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The Economic Coordination Committee (ECC) of the Cabinet approved on Thursday a set of amendments to the net-metering regulations, which it said were aimed at reducing the growing financial burden on grid consumers.

The ECC revised the buyback rate for solar net-metering electricity to Rs10 per unit from previously Rs27 per unit, stating that the revised framework would not apply to existing net-metered consumers but only until expiration of their license or agreement.

Meanwhile, the committee also approved an update to the settlement mechanism.

Under the new structure, imported and exported units will be treated separately for billing purposes. The exported units will be purchased at the revised buyback rate of Rs10 per unit, while the imported units will be billed at the applicable peak/off-peak rates, inclusive of taxes and surcharges, during the monthly billing cycle.

The buyback rate directly impacts the financial returns that consumers get for the surplus electricity they generate and feed back into the grid. With reduced buyback rates, individuals and businesses are less likely to see a positive return on investment in solar systems. Is it what the government also wants?

Net-metering in Pakistan

Net-metering is an electricity policy for consumers who own renewable energy facilities, which allows them to use electricity whenever needed while getting credit for contributing their production to the grid.

Does govt want to dim Pakistan’s solar glow?

Producing electricity partly for own consumption, and partly for sale to the power distribution companies (DISCOs), is available in Pakistan, provided anyone has a roof suitable for solar energy.

In Pakistan, the net-metering mechanism was first introduced in the Policy for Development of Renewable Energy for Power Generation, 2006 (RE Policy).

Section 8.4.2 of the RE Policy provides that subject to technical considerations and without discrimination and upon request by distribution end-users, DISCOs shall enter into net-metering agreement with qualified endusers who will be installing the RE system.

The policy was launched to address several energy-related challenges, including energy shortage. Power outages and load shedding were common, and by encouraging people to generate their own electricity through solar power, the policy aimed to reduce pressure on the national grid.

The net-metering policy also aimed to promote renewable energy. Solar power, being clean and sustainable, was a key focus. By offering incentives to use solar energy, Pakistan hoped to reduce its reliance on fossil fuels, which are expensive and harmful to the environment as well as a burden to the country’s import bill. The move was also aligned with global efforts to fight climate change.

What has changed now?

What was then a helping hand is now considered a burden on the national grid.

In the ECC meeting on Thursday, the Power Division highlighted the pressing need for regulatory adjustments, citing a record decline in solar panel prices that led to a sharp increase in the number of solar net-metering consumers.

Leghari says govt to ‘rationalise net-metering,’ aims to ease burden on consumers

As of December 2024, according to a Finance Division statement, solar net-metering consumers had transferred “a burden of Rs159 billion to grid consumers, a figure expected to rise to Rs4.240 trillion by 2034 without timely amendments”.

It was informed that the number of solar net-metering consumers surged significantly, reaching 283,000 by December 2024, up from 226,440 in October 2024.

The total installed capacity also grew from 321 MW in 2021 to 4,124 MW by December 2024, underscoring the rapid expansion of the net-metering sector.

“However, the increase in solar net-metering consumers has contributed to a rising cost of electricity for grid consumers, undermining the government’s efforts to reduce power tariffs,” the Finance Division statement read.

The ECC also discussed the financial implications of the growing number of solar net-metering consumers, especially as “they avoid paying the fixed charge component of the tariff, including capacity charges and the fixed expenditures of power distribution and transmission entities.”

“This has transferred a disproportionate financial burden onto grid consumers, contributing to higher electricity tariffs and undermining the sustainability of the energy sector.”

The committee also noted that 80% of solar net-metering consumers are concentrated in nine major cities, with a significant proportion located in affluent areas.

“This geographical concentration further highlights the need for regulatory reforms to ensure fairness and balance in the energy distribution system.”

Was there a better solution?

Currently, Pakistan’s electricity generation capacity exceeds consumer demand, and the growing adoption of solar energy is increasing pressure on the energy sector due to capacity charges.

The government says it’s easing the financial burden on grid consumers by reducing buyback rate, but at the same time it has failed to reduce the transmission and distribution losses (T&D) in billions of rupees, which the consumers bear every year.

According to a Business Recorder report published in November 2024, the National Electric Power Regulatory Authority (Nepra) decided to initiate legal action against the DISCOs that contributed to the circular debt of Rs276 billion in terms of increase in T&D losses.

As per the report, DISCOs electricity purchases for the FY 2023-24 reduced to 115,142 GWh, ie, 1% less as compared to 116,696 GWh for the FY 2022-23. However, DISCOs losses during FY 2023-24 increased to 18.31% as compared to 16.84% during FY 2022-23, ie, increase of 1.47%.

Meanwhile, in a post on X formerly Twitter, former finance minister Miftah Ismail criticised the government over its buyback rate cut decision.

“Rather than reducing distribution losses (which are 20 times more than the solar units purchased) the government is reducing the payment for the small amount of green solar units it purchases and which the middle class people are now installing to save themselves from crushing power bills.

“Can you tell us how much in T&D losses the DISCOs incur annually above and beyond what NEPRA allows? And has there been any improvement in it lately?”

Solar net-metering consumers: Discovering Rs9.8bn loss, FTO orders 18pc GST levy

Miftah further grilled the government for “selling electricity for Rs48.8 per unit (plus taxes) whereas buying from new consumers for only Rs10”.

“Is this fair? Why is it that India, Bangladesh and Sri Lanka are able to sell power for much less than our government? If you have so much excess capacity, why is the government not pricing power closer to the marginal cost of producing power?”

Pakistan’s circular debt crisis is not caused by net-metering but by inefficiencies in the power sector, such as high transmission losses, reliance on expensive thermal power plants, and poor revenue collection from defaulters.

The reduction in solar buyback rate will also deter new investments in solar energy, slowing the growth of renewable energy adoption in Pakistan.

A better approach would have been to cut line losses and improve bill recovery instead of punishing solar energy producers!

The article does not necessarily reflect the opinion of Business Recorder or its owners

Rehan Ayub

The writer is News Editor at Business Recorder (Digital)

Comments

200 characters
KU Mar 14, 2025 09:15pm
Keeping up with traditions of destruction, it is always a handful who deny every possible progress n destroy a nation.
thumb_up Recommended (2) reply Reply
Zeus Mar 16, 2025 12:09pm
We can always make an opportunity into a crisis.
thumb_up Recommended (6) reply Reply