Pakistan’s energy sector is quickly hitting an impasse with solarization. On one hand is the surging interest in net metering across the country, where elite residential customers with three-phase meters are leading the charge to save bills and make a return on investment. However, they are a handful of overall residential customers.

On the other hand, there is also the use of solar panels in rural centers to substitute for or supplement the supply from the grid, which is subject to load shedding. These single-phase users are the bulk of the national sanctioned load, almost 10 times higher than industries.

These both trends are pushing demand away from the grid. And this is not unique to Pakistan. A glut of solar installations has pushed governments across the world to reconsider the wide berth given to solarization through subsidies, tax rebates, and other incentives at the outset.

A common conclusion, short of an outright ban on the sale of excess generation or a penalty for selling units to the grid when it doesn’t need them, has been to reduce the cost of buyback.

This has been met with harsh criticism by people who have installed their systems with hopes of recovering costs within 2 to 3 years. Which is within reach because of the overall costs of systems coming down as well. However, there are multiple reports internationally and locally that indicate this may not be the end of the world.

A report by independent analysts at IEEFA showed how the increase in payback period was marginal if the rate of buyback is reduced even to Rs15/unit (though it could be lower) from the current rate of Rs27/unit, or if there are shifts from net metering to net billing or other mechanisms.

One would still get their money’s worth, just with a bit of patience. Similar arguments were made in a report by two Dutch institutions, who encouraged self-consumption by shifting gas-based usage to electricity, such as space heating and cooking. They suggested that it would not impact profitability if self-consumption levels were maintained at a certain level.

These examples counter common perception. And provide food for thought. If the trend continues the path it is on, the solar demand will end up affecting the grid. The government is in a pickle and requires attention on how to balance the new addition of solar alongside utility-scale generation.

A middle ground could be to introduce reduced buyback rates for future solar installation while keeping the current rate for current systems until their generation licenses are up for renewal. It may require more convincing and calculations but may ease the transition. Then more analysis is also needed to see how different billing methods or metering mechanisms can support balancing the equation. Is there a benefit or potential application of gross metering or net billing?

It is imperative that the government identify the critical point of rooftop solar, which will be detrimental to the grid, and then measure our distance from it. Without knowing the tipping point, policy decisions may be ineffective or obsolete by the time they are formed.

This is also critical because the first ones to leave the grid are customers who are cross-subsidizing those at the bottom of the pyramid. If a sufficient quantity of affluent customers leave, that stranded cost and cross subsidy will have to be absorbed in circular debt or passed onto remaining customers in their bills. In the long term, this will undermine the government’s own efforts to reduce costs.

Hence, this becomes a discussion on the haves and the have-nots. Those who have the means to leave are doing so, but those without the means to go solar are dealing with higher prices. The downward spiral needs to be contained soon.

Winter months approach, and word is that the government may be considering another rebasing of tariffs. Even if costs are miraculously lowered because the calculation base is changed from fiscal to calendar year, the government must decide a long-term, or at least a medium-term, strategy to contain the situation before reaching the point of no return.

Ironically, the conversation reminds of the example of Icarus from Greek mythology, who initially confidently flew to the sun on waxen wings, only to realize his mistake. By then it was too late, and he collapsed back to earth. Let’s not make the same mistake as a country as Icarus did, flying at a safe distance from the sun.