Government Slashes Solar Net Metering Benefits: Electricity Costs Surge by 550%

March 14, 2025 Mahi Bukhari

Major Policy Shift in Solar Net Metering: Reduced Incentives and Increased Costs

The Pakistani government has made a drastic change to the net metering policy, significantly reducing benefits for new solar panel users while increasing electricity costs by an alarming 550%. The new policy slashes the buyback rate for solar users by 63%, creating a major financial disadvantage for those investing in renewable energy.

Under the revised policy, solar energy producers will now sell electricity at just Rs10 per unit, whereas they will have to buy electricity from the national grid at Rs65 per unit—a staggering increase that places a heavy financial burden on consumers.

New Net Metering Policy: What Has Changed?

Reduced Buyback Rate for Solar Consumers

The biggest change in the new net metering policy is the drastic cut in the buyback rate for solar energy producers. Previously, solar users were receiving Rs27 per unit for their electricity contributions to the grid. However, under the new policy:

The buyback rate has been slashed to Rs10 per unit, a 63% reduction.
Consumers will now have to purchase electricity at full market rates, which currently stand at Rs65 per unit.
The concept of adjusting exported units with imported units has been completely removed, forcing consumers to pay significantly more for electricity.

No More Net Adjustment of Electricity Units

Previously, solar panel owners could offset their electricity costs by adjusting the units they exported with the units they consumed from the national grid. However, under the new system:

Imported and exported electricity will now be treated separately in billing.
Consumers cannot balance their usage with the electricity they generate, leading to higher bills.
Those who generate excess electricity will now receive very little compensation for their contributions.

Shorter Contract Duration for Solar Net Metering Users

The Economic Coordination Committee (ECC) of the Cabinet has also shortened the contract period for net-metered users:

Previously, agreements lasted for seven years.
Now, the maximum contract period has been reduced to five years.
After this period, the buyback rate can be further adjusted by regulatory authorities.

Stricter Technical Requirements for Solar Installations

To further restrict new solar energy installations, the government has introduced higher technical standards for solar systems:

Only high-quality solar panels will be allowed for installation.
The capacity limit for distributed generation has been reduced.
The new system caps the hosting capacity on transformers and feeders, limiting the number of new connections.

Reasons Behind the Drastic Policy Change

The government has justified these changes by stating that the rapid growth of solar net metering has created financial challenges for the power sector. Here are the main reasons cited for the new policy:

Financial Burden on Non-Solar Consumers

The government claims that non-solar users are being burdened due to solar users receiving excessive benefits. According to reports:

The rapid expansion of net metering has led to a 3.2 billion unit reduction in electricity sales.
This has added Rs101 billion in financial losses for power distribution companies.
The government estimates that by 2034, net-metering users could reduce grid electricity sales by 18.8 billion units, leading to a Rs545 billion loss.

Rising Electricity Costs Due to IMF Agreements

Many energy experts believe that these changes are a result of IMF pressure. Over the years, successive governments have been forced to increase electricity tariffs to meet loan conditions. As a result:

Electricity prices have surged over Rs65 per unit, making it one of the most expensive in the region.
The government has failed to reduce energy sector inefficiencies, including line losses and power theft.
Instead of fixing these issues, policymakers have targeted solar net-metering users as a source of additional revenue.

Impact on Renewable Energy Growth in Pakistan

The net metering system was introduced in 2015 to promote renewable energy and reduce Pakistan’s reliance on imported fuel-based power generation. However, with the new policy:

The financial incentive to install solar panels has been severely reduced.
Growth in solar adoption may slow down, preventing Pakistan from achieving its renewable energy targets.
The major beneficiaries will be fossil-fuel-based power producers, as demand for grid electricity is expected to rise.

Public Reaction and Industry Concerns

The new net metering policy has sparked significant backlash from solar industry leaders, environmental activists, and consumers.

Consumers Facing Higher Electricity Bills

Many solar users feel betrayed by the government’s decision to reduce the financial benefits of solar adoption. The drastic increase in electricity costs will:

Discourage households and businesses from investing in solar power.
Increase financial pressure on existing solar users, especially those who rely on solar as a cost-saving measure.
Force consumers to pay excessive energy bills, making electricity less affordable for the middle class.

Solar Industry Growth at Risk

The solar energy sector in Pakistan has seen rapid growth in recent years, with installations rising from just 5 MW in 2017 to 4,135 MW by the end of 2024. However, with the new policy:

The growth of rooftop solar installations may decline.
The local solar industry could face major setbacks, leading to job losses and reduced investment.
Energy experts warn that discouraging solar adoption will increase reliance on costly fossil fuels, worsening Pakistan’s economic challenges.

Future Outlook and Potential Revisions

Given the negative response from the public and industry stakeholders, there is a possibility that the government may revisit its policy. However, for now:

Solar net metering benefits will continue to decline, making it less attractive.
Electricity costs will remain high, adding more burden on consumers.
The government may introduce additional regulations to further restrict solar adoption.

Many energy experts and consumer advocacy groups are urging the government to reconsider its decision and introduce a more balanced policy that encourages renewable energy without overburdening grid consumers.

FAQs

1. What is the new buyback rate for solar energy?

The government has reduced the buyback rate for solar net-metering users from Rs27 per unit to Rs10 per unit, a 63% reduction.

2. How much does electricity from the grid now cost?

Consumers will now have to buy electricity from the national grid at Rs65 per unit, which is 550% higher than the new solar buyback rate.

3. Will existing net metering users be affected?

Existing users will continue under their current agreements but will be subjected to the new rules once their contract term expires.

4. Why did the government change the net metering policy?

The government claims that net-metering has caused financial losses to power companies and increased costs for non-solar users.

5. What impact will this policy have on solar adoption in Pakistan?

This policy is expected to reduce the growth of solar installations, increase electricity costs, and benefit fossil fuel-based power producers.