The renewed proposal to amend Pakistan’s net-metering regulations and compress incentives for rooftop solar is being presented as a technical correction to stabilize the power sector. In reality, it risks becoming a strategic misstep with long-term fiscal, regulatory, and systemic consequences. Pakistan’s electricity crisis is not the result of excessive solar adoption; it is the outcome of deep structural flaws that predate rooftop solar by decades. Treating net-metering as the problem is therefore not reform, it is deflection.
Power-sector is in distress due to rigid cost structure. Installed generation capacity now exceeds 45,000 MW, while peak demand in recent years has hovered around 30,000 MW. Yet capacity payments continue to rise because they are contractually guaranteed under long-term, take-or-pay power purchase agreements indexed to foreign exchange, inflation, and interest rates.
In FY2025 alone, capacity payments crossed PKR 1.77 trillion, more than half of total power-sector costs. These payments do not disappear when demand falls; instead, they are redistributed across fewer units sold, pushing tariffs upward. Rooftop solar did not create this arithmetic. It merely exposed it.
Against this backdrop, weakening net-metering incentives addresses neither excess capacity nor contract rigidity. It leaves untouched the real drivers of high tariffs: over-contracting, underutilization, distribution losses exceeding 17 percent, and chronic inefficiencies in DISCO billing and recovery. Penalizing prosumers may temporarily slow distributed generation, but it will not reduce capacity charges by a single rupee. Structural issues must therefore be confronted first, otherwise policy risks chasing its own shadow.
The debate becomes even more paradoxical when viewed through the lens of Pakistan’s commitments under the IMF’s Resilience and Sustainability Facility. The RSF’s logic is explicit: eliminate cross-subsidies, rationalize energy pricing, and protect vulnerable households through targeted mechanisms rather than blanket distortions. Yet the current policy instinct appears to be to preserve an unsustainable subsidy architecture by squeezing one of the few market-driven solutions that has reduced household exposure to high tariffs.
Targeted cash transfers through the Benazir Income Support Programme may cushion consumption in the short run, but they remain a recurrent fiscal liability. Each tariff hike increases the transfer requirement, locking the state into an ever-expanding subsidy bill.
Providing solar assets to protected consumers, by contrast, fundamentally alters the equation. A one-time capital intervention, say a 1–2 kW rooftop system, can permanently reduce grid consumption by 40–60 percent for low-income households. Instead of paying indefinitely for units consumed, the state invests once in resilience. This approach is far more consistent with the RSF’s emphasis on sustainability than endlessly recycling cash to offset structurally high tariffs.
Crucially, weakening net-metering also ignores behavioral responses. Households are not passive policy subjects; they are rational actors. If export rates are reduced sharply while retail tariffs remain in the range of PKR 35–47 per kWh, consumers with financial capacity will not abandon solar.
They will abandon the grid. Battery prices have fallen dramatically, lithium-ion pack prices are now below USD 140 per kWh globally, down nearly 90 percent from 2010 levels. Once storage becomes economical, partial grid reliance turns into full defection. The result is fewer paying consumers, higher average tariffs, and a faster utility death spiral. Ironically, curbing net-metering in the name of grid protection may accelerate grid irrelevance.
What is missing from the current discourse is system design. Distributed solar should not be framed as an exit instrument but as a system-relief instrument. Unmanaged rooftop solar can indeed erode daytime demand while leaving evening peaks intact, increasing stranded capacity risk for existing IPPs. But solar paired with battery energy storage systems tells a different story.
Properly structured, solar + BESS allows households and SMEs to self-generate during daylight hours, charge storage during low-marginal-cost periods, and draw from the grid in a controlled manner during peaks. This shifts consumption rather than destroys it, reducing fuel burn without collapsing demand for contracted capacity. For investors and policymakers alike, this distinction is decisive.
Off-grid solar also has a clear and rational role, but not where the grid is already strong. Mini-grids and stand-alone systems should be prioritized in non-served or weak-grid areas, where grid extension is uneconomic and technically fragile. These consumers were never meaningfully served by IPPs to begin with; off-grid solar therefore does not cannibalize existing contracted generation. Instead, it avoids future transmission and distribution capex and prevents the addition of new subsidized consumers to the system, an outcome fully aligned with fiscal consolidation and RSF objectives.
