Towards a more sensible solar policy

There is a cautionary tale taking shape in the academic literature that should make every Pakistani policymaker and sensible utility executive pause.

A detailed modelling study undertaken at the Massachusetts Institute of Technology (MIT) Center for Energy and Environmental Policy Research (CEEPR) in the USA shows that under typical net-metering rules, households that install rooftop solar and particularly those who pair it with behind-the-meter storage, can reduce their electricity bills by as much as seventy-one percent on average, while non-adopters in the same system may see their bills rise by around eighteen percent in scenarios of high distributed energy penetration.1

At first glance, this reads like an obvious win for households that can afford panels and inverters. Look a little deeper, though, and the numbers reveal an uncomfortable truth. The benefits of distributed solar under current pricing arrangements tend to accrue to wealthier, better-placed consumers, while costs are shifted to those left behind.

Pakistan already has a fragile and complex power economy. Recent regulatory filings and national commentary show that the country’s effective tariffs and fuel cost components remain high, relative to many neighbors, and tariff design has been under stress during the recent macroeconomic adjustments and IMF-linked reforms.23

Against this backdrop, a sudden and large migration of higher-income households and commercial users to rooftop solar, supplemented by relatively affordable Chinese hardware and hybrid inverters, has the potential to hollow out the revenue base utilities need to cover fixed transmission and distribution costs.

The arithmetic is simple; when the fixed costs of running the grid are recovered mainly through per-unit volumetric charges, the units sold to remaining non-solar customers must carry a larger share of the same fixed cost pool. Those who cannot install panels like tenants, apartment residents, lower-income households, and many in small businesses are left with higher per-unit bills and weaker service. 4

The news from Pakistan’s streets and policy papers is not hypothetical. Journalists and analysts have documented a rapid surge in solar imports and rooftop adoption; a growth spurt that has relieved some consumers but strained the grid and public finances.5

One recent account notes that imports of solar hardware peaked in 2024 and that rooftop and behind-the-meter adoption is creating both technical stresses on feeders and financial stresses on utilities, prompting regulators to rethink buyback rates and levy charges aimed at protecting non-participants.6 When affluent households lock in their energy savings, the financial burden of shifting costs inevitably falls on those with fewer resource, and the net result is a regressive energy transition. Headline penetration figures obscure the fact that the transition benefits those already ahead and leaves vulnerable consumers paying more for less reliable service.

That is why net-metering policy design matters so much. A policy that pays retail rates for exported rooftop energy, without adjusting how network fixed costs are recovered, creates a perverse incentive. It rewards those with capital and good roofs and punishes those who cannot participate. The MIT modelling makes the mechanism clear that at high penetration, the combination of net metering and volumetric recovery of fixed costs produces large distributional effects, and the economically disadvantaged groups can be among the hardest hit. We do not need to import the full regulatory architecture of another country to learn from its modelling and experience; we need to read the signals and adapt policy locally.

For Pakistan, the obvious alternatives are not anti-solar. The country must scale renewables and seize the economic and environmental benefits of clean energy, but the instruments should be different. Policy should prioritize inclusive models including utility-scale renewables coupled with targeted subsidies for low-income households.

Other important measures include on-bill financing and community solar schemes that allow renters and apartment dwellers to participate, and a re-balancing of tariff structures so that fixed network costs are recovered through capacity or fixed charges rather than purely volumetric rates. These changes protect the social compact that keeps the grid viable while enabling widespread clean energy adoption.

Power distribution companies are already bearing the brunt of this surge. As wealthier customers partially desert the grid during daylight hours, the utilities’ revenue shortfalls are real and affect everyone who remains connected. It would be short-sighted to let the romance of rooftop independence dictate policy choices that will raise the cost of staying connected for the poorest. Effective reform would align incentives including fair compensation for exported energy that reflects system value, safeguards for vulnerable customers, and a clear path for lower-income participation in the benefits of renewable energy.

The conversation about solar in Pakistan should not be framed as solar versus grid; but as solar plus policy.

The MIT study from Chicago does not argue against distributed energy; it warns about careless design. Pakistan can avoid the distributive disaster the modelling foresees by designing a framework that balances ambition with equity. Otherwise, the sunny promise of cheap panels may burn a hole not just in the tariff ledger but in the social fabric, leaving those who can least afford it to shoulder the cost of others’ escape to cheaper, cleaner self-sufficiency.

Copyright Business Recorder, 2025