has expanded at breakneck speed, creating distortions in grid pricing. The government says it costs grid consumers around Rs150 billion annually. That’s not pocket change. With net-metered capacity jumping from 321 MW in 2021 to 4,241 MW by December 2024—doubling in just six months—the impact on the power system was too big to ignore.

Enter the new net metering policy. The core shift? A distinction between existing and new net metering consumers. Those already in the system will keep their Rs27 per unit buyback rate but will likely be moved to gross metering—meaning exported and imported units are billed separately (more clarity is awaited on moving from net to gross for existing consumers). New entrants will have a lower buyback rate of Rs10 per unit at gross metering, stretching payback periods.

For perspective, the Rs27 per unit buyback rate is based on the National Average Power Purchase Price (NAPPP), while the new Rs10 per unit rate is closer to the marginal cost of grid generation. The logic? Solar net metering consumers use the grid as a backup, not a primary source, and should pay more for that privilege.

The current structure allows consumers to recover their investment in under three years under most scenarios. Globally, the average payback period is closer to five years. Even after this policy shift, most consumption scenarios will see a payback of close to five years—still a solid return. Before the policy shift, consumers were recovering their investments in as little as 1.5 to 2 years—among the fastest solar paybacks globally. The new structure aligns Pakistan with international standards.

The numbers speak for themselves. Under the current net metering regime, solar pays off fast—just 1.95 years for a 10kW system with 100 percent self-consumption. That changes under the new policy. Existing users see a mild increase, but for new users, the shift is sharp. A 10kW system with 100 percent self-consumption now takes a little over three years to break even. Even with the new policy, the payback stays well within global averages in most cases.

The shift isn’t accidental. The regulator is recalibrating incentives to match market realities, cutting net metering rates to ease cross-subsidization concerns. But even with a longer payback, the numbers still make sense. Adoption might slow, but the shift to solar isn’t reversing. For those who can optimize self-consumption, the opportunity remains as strong as ever.

There are those who maintain this move will kill rooftop solar adoption. That’s a stretch. It may slow the pace, but it won’t stop the transition. Even in a worst-case scenario of low self-consumption, savings remain substantial. The reality is that incentives for new technologies aren’t permanent. Vietnam, for instance, slashed its generous feed-in tariff in phases, cutting rates by nearly half as the market matured. Australia also moved to dynamic tariff structures that better align with demand. Pakistan is simply following a global trend of policy evolution, ensuring price equity as rooftop solar scales.

The real debate is one of fairness. There are 32 million domestic consumers dependent on the grid. Meanwhile, net metering beneficiaries—just 280,000—are predominantly well-off households with high disposable incomes. Offering them lucrative buyback rates, while the majority shoulder rising grid costs, was never sustainable. With rooftop solar imports surpassing $2 billion in 2024 alone, this transition was only accelerating. Data shows the best-paying grid consumers—who previously cross-subsidized electricity—is leaving the system. The grid is left carrying the burden.

Another major concern is technical feasibility. The current rules allow installations up to 1.5 times a consumer’s sanctioned load. If everyone maxed out, the total rooftop load could exceed transformer capacity by the same factor—potentially overloading the system. Reports from discos suggest that medium-voltage feeders are already facing reverse power flow issues. These are challenges that require long-term planning, and unchecked rooftop solar expansion only exacerbates them.

This isn’t about being against renewable. Pakistan needs solar. What it also needs is a balanced, equitable pricing structure that doesn’t disproportionately benefit a privileged few. Net metering was always going to evolve as the market matured. This policy shift is not an attack on solar—it’s an adjustment to market realities.

(Assumptions used for payback scenario analysis: Day/Night consumption ratio 40:60, Specific Production Yield 4.7 Kwh/Kwp as per Global PV Potential Study, World Bank, Peak Hour Factor 25%, Existing buyback rate Rs27/Kwh, Proposed buyback rate Rs10/unit, gross metering for new policy, all calculations exclude taxes and surcharges, including taxes and surcharges improved the payback period, reducing the production yield increases the payback period)