For grid-connected consumers, the policy challenge is to internalize capacity cost signals rather than bluntly suppress solar adoption. Incentivizing battery-backed systems achieves precisely this. Storage decouples solar generation from peak avoidance, allowing the system to maintain capacity utilization while lowering variable fuel costs. It also reduces regulatory backlash risk, the single largest non-technical risk facing Pakistan’s solar market, by aligning private investment with system needs.
At the system level, BESS plays an even larger role. Pakistan’s IPP fleet represents sunk capital with long-term obligations. Abrupt displacement is neither fiscally feasible nor politically realistic. Grid-scale and distributed storage provides a bridge between this legacy system and a cleaner future. Batteries absorb excess generation during low-demand hours, smooth ramps, and reduce reliance on inefficient mid-merit and peaking plants. In effect, they allow Pakistan to extract more value from existing IPPs while gradually reducing fuel burn, turning rigidity into flexibility without contract repudiation.
Contrary to popular belief, fuel-based generators can actually benefit from storage-enabled solar. Reduced cycling lowers start-stop losses and heat-rate penalties, particularly for RLNG and furnace-oil units that suffer most from ramping inefficiencies. By flattening net load profiles, batteries lower system fuel costs while preserving capacity revenues. Storage is not an anti-thermal weapon; it is a cost-containment layer for an over-contracted system.
Technology choice strengthens this case further. Sodium-ion batteries, optimized for stationary daily cycling, are particularly well-suited to Pakistan’s needs. They rely on abundant materials, exhibit lower cost volatility, and offer strong safety characteristics. Their comparative advantage lies not in electric vehicles but in grid support, peak shaving, time-shifting, and frequency regulation. This positions sodium-ion storage as a system asset rather than a consumer gadget, stabilizing IPP dispatch patterns instead of undermining them.
Indigenization amplifies these benefits. Local assembly, and eventual manufacturing, of battery packs, battery-management systems, and power electronics reduces foreign-exchange outflows without altering the dispatch merit order. Given that FX-linked fuel and capacity payments are a silent driver of Pakistan’s power crisis, reducing imported components attacks the problem at its root. Investors gain currency hedging; the system gains macro resilience.
Beyond economics, there is a constitutional dimension that cannot be ignored. Article 10A of Pakistan’s Constitution guarantees due process and fair treatment. Article 10A of the Constitution, which guarantees the right to fair trial and due process, is directly engaged in the net-metering debate because energy regulation creates enforceable economic rights and legitimate expectations, not abstract policy preferences.
Households and SMEs invested capital, often financed through savings or bank loans, under a formally notified regulatory regime that specified export rates, settlement mechanisms, and contract duration. Any unilateral, mid-contract alteration of these terms by the National Electric Power Regulatory Authority or the Power Division raises a serious due-process concern.
Due process in administrative action requires transparency, proportionality, reasoned justification, and meaningful opportunity to be heard; it does not permit retroactive economic harm through regulatory convenience. When a change materially alters the financial basis on which citizens committed capital, it begins to resemble regulatory expropriation, an outcome Pakistani courts have historically viewed with constitutional caution.
More importantly, when a regulatory amendment has economy-wide distributive effects, reshaping household welfare, investment incentives, climate outcomes, and fiscal burdens, it crosses from technical regulation into public policy of legislative character. Such decisions must therefore be debated openly in the National Assembly of Pakistan to ensure democratic legitimacy and legal robustness.
Bypassing Parliament not only weakens constitutional compliance but also erodes regulatory credibility across the entire power sector, increasing risk premiums and discouraging future investment. Article 10A is thus not a procedural footnote; it is a constitutional boundary. Any redesign of net-metering must be prospective, transparent, and legislatively anchored, otherwise, it risks legal challenge, investor flight, and a deeper trust deficit in Pakistan’s energy governance.
The strategic choice before Pakistan is therefore not between solar and the grid. It is between managed solarization and runaway solarization. Managed solarization means off-grid systems where the grid is absent, net-connected solar with storage where the grid exists, and grid-scale batteries to protect system stability.
In this equilibrium, IPPs continue to earn capacity revenues, fuel burn declines, subsidies erode structurally, and investors face a predictable regulatory pathway. Undermine net-metering without fixing the structure, and the result will not be reform, it will be a faster slide into a power-sector dead end, with higher tariffs, deeper fiscal stress, and a grid increasingly deserted by those who can afford to leave.
Copyright Business Recorder, 2026
Engr M. A. Jabbar is former VP FPCCI/Chairman SAI and Dr Khalid Waleed is Research Fellow in Sustainable Development Policy Institute (SDPI)