The shift towards solar power is inevitable, but ensuring an equitable and sustainable transition is key. Prime Minister Shehbaz Sharif’s latest announcement that there is no change in Pakistan’s solar energy policy has left many scratching their heads, as it comes after the Economic Coordination Committee (ECC) of the Cabinet had already approved amendments to the solar net metering policy.
However, recent reports suggest that the implementation of these changes has been postponed, adding another layer of uncertainty to the debate.
The decision, which aimed to lower the buyback rate for surplus electricity from Rs 27 per unit to Rs 10 per unit, had already sparked strong controversy and was being criticized as a major setback for renewable energy adoption.
On the other hand, officials defend the move, insisting that the previous policy disproportionately benefited wealthy solar users at the expense of middle and lower-income grid consumers.
The earlier net metering policy, designed to encourage solar adoption, allowed prosumers — households and businesses producing their own electricity — to sell excess energy at retail rates.
While this spurred a rapid increase in solar installations, it also led to an economic imbalance, as utilities were forced to buy electricity at inflated prices while still maintaining the fixed costs of the grid. The burden of these inflated costs was passed down to non-solar consumers, resulting in higher tariffs for those who could not afford solar installations.
A recent study titled, ‘Distributed Divide’ by Arzachel highlighted that in FY 2023-24, PKR 200 billion in fixed grid costs were transferred to non-solar consumers, leading to a PKR 2 per unit increase in electricity tariffs.
Projections revealed that without policy intervention, a 5 percent reduction in grid demand due to solar adoption would shift an additional PKR 131 billion in costs annually to non-solar customers, while a 10 percent reduction would escalate this figure to PKR 261 billion. Had the policy remained unchanged, non-solar consumers — many of whom belong to lower- and middle-income groups — would have continued to subsidize higher-income solar adopters, widening the economic divide in the energy sector.
The revision has faced resistance, particularly from prosumers in the business community, industrialists, and political figures, many of whom have leveraged higher buyback rates for commercial gains rather than self-consumption.
Critics claim the new rates discourage investment in solar energy and threaten the country’s renewable energy targets. However, officials argue that the previous system was unsustainable, effectively forcing non-solar consumers to subsidise wealthier individuals who were profiting from excess energy sales rather than simply reducing their own energy bills.
Grid stability is another major concern. The surge in solar-generated exports led to reverse power flows, voltage fluctuations, and over-generation risks, putting strain on national infrastructure. By lowering buyback rates, the government aims to encourage self-consumption, reducing reliance on the grid and ensuring a more balanced energy distribution.
Experts emphasize that instead of relying on inflated buyback rates, investments in Battery Energy Storage Systems (BESS) and smart grids should be prioritized to support long-term sustainability.
Amid the debate, misinformation has spread, with some opponents of the policy claiming that reduced buyback rates signal a government crackdown on solar energy. However, energy analysts stress that solar adoption remains viable, especially for households and businesses seeking energy independence and lower electricity costs. The revision does not eliminate net metering—it adjusts compensation to prevent financial distortions while keeping incentives for self-consumption intact.
Pakistan is not alone in making such adjustments. Germany and Australia have moved from net metering to net billing, compensating solar producers at wholesale market rates rather than retail prices.
California, USA, has implemented time-of-use pricing, requiring solar users to integrate battery storage solutions to stabilize energy supply. Whereas, Japan has developed Virtual Power Plants (VPPs) to efficiently manage distributed solar energy without destabilizing the grid.
While the net metering revision addresses financial and technical challenges, further policy refinements will be necessary to ensure continued solar adoption without compromising grid reliability.
Energy experts suggest encouraging self-consumption, expanding Battery Energy Storage Systems (BESS), introducing grid service fees for prosumers, and scaling up grid-based renewable energy projects such as solar and wind farms in Sindh and Balochistan to create a more inclusive energy transition.
Although the implementation of the policy change has been delayed for the time being, experts maintain that such reforms are necessary to prevent economic disparities in the energy sector. The challenge now is to strike the right balance between promoting solar growth and protecting the interests of all electricity consumers—not just a select few.
Copyright Business Recorder, 2025
The writer is an independent Public Policy analyst based in Islamabad. He can be reached on +92-332-5416463, Email: [email protected]
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